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