US indices close sharply lower
The S&P 500 dropped 1.2 percent, while the technology heavy Nasdaq Composite fell 2.2 percent. Investors increasingly shifted towards more defensive areas of the market, with industrials and defence stocks outperforming amid expectations of higher government spending and sustained economic resilience. Concerns that higher energy costs could slow the recent progress on inflation prompted a broad based sell-off in government bonds, sending the 10 year US Treasury yield close to 4.70 percent and the US dollar higher.
U.S. futures were little changed overnight following Thursday’s sharp technology-led sell-off, with investors remaining cautious amid elevated oil prices, geopolitical tensions and tariff concerns. Nasdaq 100 futures edged 0.1 percent lower, while S&P 500 and Dow futures were broadly flat. Alphabet and Tesla stabilised in after-hours trading following their steep declines after the earnings releases.
Alphabet and Tesla lead the technology sell off
Alphabet and Tesla both declined after reporting quarterly results. Investors focused less on current earnings and more on the substantial capital expenditure required to fund artificial intelligence investment and the pressure this is placing on cash flows. Despite the weakness among the largest names, the broader earnings season remains constructive so far, with profit growth expected to be more evenly spread across sectors as the reporting period progresses, supporting the longer term outlook for more diversified market leadership.
Meanwhile, stronger than expected US labour market data reinforced expectations that the Federal Reserve is unlikely to cut interest rates in the near term, with markets increasingly pricing in the possibility of additional policy tightening later this year should elevated energy prices feed through into inflation.
European and Asian equities extend losses
The sell off that began on Wall Street carried through to European markets on Thursday and into Asian trading on Friday, as investors across regions responded to the same combination of rising energy costs and fresh trade tensions.
European markets fall on inflation concerns
European equities closed sharply lower on Thursday as rising energy prices reignited concerns over inflation and the possibility of further interest rate increases. The Euro STOXX 50 dropped 1.7 percent to 6,210, while the broader STOXX Europe 600 index declined 1.3 percent to 638. Banking and luxury names were among the session’s biggest laggards, with UniCredit falling 4.8 percent amid investor unease over its pursuit of a controlling stake in Commerzbank, and BNP Paribas losing 2.8 percent. Luxury shares also came under pressure following Moncler’s results.
Asian markets slide sharply on Friday
Asian equities fell sharply on Friday as new US tariffs on 60 trading partners revived global trade concerns, while higher oil prices and cautious technology sentiment weighed on risk appetite. Japan’s Nikkei dropped 3.2 percent and South Korea’s KOSPI fell 5.8 percent, with chip stocks under pressure. China outperformed, supported by policy hopes.
Currencies and commodities react to escalating risks
The renewed geopolitical shock has had a clear impact across foreign exchange and commodity markets.
US dollar strengthens on hawkish expectations
The US dollar strengthened, with the dollar index trading near a three-week high at 101.3 as new tariffs, higher energy prices and expectations of a more hawkish Federal Reserve supported demand. The euro came under pressure as a result, with EUR/USD easing to around the 1.1382 level, weighed down by both renewed trade tensions and widening expectations for US monetary policy.
Oil extends its third consecutive week of gains
Brent crude climbed above 100 US dollars per barrel, while West Texas Intermediate rose back above 90 US dollars, before both benchmarks eased slightly in Asian trading on Friday. Brent was still on course for a third straight week of gains, up around 14 percent over the week, after the Houthi movement attacked Saudi Arabian tankers and the ceasefire between the United States and Iran collapsed, raising concerns over tighter supplies and renewed inflationary pressures.
Geopolitical tensions dominate the narrative
Developments in the Middle East and in US trade policy have been the two dominant forces shaping investor sentiment this week.
Tensions between the US and Iran intensify
Iran has rejected the latest US backed proposal to end hostilities, insisting that any lasting agreement must resolve the question of control over the Strait of Hormuz. President Trump has responded with threats of severe military action and has suggested that frozen Iranian assets could be used to compensate for losses suffered by shipping companies. The developments heightened fears of a wider regional conflict and further disruption to global energy supplies.
Washington imposes fresh tariffs on 60 trading partners
The Trump administration has imposed tariffs of 10 to 12.5 percent on 60 major trading partners, citing their failure to prevent imports produced using forced labour. Countries with import bans, including the UK, Canada, Mexico and India, face 10 percent tariffs, while those without such measures will be subject to 12.5 percent duties, adding fresh uncertainty to global trade.
European Central Bank holds rates amid conflict related uncertainty
The European Central Bank left its deposit rate unchanged at 2.25 percent, warning that uncertainty surrounding the Middle East conflict and higher energy prices could still fuel inflation. While policymakers expect rates to remain on hold if oil prices ease, they signalled further increases remain possible. The ECB also downgraded its Eurozone growth forecasts and raised its inflation outlook.
Equities on the move
A wide range of individual stocks experienced significant price moves this week, driven by quarterly earnings, analyst rating changes and corporate news. A short introduction to each theme is provided before the relevant company updates below.
Technology and semiconductor names
- Intel shares rose more than 5 percent in after hours trading following quarterly results and guidance that came in well above expectations, supported by strong demand for AI focused data centre processors. Management used the results to increase capital expenditure plans and reaffirmed confidence in its next generation manufacturing technology and progress in its foundry turnaround.
- Oracle shares rose 2.3 percent after hours after securing a US Department of War contract worth up to 6.99 billion US dollars over ten years, strengthening its position in the public sector, providing defence agencies with streamlined access to cloud, software and artificial intelligence solutions while improving long-term revenue visibility.
- AMD announced that its Helios AI servers have entered full production and will begin shipping later this year, with strong demand from customers including OpenAI; the company aims to challenge Nvidia in AI infrastructure, highlighting a potential 2 trillion US dollar computing market by 2030, though shares fell amid broader semiconductor weakness.
- Cerebras Systems shares rose after AMD announced a partnership between the two companies aimed at combining their technologies to improve AI inference capabilities, with a joint product to launch later this year also available through Cerebras Cloud.
- STMicroelectronics returned to profit in the second quarter, supported by robust AI related demand and revenue growth of 12.7 percent year on year, although shares fell after third quarter guidance came in below expectations despite stronger margin forecasts, with the company expecting AI data centre demand to drive further revenue growth in the fourth quarter and beyond.
- Nokia reported stronger second-quarter earnings, driven by exceptional demand from AI and cloud customers, with AI-related orders surging to €2.8 billion. However, shares slipped as the company maintained its 2026 guidance despite the strong performance, though Nokia still expects results to come in slightly above the midpoint of its forecast range.
Financials and insurance
- HSBC has agreed to sell its Singapore life insurance business to Allianz for 2.7 billion Singapore dollars as part of an ongoing restructuring programme, a deal expected to generate a pre-tax gain of 1.8 billion US dollars and to strengthen the bank’s capital position. The two companies will also enter a 15 year bancassurance partnership, with HSBC receiving an initial cash payment.
- UniCredit reported second quarter net profit above expectations and upgraded its full year profit targets, supported by strong fee income, insurance and loan growth, though shares fell after the bank announced plans to pursue control of Germany’s Commerzbank, a move that would reduce capital flexibility and halt share buybacks. The deal is expected to generate higher synergies if approved.
Industrials, travel and consumer names
- Lockheed Martin reported stronger than expected second quarter earnings and revenue, supported by robust demand and higher production across its defence programmes, and raised its full year earnings, revenue and free cash flow guidance on the back of a record 230 billion US dollar order backlog, sending shares sharply higher in pre-market trading.
- Deckers Brands exceeded first quarter expectations, surpassing 1 billion US dollars in quarterly revenue for the first time on strong growth from its HOKA, UGG, international and direct-to-consumer business, with adjusted EPS beating forecasts and full-year profit guidance raised, though shares fell 3.4 percent as revenue expectations remained slightly below Wall Street estimates.
- American Airlines reported record second quarter revenue and earnings but issued weaker than expected guidance citing higher fuel costs, sending shares lower despite robust demand, premium travel growth and strong corporate bookings, with elevated fuel prices expected to weigh on profitability in coming quarters.
- T-Mobile exceeded second-quarter earnings expectations and raised its full-year cash flow guidance, supported by strong service revenue and EBITDA growth, though shares fell after revenue narrowly missed forecasts and postpaid account additions declined; the company maintained its full-year subscriber, EBITDA and capital expenditure guidance.
- Comcast reported second-quarter earnings ahead of expectations, supported by improving broadband trends, record wireless customer growth and stronger-than-expected revenue, with Peacock achieving its first quarterly profit as subscribers increased to 48 million; shares rose despite overall revenue declining 1.2 percent year-on-year.
- Freeport-McMoRan reported stronger-than-expected second-quarter earnings, helped by a sharp rise in copper prices despite lower output at its Grasberg mine, with production remaining affected by repairs following last year’s fatal accident and reopening targeted by year-end; the company is also seeking an extension of its Grasberg operating permit beyond 2041.
Regulatory and analyst developments
- European Commission / Google: The European Commission fined Google 890 million euros for breaching the Digital Markets Act by favouring its own services in search results and restricting app developers on Google Play. While Google may appeal, regulators indicated that its recent compliance efforts have been constructive and reduce the likelihood of further penalties.
- OpenAI: Launched a new ChatGPT health feature in the US, allowing users to connect medical records and Apple Health data for personalised health insights, with users able to analyse lab results, appointments and lifestyle trends; OpenAI said health data will not be used for model training or advertising and includes enhanced security protections.
- Anthropic: Reportedly considering requiring employees to use preset stock trading plans ahead of a potential IPO to reduce insider trading concerns, and is also evaluating shareholder selling limits and post-listing lock-up periods, with discussions ongoing as Anthropic and OpenAI prepare for possible public listings amid strong AI investor demand.
- Wedbush: Added Alphabet and Reddit to its Best Ideas List, citing strong cloud growth and advertising momentum, with Alphabet’s AI investments driving cloud share gains, though higher capital spending may pressure free cash flow, and Reddit’s improving ad business and AI licensing deals with Google and OpenAI offering further growth potential.
- Morgan Stanley Portfolio Solutions: Added Broadcom and removed Eaton, seeking greater exposure to AI infrastructure growth, with Broadcom highlighted for its leadership in AI chips, networking and VMware software, while Eaton was removed due to valuation concerns and already priced-in growth expectations; the firm cited AI spending risks as a key consideration.
- Goldman Sachs: Noted that US equities have overtaken real estate as the largest component of household net financial wealth for the first time since the Second World War, driven by strong stock market gains particularly in technology shares, which have driven wealth accumulation and consumer spending; however, elevated equity exposure increases vulnerability to potential market corrections.
Upcoming economic data and events
Investors will turn their attention to a busy calendar in the days ahead. Flash PMI readings are due, with markets watching closely for signs of continued momentum in US manufacturing and services activity, alongside UK retail sales and consumer confidence figures. On the earnings front, American Express, Verizon, HCA Healthcare, NextEra Energy, Volkswagen, SLB, CATL and Canadian National Railway are among the companies scheduled to report second quarter results.
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