Mixed US session as softer producer inflation tempers chip sell-off

Market Commentary

US equities closed mixed on Wednesday as softer-than-expected producer inflation data reduced expectations of a Federal Reserve (Fed) interest rate hike this month, helping offset a sell-off in semiconductor shares. The S&P 500 gained 0.40% and the Dow Jones Industrial Average added 150 points, while the Nasdaq 100 declined 0.30%. June producer prices, together with the softer consumer inflation data released a day earlier, reinforced expectations that the Fed is unlikely to raise interest rates at its upcoming meeting, despite elevated energy prices linked to the escalating conflict between the US and Iran.

Financial shares remained supported by the US earnings season. Morgan Stanley gained 0.20% after reporting stronger results, joining JPMorgan (+1.10%) and Goldman Sachs (+1.10%) in posting gains. BlackRock surged 6.60% following its earnings release, while Johnson & Johnson declined 2.70%. Large technology companies also advanced, with Microsoft rising 2.80%, Amazon gaining 3% and Alphabet adding 3.20% after strong results from ASML. However, losses among major memory chipmakers and SpaceX (-0.60%) weighed on the Nasdaq.

European markets ended mixed as investors balanced corporate earnings against an uncertain macroeconomic backdrop. The STOXX Europe 600 rose 0.20%, while the Euro STOXX 50 edged 0.20% lower. ASML raised its near-term guidance and announced plans to expand production capacity following stronger-than-expected quarterly results driven by demand from chipmakers, although the share closed flat after reversing early gains. Luxury stocks outperformed after Richemont delivered strong earnings, lifting its shares by 6%, while LVMH and Hermès gained around 2.50% each. Banks weakened as higher sovereign bond yields weighed on the outlook for lending, while elevated energy prices reflected ongoing tensions between the US and Iran. The UK's FTSE 100 edged marginally lower as mining shares came under pressure following weaker-than-expected Chinese GDP data, although Barratt Redrow and Persimmon gained strongly after positive company announcements.

Asian markets delivered a mixed performance. China's Shanghai Composite fell 0.29% and the Shenzhen Component lost 0.97% after second-quarter GDP growth slowed to 4.30% year-on-year, below expectations, while fixed-asset investment also disappointed. Industrial production accelerated to a three-month high and retail sales unexpectedly rebounded, but technology shares led declines. In Japan, the Nikkei 225 rose 1.49% as investors welcomed softer US inflation data and looked beyond geopolitical tensions in the Middle East. Technology and artificial intelligence-related companies led gains, with Lasertec, Advantest, Kioxia Holdings and Tokyo Electron among the strongest performers.

South African equities ended lower on Wednesday, with the FTSE/JSE All Share Index declining 0.26% and the JSE Top 40 easing 0.21%. Losses were driven primarily by weakness in the resource sector, with the Resource 10 Index falling 2.80% and the Metals and Mining Index shedding 3.30%. Financial shares also closed lower, with the Financial 15 Index down 0.26%. Industrial shares outperformed, with the JSE Industrial 25 Index gaining 2%. The rand held firm against most major currencies during the session. At 20h07 SAST, the rand traded at R16.29 against the US dollar, R22.08 against the pound and R18.69 against the euro.

In commodity markets, Brent crude fell 0.59% to $84.23 per barrel after earlier gains moderated, although continued US-Iran tensions kept supply concerns elevated. Gold gained 0.32% and platinum rose 1.63%, while silver fell 1.31%.