Key developments
1. Federal Reserve and bonds — largest immediate market risk
The Fed maintained its policy rate at 3.50%–3.75%, but three policymakers favoured a 25-basis-point hike. The US 10-year yield subsequently reached about 4.75%, while the 30-year yield moved above 5.2%. These levels raise discount rates across global assets and increase refinancing pressure.
Likely winners: banks with strong deposit franchises, exchanges, cash-rich companies.
Likely losers: REITs, long-duration growth stocks, highly leveraged utilities and speculative technology.
2. Earnings — AI spending is being accepted when revenue follows
Amazon reported AWS growth of 37%, raised planned 2026 capital expenditure to US$220 billion and said demand continues to exceed available capacity. Microsoft reported 43% Azure growth and stronger-than-expected revenue and profit. These results meaningfully strengthen the case that AI infrastructure demand remains real.
Apple was the contrasting result: its shares fell more than 7% after guidance highlighted component shortages and concerns that higher prices could weaken demand.
3. AI and semiconductors — fundamentals good, positioning fragile
The AI trade is no longer moving as a single block. Hyperscalers with clear cloud growth are being rewarded, while semiconductor and hardware names face scrutiny over valuations, Chinese competition and crowded positioning. Reuters reported that the Philadelphia Semiconductor Index had fallen nearly 30% from its June peak during the recent liquidation.
The correct interpretation is not “AI demand has ended.” It is that investors now require evidence of:
* revenue conversion,
* sustainable free cash flow,
* capacity utilisation,
* competitive durability.
4. Energy and geopolitics — risk premium remains embedded
Oil retreated substantially after exceeding US$100, but renewed attacks and threats to Suez and regional tanker routes have kept crude prices volatile. Another sustained rise toward or above US$100 would revive inflation expectations and increase the probability of further central-bank tightening.
Winners: upstream oil, LNG, tankers, defence and energy-services companies.
Losers: airlines, transport, petrochemicals and energy-importing Asian economies.
5. China — incremental support, not a major rescue package
China’s second-quarter growth slowed to 4.3%. Beijing has pledged faster deployment of already-budgeted infrastructure spending, including energy, telecommunications, logistics and data networks, but has avoided announcing a large new stimulus package.
China’s industrial profits still grew strongly in the first half, supported by exports, but domestic consumption, property and automobile profitability remain weak.
This favours infrastructure and export-linked Chinese companies over property developers or domestic discretionary businesses.
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