Semiconductor losses weigh on technology as broader markets remain resilient

Market Commentary

US equities closed mixed on Tuesday as weakness across semiconductor shares continued to weigh on technology stocks, while stronger corporate earnings and falling oil prices supported broader market sentiment. The S&P 500 gained 0.20% and the Dow Jones Industrial Average advanced 537 points, while the Nasdaq 100 declined 1%.

Technology stocks remained under pressure as investors continue to question the pace of artificial intelligence (AI) infrastructure spending and the sustainability of data centre investment. Micron slumped 8.80%, AMD lost 8.10%, Intel fell 5.90%, and Sandisk tumbled 14.20%. Sentiment was further weakened after the successful initial public offering of China's ChangXin Memory Technologies (CXMT) boosted expectations of increased competition within the semiconductor industry. By contrast, defensive sectors outperformed. Coca-Cola surged 5% after reporting stronger-than-expected earnings and raising its full-year outlook, while Eli Lilly gained 1.90%, Berkshire Hathaway rose 3.10%, and Visa advanced 1.10% ahead of its earnings release.

The US dollar softened to 101.3 after testing a 15-month high during the previous session as lower oil prices reduced expectations of a Federal Reserve interest rate increase this year. Renewed diplomatic efforts between the US and Iran weighed on crude oil prices, easing concerns over energy-driven inflation. Nevertheless, interest rate futures continue to reflect expectations of one further rate increase later this year.

European markets ended firmer as corporate earnings and lower energy prices supported investor sentiment. The STOXX Europe 600 gained 0.40%, while the Euro STOXX 50 rose 0.20%. London's FTSE 100 advanced 0.90% to its highest level since February, supported by stronger-than-expected results from Unilever and GSK. Germany's DAX 40 gained 0.50%, reaching its highest level since early July as SAP extended recent gains following stronger-than-expected quarterly results and the next phase of its €10 billion share buyback programme. France's CAC 40 rose 0.60%, with luxury shares benefiting from stronger-than-expected results from LVMH. Technology shares remained under pressure across Europe, with ASML extending recent losses amid continued concerns over AI-related capital expenditure and growing Chinese competition.

Asian markets weakened as semiconductor shares extended their global sell-off. The Shanghai Composite declined 1.16%, while Japan's Nikkei 225 fell 3.95% to a more than two-month low as technology stocks came under renewed pressure. Investors also continued to monitor developments ahead of China's upcoming Politburo meeting for further guidance on economic policy.

South African equities closed marginally lower, with weakness in resource counters outweighing gains across industrials and financials. The FTSE/JSE All Share Index declined 0.19% to 109 904.12 points, while the Top 40 Index eased 0.27% to 101 832.16. Resource shares came under pressure as weaker precious metal prices weighed on the sector, with the Resources 10 Index falling 1.88% and the Metals and Mining Index declining 1.70%. Industrials gained 0.69%, while financials advanced 0.27%.

The rand strengthened against the major currencies, appreciating 0.55% against the US dollar to R16.69/$, gaining 0.55% against the British pound to R22.18/£, and strengthening 0.39% against the euro to R19.01/€.

Commodity prices were broadly weaker. Brent crude oil declined 4.92% to US$84.01 per barrel as renewed diplomatic efforts between the US and Iran eased concerns over supply disruptions. Gold fell 1.24% to US$4 025.03 per ounce, silver declined 2.17% to US$57.14 per ounce, and platinum eased 1.06% to US$1 614.70 per ounce.