US Pre-Market: Market Awaits Fed Leadership Change, AI Rally Boosts Market, Asian, European and US Stocks Rise, Futu and Tiger Brokers Plunge 40%, China Stocks Broadly Fall

TradingKey - Before the market opened on Friday, May 22 (ET), the three major U.S. stock index futures all rose, while European stock index futures also trended higher and Asian stocks climbed for the second consecutive day. South Korean stocks closed slightly higher, and the Nikkei 225 index surged 2.68%, primarily driven by an 11% gain in heavyweight SoftBank Group.

On the news front, Saudi media reported obtaining a draft U.S.-Iran agreement, which calls for an immediate, comprehensive, and unconditional ceasefire on all fronts. It also mentions "commencing negotiations on outstanding issues within 7 days" and "the gradual lifting of U.S. sanctions against Iran in exchange for Iran's compliance with the agreement." Iranian Foreign Minister Abbas Araghchi confirmed that the final draft of the U.S.-Iran agreement has now been completed.

The Federal Reserve will welcome its new chair, Kevin Warsh, and President Trump will host the swearing-in ceremony for the Fed chair at the White House.

Market Volatility

Futu Securities (FUTU) fell more than 40%, while Tiger Brokers (TIGR) dropped over 45%. The China Securities Regulatory Commission (CSRC) announced that day that the illegal cross-border business activities of Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) Limited, and Longbridge Securities (Hong Kong) Limited violated securities, fund, and futures laws and regulations. The CSRC plans to confiscate all illegal gains from the domestic and offshore entities of Tiger, Futu, and Longbridge and impose severe penalties in accordance with the law.

Chinese concept stocks declined in pre-market trading, with JD.com (JD) down more than 3%, Alibaba (BABA) down over 4%, and Pinduoduo (PDD) falling nearly 6%. Analysts pointed out that online brokerages such as Futu and Tiger have long been the primary channels for mainland Chinese retail investors to trade US-listed Chinese stocks; the implementation of this regulatory policy will impact the liquidity and valuation foundations of the entire Chinese concept stock sector.

Quantum computing stocks continued to rise slightly in pre-market trading, with D-Wave Quantum (QBTS) , IBM, Quantum Computing (QUBT) rising more than 2%, while Rigetti Computing (RGTI) gained 4%.

Market Headlines

The draft ceasefire agreement between the U.S. and Iran has been completed, but key issues remain unresolved. Iranian media reported that the final draft of the agreement has been reached and is expected to be announced in the coming hours. Saudi media stated they have obtained the draft, which calls for an immediate, comprehensive, and unconditional ceasefire on all fronts. Iranian Foreign Minister Araghchi posted on social media that while the final draft is complete, obstacles remain for both sides to reach a final result: the U.S. insists on addressing the Iranian nuclear issue immediately, while Iran hopes to establish a 30-day mutual trust period before proceeding with negotiations; furthermore, the two sides have serious disagreements over whether to establish a "transit toll mechanism" in the Strait of Hormuz.

Quantum computing stocks surged as the U.S. government plans to provide $2 billion in funding to nine quantum computing companies. Under this initiative, IBM received $1 billion to build Anderon, the first dedicated quantum wafer foundry in the U.S., while chip foundry GlobalFoundries received $375 million. In exchange, the government will hold minority stakes in these quantum computing firms.

SoftBank rose 11% intraday, lifting the Nikkei 225 Index. This was driven by SoftBank's massive stake in Arm, whose stock soared 16.16% at the May 21 close to hit a fresh record high, with its market capitalization surpassing $317.3 billion and crossing the $300 billion milestone for the first time.

A leadership transition at the Federal Reserve is imminent as Warsh takes the helm. Trump will host the swearing-in ceremony for new Fed Chair Kevin Warsh at the White House, while markets bet on rate hikes. Nick Timiraos, known as the "Fed Whisperer," noted that investors are abandoning bets on Fed rate cuts, pushing up bond yields and consequently raising overall borrowing costs.

Key Data/Events Preview

On May 22, the University of Michigan will release the final reading of its consumer sentiment report for May; Kevin Warsh, the newly appointed Federal Reserve Chair, will be sworn in and is scheduled to deliver a speech at 10:00 a.m. ET.

On May 25 (next Monday), Hong Kong and South Korean stock markets will be closed for one day for Buddha's Birthday, while U.S. markets will be closed for one day in observance of Memorial Day.