Stocks saw their worst week since April, with significant indexes under pressure amid a massive global software glitch that stranded flights, interrupted healthcare services, and interfered with business worldwide.
The NASDAQ fell nearly 4% as several mega-cap technology names slid for the second week. The S&P 500 sustained a smaller weekly decline of around 2%, while the Dow Jones was an outlier with a nearly 1% gain.
What You Will Learn
- Understand why major stock indexes had their worst week since April, driven by a global software glitch.
- Learn about the sharp decline in chip stocks due to potential US export curbs on semiconductor technology to China.
- Discover the reasons behind the Russell 2000’s 7.7% rise and the increase in market volatility.
- See how geopolitical tensions and inflation data influenced US, European, and Japanese markets.
Decline in Chip Stocks and Growth Stocks
A significant factor in the underperformance of growth stocks was a sharp decline in chip stocks following news that the Biden administration had told allies it was considering severe export curbs if companies such as Tokyo Electron and the Netherlands’ ASML Holding continued providing China with access to advanced semiconductor technology.
Chip giants such as Taiwan Semiconductor Manufacturing, Broadcom, and Nvidia also fell sharply.
Surge in Small Cap Stocks and Volatility
The Russell 2000, an index of small-cap stocks, surged 7.7% over the last two weeks. This can be seen as an indicator of a rotation towards market segments that may be the biggest beneficiaries of potential interest-rate cuts.
The most notable change last week was the CBOE’s Volatility Index, which climbed 32% weekly.
The rapid rise in volatility reflects tech earnings in the coming weeks and geopolitical worries, including concerns about the US presidential race as investors contemplate what sort of policies might change if control shifts in Washington, DC.
European Stocks and ECB Decision
European stocks followed their US counterparts and ended the week lower amid rising tensions between the US and China. Germany’s DAX fell 3.1%, France’s CAC 40 lost 2.5%, Italy’s FTSE MIB gave back 1.1%, while the UK’s FTSE 100 index declined 1.2%.
As expected, the European Central Bank (ECB) kept its key interest rates unchanged at 3.75%. The ECB said it would not pre-commit to any rate path and emphasised that economic data would guide its decisions.
UK Inflation and Market Impact
In the UK, headline inflation held steady at 2% in June, partly due to a meaningful decline in energy costs compared with last year.
Core inflation, which excludes the impact of energy and food, remained at 3.5%. Services inflation, which policymakers closely watch, stayed at 5.7%.
Japanese and Currency Market Movements
Japan’s stock markets generated negative returns over the week, with the Nikkei 225 falling 2.7% and the broader TOPIX Index down 1.2%.
The US dollar index rose weekly against a basket of major currencies in the currency markets. EUR and GBP weakened 0.2% w/w and 0.6% w/w, respectively, against the dollar, while JPY and CHF appreciated last week.
Investment Management Services
Unlock your financial potential with AHR Group. Our investment management services are designed to help grow your wealth.
