Equities: AI reassessment shakes global markets – Deutsche Bank

Deutsche Bank strategists highlight a sharp reassessment of the AI (Artificial intelligence) trade with semiconductor and Korean equities suffering steep monthly losses despite strong YTD gains. European stocks outperformed as sector rotation and solid Eurozone growth supported broader indices.

AI trade drives sharp equity swings

"A reassessment of the AI trade was the key theme in equities, with the Philly Semiconductor index (-20.6%) seeing its worst month since 2008 and the KOSPI slumping by -22.2% despite a late rebound, though both are still up over +50% YTD. European stocks outperformed and sectoral rotation meant that many broader indices are still within touching distance of record highs."

"Equities saw a solid gain in aggregate, with the S&P 500 advancing +1.05% (+0.70% Friday). But the standout theme was continued volatility around the AI trade, with the Philly semiconductor index ending the week -4.30% lower despite a +8.19% spike on Thursday. The Mag-7 (+4.16%) had a strong but varied week, with Microsoft (+21.75%) and Amazon (+17.00%) surging after their earnings, but Apple (-7.24%) and Meta (-6.47%) losing ground after theirs."

"Internationally, the volatility was most extreme for Korea’s KOSPI index, with a +17.91% surge on Friday still leaving the index -1.42% lower on the week after it plunged across Tuesday-Wednesday.

"A solid Eurozone Q2 real GDP print (+0.4% qoq) also helped, sending the DAX (+2.11%), CAC (+1.64%) and FTSE 100 (+1.23%) to strong advances, though the STOXX 600 (+0.73%) was weighed down by a -8.24% decline for ASML."

"S&P (+0.61%), Nasdaq (+0.96%) and Stoxx (+0.93%) futures have also rallied this morning although the ongoing tech volatility is holding back the KOSPI (-4.92%) and the Nikkei (-0.93%). The Hang Seng is flat and mainland Chinese markets are down a few tenths of a percent."

"Corporate earnings remain another major theme. In the US, reports are due from Palantir (today), SpaceX, AMD, Caterpillar, McDonald’s and Toyota (tomorrow), before attention shifts to Eli Lilly, Walt Disney and Uber (Wednesday). European highlights include Novo Nordisk and Siemens Energy (Wednesday), followed by Siemens and Rheinmetall (Thursday), while Japan’s reporting calendar includes SoftBank and Nintendo (Thursday)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)