Markets Briefing: Chip Rout Batters Korea as Missiles Lift Crude Before an Unreadable Fed
Asian equities fell for a second session as the unwind in memory shares turned violent, though the worst of it was pared as the session wore on. Korea took the damage, with the Kospi 200 down 6.31 per cent after recovering from a far steeper intraday fall, and the trigger was a memory maker that beat on almost every operational measure and still dropped sharply, because the record capital spending plan attached to those results landed at the exact moment investors began asking whether artificial-intelligence spending will earn a return (BBG).
One bank's Japan strategist argued the correction has lowered the bar for earnings to impress and that the story is not broken, but pointed out that hedge fund gross and net exposure to Japan sits above the 98th percentile of its five-year range, which is why the bank expects volatility to persist in the near term (BBG). Wall Street banks including Goldman Sachs and JPMorgan Chase have demanded additional collateral from hedge funds whose books are concentrated in the sector, calls largely triggered automatically by the volatility, after a build-up in gross leverage over the first five months of the year that Goldman describes as the largest cumulative increase since it began tracking the data in 2016. Long-short and multi-strategy funds both had their worst single day since the market swings of 2020 (FT).
The regional picture was uneven. MSCI's emerging market index dropped 1.59 per cent, yet the Nikkei pared most of its losses to close 0.40 per cent lower; Hong Kong rose 1.46 per cent; mainland Chinese shares gained 0.73 per cent; and Australia added 1 per cent. American index futures steadied as the European morning wore on, with the Nasdaq little changed and the S&P 500 marginally higher. Washington moved overnight to bar imports of new Chinese humanoid and quadruped robots and connected power inverters, an order the Federal Communications Commission framed as a matter of supply-chain and cybersecurity risk to the American artificial-intelligence buildout. (Reuters).
Central banks dominate the day, and the Federal Reserve decision at 20:00 CET is the least predictable in years. Markets price a 29.4 per cent chance of a quarter-point increase at a meeting most economists expect to pass without one, and positioning in federal funds futures settling after the decision has reached an all-time high, surpassing the record set in October 2024 (BBG). The argument for moving has grown louder, with Citadel Securities switching its base case to an increase and PGIM warning the market is underestimating the risk, while a rates strategist at Bank of America said the market is pricing a very real risk of a rise (BBG). Against that, Meredith Whitney expects a hold paired with hawkish language, arguing the chair's bias is to wait and be right (BBG). The Bank of England, meanwhile, has opened a supervisory review of prime brokerage in London, concerned that exposures to a small number of Asian artificial-intelligence companies have become dangerously concentrated as the business boomed, and that some clients may be using options to lever those bets further (FT).
In currencies, the dollar softened marginally, with the Bloomberg dollar index down 0.08 per cent. The yen firmed to 163.55 against the US dollar, a gain of 0.18 per cent, but stays close to the level market participants associate with official action after the finance minister's warning about excessive volatility, and overnight index swaps show about a 29 per cent chance of a Bank of Japan increase by September and around 78 per cent by October (BBG). The Australian dollar fell 0.29 per cent on its inflation undershoot, and the Korean won firmed 0.37 per cent even as the local equity market fell.
Government bonds were quiet by comparison. The Japanese ten-year yield sits at 2.761 per cent, down two basis points, with the futures contract little changed, in a market where the country's largest pension fund has just hired active domestic bond managers for the first time in five years after losing 5.1 per cent on its domestic debt book, a decision it took amid a drop in bond prices punctuated by bouts of volatility (BBG). The US ten-year yield was little changed at 4.6083 per cent and the two-year at 4.2871 per cent.
WTI rose 3.49 per cent after Iran fired ballistic missiles at American forces without prior provocation, all of which were intercepted, prompting American and Saudi strikes on Iran-backed groups in Iraq (BBG). Few vessels are transiting the Strait of Hormuz with transponders on; Iranian state media claimed three tankers were halted, and Tehran has rejected the Omani proposal for shared control of the waterway in favour of one giving it more authority (WSJ). The Houthis declared a blockade last week on vessels calling at Saudi ports, and China has since held direct talks with the movement to secure safe passage for its tankers, clearing each vessel individually as Beijing tries to keep Saudi crude moving from Yanbu to replace barrels stranded by the closure of Hormuz. Two supertankers have already turned back out of the Gulf of Aden (Reuters). Grains added 0.52 per cent as attacks on Black Sea shipping threatened exports from two of the largest wheat suppliers, with analysts estimating several million tonnes less grain will ship this quarter (BBG). The Senate advanced the Russian energy sanctions bill, which would let the president impose tariffs on the largest buyers of Russian oil and gas, though it still needs the House, which does not sit again until September (Reuters). Gold rose 0.35 per cent to 4,043.79 dollars, and Bitcoin gained 0.79 per cent.
The overnight data run belonged to Australia. Underlying inflation undershot on both measures, with the trimmed mean up 0.8 per cent on the quarter against 0.9 per cent expected and 3.6 per cent on the year against 3.7 per cent, while headline prices rose 0.6 per cent on the quarter after 1.4 per cent previously and the monthly series slowed to 3.8 per cent from 4.0 per cent (BBG). Tradables inflation ran at 1.5 per cent on the year against 4.9 per cent for non-tradables, so the relief came from imported goods and a temporary fuel excise cut while domestic services pressure persisted. Traders cut the odds of another increase this year to about half from more than ninety per cent, and the August meeting itself now carries just 4.0 per cent. Separately, a Japanese labour ministry panel recommended raising the minimum wage by 4.9 per cent, the second-largest rise on record in absolute terms, supporting the central bank's case that pay gains are broadening (BBG).
European bank earnings led the corporate tape. UBS announced a three-billion-dollar buyback running through mid-2027, and Standard Chartered announced a one-billion-dollar programme alongside second-quarter earnings that beat expectations, while Deutsche Bank's fixed-income trading revenue jumped and outperformed most American peers, and Porsche reaffirmed full-year guidance after first-half profitability improved.
In Britain, the new prime minister meets opposition leaders today to begin cross-party talks on social care reform, with no indication yet of how the changes would be funded, a week after taking office and against a backdrop of existing fiscal questions (BBG).
Ahead today: the Federal Reserve decides at 20:00 CET with no projections and no dot plot, so the signal will come from the dissents and the chair's language rather than any forecast. The target range currently stands at 3.50 to 3.75 per cent.
Microsoft and Meta report after the American close, with Apple and Amazon following tomorrow.
Time Stamp: 29 July 2026, 08:40 CET