Oil (UKOIL) up 12% on the week as the US-Iran conflict ramps into its fifth month. A very volatile and ultimately negative week for chip stocks and the broader tech sector. JPY traders still waiting for intervention as Katayama warns without follow-through once more at 40-year lows. Metals sliding as markets reprice rate hike expectations. SpaceX now trading lower than its IPO price after failed rocket launch. IBM through its worst day of trading since 1968, down over 25% on an earnings warning and mea culpa from its CEO.
On top of renewed inflationary pressures and geopolitical threats, concern – or excitement depending on your view – around the extraordinary amounts invested in AI of late remains a key theme. This week it was the side of concern that dominated. The Philadelphia Semiconductor Index (SOXX.ETF), now a key gauge of the sector, is down close to 20% from its highs in June. Chip stocks now make up over 20% of the S&P 500, up from around 8% three years ago, so the sector is an increasingly significant force on markets in general, via both size and volatility. In recent weeks, moves have been largely specific to niches within the sector, e.g. memory chip manufacturers down while mature-node foundries were up. Yesterday though, they all suffered. The SK Hynix ADR dropped over 13% in one session, Micron and AMD both slid more than 5%, and Intel was down close to 8%.
Following its worst quarter since 2013, gold (XAUUSD) has continued to drop. Back on the wrong side of $4,000 now, it is down around another 4% this week. The re-escalation of the conflict in the Middle East has pushed the USD and in particular oil higher. “Not a single drop of oil and gas will be exported from the region as long as the American aggressions continue” proclaimed an IRGC spokesperson today. And indeed shipping traffic through the Strait of Hormuz has fallen right back. This inflationary shift has in turn brought rate hike expectations forward, despite soft data releases from the US this week. As a result, metals have suffered. Are the technical buy signals to be followed, or will the threat of imminent rate hikes continue to pile on the pressure?
The first rocket launch following SpaceX’s (SPCX.US) record-breaking IPO was aborted this morning. It is being framed as only a minor setback, that will be remedied within a few days. Nonetheless, the negative optics were not what Musk and the team needed, in a week where the stock price had already slid back through its IPO level. Indeed the share price dropped further on the news, now down close to 45% from its highs.
Before the company can fulfil its contract with NASA to land astronauts on the moon, let alone transport a million residents to Mars, the company must of course prove that their rockets are safe. Doing so requires, among other checks, at least ten consecutive safe launches. Many eyes will be on the Starbase for the next attempt, including now of course retail traders. Also on the radar for shareholders is the lifting of lockup restrictions for those who held shares before the IPO, the first of which will lapse after its Q2 earnings report.
Australian unemployment numbers will be a key factor in determining the likelihood of further rate hikes by the RBA in 2026. No change is expected in Europe this month as the ECB hands down its rate decision, following its first hike since 2023 at the June meeting. Coming shortly before the BoJ meeting, CPI in Japan is expected to rise 1.7% y/y.
US earnings season ramps up. Wednesday’s post-market session will be one to watch, with Alphabet, Tesla, IBM and ServiceNow all releasing their Q2 figures after the bell. Go well out there.
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