Global markets closed out the week on a cautious note as investors weighed a fresh bout of technology weakness against escalating tensions in the Middle East. Wall Street’s sell-off in chip and AI-linked names spilled over into Asian trading on Friday, while European equities held broadly steady as strong corporate updates offset concerns over rising energy costs. Currency and commodity markets also moved, with oil on track for a sharp weekly gain and the US dollar continuing to soften against the euro.
US markets extend the technology pullback
Thursday’s session in New York was dominated by a rotation away from big tech, as investors took profits following the sector’s strong run over recent months. The pullback was broad enough to drag the wider market lower, even as some defensive sectors managed to post gains. Despite the weakness in technology, the broader market backdrop remains constructive, with signs of a gradual broadening in market leadership as investors continue to favour a more diversified mix of cyclical and defensive sectors.
Chip stocks lead the Nasdaq lower
The Nasdaq Composite dropped 1.5%, once again underperforming the rest of the market, driven by a broad sell-off in semiconductor shares. The S&P 500 slipped 0.5%, while the Dow Jones Industrial Average held up comparatively well, edging just 0.2% lower. Communication services and technology were the day’s weakest sectors, whereas consumer staples, healthcare and real estate attracted buyers looking for shelter from the volatility.
Bank earnings and softer inflation offer some reassurance
Away from the tech rout, the underlying tone was more encouraging. A wave of second-quarter results from major US lenders beat expectations, lifting confidence ahead of the more closely watched earnings due from large technology companies in the coming days. On the inflation front, June producer prices rose by less than economists had forecast, building on an already soft consumer inflation print and reinforcing bets that the Federal Reserve will hold interest rates steady for now. That said, renewed US military action against Iran and warnings over possible disruption to Red Sea oil shipments kept a lid on risk appetite. Although oil prices eased slightly on the day, they remained elevated, while Treasury yields ticked higher as traders balanced encouraging data against a more cautious outlook for monetary policy.
Asia and Europe track a cautious global mood
The weakness that gripped Wall Street carried through into Friday’s Asian session, while European markets closed out Thursday largely unmoved as investors sifted through a mixed bag of company news.
Asian equities open lower on AI valuation worries
Asian markets started Friday on the back foot, with the MSCI Asia-Pacific index down a marginal 0.06% and Japan’s Nikkei sliding a sharper 2.8%. Investors continued to rotate out of technology names and into banking stocks, encouraged by a strong run of lender earnings, amid growing debate over how sustainable the current pace of AI investment really is. US equity futures also pointed lower heading into the session, with continued pressure on chip stocks compounded by a disappointing sales outlook from Netflix. Traders remained wary given the ongoing US-Iran standoff and a more hawkish tone from Federal Reserve officials, with attention now turning to results from Alphabet, Microsoft, Amazon and Meta.
European benchmarks hold steady despite energy concerns
European equities finished Thursday’s session essentially flat, with both the Euro STOXX 50 and the broader STOXX Europe 600 closing unchanged.
Enel, Schneider Electric and Siemens Energy: the notable laggards, all falling between 1.5% and 2.5%.
LVMH and Hermès: each rose 1.5% after Richemont posted stronger than expected results.
Publicis: climbed 3% on the back of upgraded guidance.
Currencies and commodities stay in focus
Beyond equities, currency and commodity markets reflected the same push and pull between softer US inflation data and mounting geopolitical risk.
The dollar softens as rate hike bets are pared back
US dollar index hovered around the 100.7 mark and remained on course for a weekly decline, as cooler than expected US inflation figures reduced expectations of near-term Federal Reserve rate hikes.
EUR/USD traded around 1.1436, with the greenback weaker against the euro as markets priced in a more cautious Fed stance despite ongoing Middle East tensions and inflation risks.
Oil heads for a double-digit weekly gain
Brent crude traded close to $85 a barrel, supported further by a decline in US crude inventories, though markets continued to weigh the chances of a prolonged standoff against the possibility of a diplomatic breakthrough.
Oil prices pushed higher on Friday and were on track for weekly gains of more than 11%, as the deepening US-Iran conflict stoked fears of supply disruption across the Middle East.
Stocks and sectors on the move
A number of individual names made sharp moves this session on the back of earnings, analyst rating changes and other company-specific news, offering a useful read on where investor conviction currently sits.
Technology and AI names dominate the headlines
SpaceX forced to abort the 13th test flight of its Starship rocket moments before launch after several engines failed to start, triggering an automatic shutdown, with shares slipping almost 4% in after-hours trading. Elon Musk said another launch attempt could take place within days; the setback follows previous engine issues and may delay testing.
Netflix fell around 9% after guiding to weaker than expected third-quarter revenue and earnings, even though its second-quarter results beat estimates, while revenue narrowly missed expectations. The company reported growth in advertising and viewer engagement while shifting investor focus towards revenue and operating profit by reducing viewing-hours reporting.
Alphabet shares dropped 4.4%, wiping out roughly $200 billion in market value, after reports emerged that the launch of its Gemini 3.5 Pro AI model has been pushed back by several months, fuelling concern that OpenAI and Anthropic are pulling ahead in AI capabilities, particularly coding; investors now await Alphabet’s earnings for updates on its AI strategy.
Citi on Alphabet, Meta and Amazon flagged that the three could collectively swing to negative free cash flow in 2027 and 2028 as combined AI infrastructure spending surges to $801 billion; while demand for AI remains strong, the scale of capital investment is expected to weigh heavily on cash generation and raise questions over returns.
Morgan Stanley on Apple pointed to China’s approval of Apple Intelligence as a major catalyst for Apple, where AI features are highly valued, with Alibaba and Baidu supporting the rollout, ahead of Apple’s first foldable model; analysts see potential upside as sales momentum improves.
Chipmakers and hardware suppliers post mixed results
TSMC delivered a record quarter, with net profit up 77% year on year and revenue beating expectations, while full-year revenue growth guidance was raised to above 40% on the back of strong AI-related demand; shares still fell, however, as investors focused on rising capital expenditure, expanding US investment and softer margin guidance tied to its 2nm production ramp.
Micron announced long-term supply agreements with Qualcomm, Harman and several automotive suppliers to secure memory and storage chips for AI-enabled vehicles, providing stable pricing and supply as demand for AI memory grows and supporting next-generation software-defined vehicles and Micron’s long-term automotive business.
OpenAI‘s Sam Altman publicly acknowledged the company had underperformed over the past year, taking personal responsibility for its shortcomings, and pledged a renewed focus on users, promising significant new developments and a stronger year ahead. Altman also emphasised greater user freedom, while appearing to criticise rivals favouring stricter AI guardrails.
Financials, healthcare and industrials deliver solid updates
GE Aerospace lifted its 2026 profit forecast after a strong quarter driven by resilient demand for engine maintenance and spare parts despite higher fuel prices and fewer flight departures, with revenue up 21% and commercial engine and services sales jumping 27%, reflecting robust aftermarket demand and improving growth expectations.
U.S. Bancorp posted record revenue on the back of solid loan growth, higher net interest income and broad-based fee gains, with profit rising 20% and the BTIG acquisition boosting capital markets revenue by 62.5%, supported also by improving credit quality and record consumer deposits.
UnitedHealth beat expectations on both earnings and revenue, with adjusted EPS of $6.38 and revenue of $112 billion, and raised its full-year earnings and operating cash flow guidance, reflecting improving medical costs, stronger margins and operational progress; shares rose more than 8% as investors welcomed the stronger outlook and faster-than-expected recovery.
Publicis raised its 2026 organic growth forecast to 4.5–5.0% after stronger second-quarter performance, driven by resilient demand in North America and Europe, and increased its free cash flow outlook, citing strong new business wins, AI investment and acquisitions, while reaffirming expectations for a slight improvement in operating margins.
PayPal‘s board is reportedly resisting a $53 billion takeover approach from Stripe and Advent International, viewing the offer as undervaluing the business and weighing it against financing and regulatory risks alongside the group’s turnaround strategy and the possibility of rival bids, with the consortium having reportedly secured financing and considered remedies to address antitrust concerns.
Cantor Fitzgerald on PayPal suggested any revised bid could climb toward $70 per share, above the reported $60.50 bid from a consortium including Stripe, Block and Advent International, with the firm’s valuation analysis indicating PayPal’s businesses may be worth more, while highlighting potential impacts on payment industry partners and competitors.
Analyst ratings
ASML (Bernstein / Barclays) Bernstein raised its price target to €2,500, citing higher capacity, improving EUV pricing and better margins, while Barclays lifted its target to €2,400, highlighting stronger gross margins and sustained demand; both firms increased earnings forecasts and remain positive on ASML’s long-term growth outlook.
SpaceX (Piper Sandler) initiated coverage at Neutral with a $156 price target, citing near-term headwinds including lock-up expiries, uncertainty over a potential Tesla acquisition and heavy AI infrastructure spending; while positive on its long-term prospects, the broker believes these factors could limit near-term upside despite SpaceX’s strong competitive position.
AeroVironment (Raymond James) upgraded to Outperform with a $210 price target, citing improved risk-reward after earnings expectations reset lower, with bookings and backlog growth expected to recover, while highlighting potential from the US Army’s E-HEL programme, Domestic Shield contract, new platforms and rising international demand.
European earnings (Citigroup) noted that European corporate earnings upgrades have reached their strongest level since 2021 and are close to record highs, with around 80% of sectors now seeing net earnings upgrades and history suggesting stronger earnings growth and generally favourable market performance over the coming months.
What to watch next
With the trading week drawing to a close, attention now turns to a fuller slate of US economic releases due on Friday.
Friday’s US economic calendar
Investors will be watching June housing starts and building permits, import and export prices, industrial and manufacturing production, capacity utilisation figures, and the preliminary University of Michigan consumer sentiment and inflation expectations survey. The weekly Baker Hughes rig count is also due, while the corporate earnings calendar is comparatively quiet.
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