A look at the day ahead in European and global markets from

Ankur Banerjee

Blockbuster earnings from chipmaker SK Hynix ( SKHY ) did

little to quell investor fear about AI risk as a rout in chip

stocks deepened, setting the stage for results from Big Tech

firms this week.

SK Hynix's ( SKHY ) April-June operating profit soared more than

sixfold (that's 557% if you prefer percentages) yet still

managed to miss analysts' lofty estimates - a miss that

coincided with investors fretting about the sustainability of AI

spending and long-term returns from booming in chip demand.

Earnings from the "Magnificent Seven" members Microsoft ( MSFT )

and Meta later in the day will be a key test

of the AI trade that has shaped the global markets.

Alphabet and Tesla spooked investors last

week with negative cash flow reports, highlighting the tug of

war between the need to spend a lot to build AI infrastructure

and the need for steady cash flow and profitability.

South Korea's KOSPI dropped 12%, triggering an

increasingly common 20-minute trading halt, and carrying on from

a 10% slump in the previous trading session.

The index, which rocketed in the first half of the year due

to AI frenzy, is still the world's best performer this year but

is staring at a 35% decline in July, its worst monthly

performance.

Elsewhere, oil prices jumped after U.S. Central Command

reported the interception of Iranian ballistic missiles,

shattering the sense of calm in markets that had lasted the past

few days.

Concern about declining oil supply as well as inflationary

pressure weighed on sentiment ahead of a U.S. Federal Reserve

policy decision. Traders are pricing in a one-out-of-three

chance of an interest rate hike, with policymakers increasingly

vocal about their worries over inflation.

Still, market participants broadly expect the central bank

to stand pat so all eyes will be on Fed Chair Kevin Warsh and

his comments for hints on the rates outlook.

In Europe, a slate of earnings will provide clarity on the

state of corporate health while war in the Middle East shows no

signs of stopping soon.

Key developments that could influence markets on Wednesday:

* Earnings from Danone, Hermes, L'Oreal, UBS, Airbus, Meta,

Microsoft ( MSFT ) and Qualcomm

* Fed policy decision