Semiconductor pressure, China’s rebound and renewed oil strength shape July

Global equities edged higher in July, but headline gains masked a sharp rotation beneath the surface. Semiconductor shares fell after a strong first half, weighing on technology-focused markets in Japan and Korea, while value stocks and robust corporate earnings provided support. Chinese equities rallied as state-backed buying and monetary easing improved sentiment. Renewed conflict between the US and Iran pushed oil prices higher and revived supply concerns. Inflation trends diverged across economies, with US and UK inflation easing while euro-area and Japanese inflation increased. Central banks largely held policy rates steady as they assessed energy-related risks and slowing economic momentum.

Key highlights:

• A sharp semiconductor reversal drove divergence across global equities, offset by value shares and strong corporate earnings.
• Policy support lifted Chinese markets, while chip-heavy markets in Japan and Korea came under pressure.
• Renewed US-Iran tensions revived oil supply concerns and refocused attention on energy-driven inflation risks.

Global equity markets edged higher in July, with the MSCI World returning 0.5% (USD), while the MSCI Emerging Markets Index fell 3.1% (USD). The calm at headline level masked large moves beneath the surface. A 21% slump in semiconductor shares, which had risen 102% over the first half of the year, was offset by gains in value stocks and a strong second-quarter earnings season. Renewed conflict between the US and Iran pushed energy prices sharply higher, reversing June’s decline. Beijing’s stimulus measures drove a rally in Chinese equities, while chip-heavy markets in Japan and Korea fell.

The US economy expanded at an annualised rate of 1.5% in the second quarter, down from 2.1% in the first quarter and below expectations, as net trade weighed on growth. Headline inflation fell to 3.5% year-on-year in June from 4.2% in May, marking its first decline in five months, as energy costs rose 15.7% after increasing 23.5% previously. The unemployment rate edged down to 4.2% from 4.3%, although the decline reflected a shrinking labour force rather than stronger hiring, with labour force participation at its lowest level since March 2021.

The Federal Reserve held its target range at 3.50% to 3.75% in a 9-3 vote, with three members preferring a 25-basis-point increase. US equities were mixed, with the S&P 500 easing 0.1% (USD) as semiconductor shares fell sharply. Second-quarter earnings were strong, with about 86% of reporting companies beating estimates and aggregate earnings rising 20% year-on-year, led by cloud growth at Microsoft and Amazon.

European equities advanced, with the STOXX All Europe Index gaining 1.4% (EUR). Euro-area inflation accelerated to 2.9% year-on-year in July from 2.8% in June, driven by a renewed surge in energy prices where inflation rose to 10.0% from 8.5% as hostilities resumed. Core inflation edged up to 2.5% from 2.4%, while services inflation increased to 3.3% from 3.2%. The European Central Bank left its three key interest rates unchanged on 23 July, noting that the full inflationary impact of the energy shock had yet to materialise.

UK inflation eased to 2.6% year-on-year in June from 2.8% in May, its lowest reading since March 2025. The decline was supported by moderating transport inflation, which slowed to 5.7% from 6.8% as diesel and petrol prices fell. Food inflation cooled to 1.7% from 2.2%. The Bank of England held its Bank Rate at 3.75% in a 6-3 vote, with three members preferring a 25-basis-point increase to guard against second-round effects. The FTSE 100 gained 3.6% (GBP), making it one of the stronger developed markets.

Japan’s Nikkei 225 fell 8.1% (JPY), making it the weakest of the major markets, as the global semiconductor sell-off weighed heavily on its technology-heavy composition. Headline inflation accelerated to 1.7% year-on-year in June from 1.5% in May, its highest level since December, as government energy subsidies were scaled back. Food inflation slowed to 3.2% from 3.5%. The Bank of Japan held its policy rate at 1.0% in an 8-1 vote, leaving borrowing costs at their highest level since 1995, with one member preferring an increase to 1.25%.

Chinese equities were the standout performers in emerging markets, with the MSCI China Index rising 9.0% (USD). However, the onshore CSI 300 fell 7.4% (CNY), as the rally was concentrated in offshore listings. Beijing mobilised state-linked institutions to support equities, while the People’s Bank of China introduced monetary easing measures during the month. President Xi Jinping called for an acceleration in technology self-reliance. Inflation eased to 1.0% year-on-year in June from 1.2%, its softest level in three months, as transport costs moderated on lower fuel prices and food prices declined for a third consecutive month.

Emerging markets underperformed, with the MSCI Emerging Markets Index returning -3.1% (USD), despite strength in China. The decline was driven by Korean semiconductor shares, with SK Hynix falling approximately 30% and Samsung Electronics declining about 15%. Together, the two companies detracted roughly 4.1 percentage points from the index return. India’s SENSEX rose 2.3% (INR), while Brazil’s Bovespa gained 3.5% (BRL).

Brent crude rebounded sharply, rising 20.5% to end the month near $87.93 per barrel. Renewed US airstrikes on Iranian targets and Iranian retaliation against shipping revived supply concerns before diplomatic engagement resumed late in the month. Platinum climbed 6.2% to $1 648.38 and palladium rose 5.9% to $1 283.46, while gold edged up 1.0% to $4 046.15 and silver eased 1.7% to $57.60. Copper advanced 3.7% to $13 835.70 and coal rose 0.7% to $108.25, while iron ore fell 4.7% to $94.35.

The US dollar weakened against major developed market currencies, with the US Dollar Index declining 1.3% over the month. The rand nevertheless weakened 0.9% against the dollar to close at R16.55 per US dollar, pressured by the SARB’s unexpected decision to leave interest rates unchanged. The rand also weakened 2.5% against the pound to R22.28 and 1.8% against the euro to R19.06. It remained broadly unchanged against the dollar for the year to date.

World Market Indices Performance 

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