IN THIS EDITION
AI-linked equities test investor risk appetite
The pullback in megacap technology and semiconductor shares highlighted the need for valuation discipline after a strong AI-led advance.
U.S. inflation and activity data keep policy expectations in focus
Sticky PCE inflation alongside firmer business activity kept the Federal Reserve’s policy path central to investor expectations.
Europe and the UK face softer growth signals as inflation pressures ease
Easing inflation expectations and lower oil prices offered some relief, but weaker UK indicators pointed to a more fragile regional backdrop.
Asian markets remain sensitive to technology positioning and policy shifts
Japan and China both felt pressure from the global semiconductor sell-off, while local inflation and activity data added to policy and growth uncertainty.
South Africa contends with pipeline inflation and softer growth
Higher producer inflation and downgraded growth forecasts point to a less comfortable domestic mix, even as the rand remained broadly stable and bond yields eased.
AI-linked equities test investor risk appetite
Global markets were volatile over the last week as attention shifted from oil relief to renewed pressure in technology and AI-linked shares. The sell-off began in U.S. megacap technology before spreading into semiconductors, with Korea’s KOSPI falling sharply and the SOX chip index declining around 8% as investors questioned how far the AI trade had already run.
Micron Technology’s strong earnings update briefly steadied sentiment, but the rebound faded quickly. That left investors debating whether the pullback was normal quarter-end volatility or a sign that positioning in AI-linked shares had become stretched.
U.S. inflation and activity data keep policy expectations in focus
Monetary policy uncertainty added to the pressure. U.S. PCE inflation rose to 4.1% year-on-year in May, while core PCE increased to 3.4%, keeping attention on whether the Federal Reserve may need to keep policy restrictive for longer.
U.S. equities were mixed over the last week. The Nasdaq fell 4.60%, and the S&P 500 declined 1.96%, weighed down by renewed pressure in large-cap technology and AI-linked shares. The Dow Jones, however, gained 0.60%, showing that the sell-off was concentrated in large-cap growth and technology shares.
On the data front, first-quarter U.S. GDP was revised higher to an annualised 2.1% from 1.6%, helped by lower imports, while consumer spending was revised down. Business activity also improved in June, with the composite PMI rising to 52.2, its highest level in five months, while manufacturing activity reached its strongest level since May 2022.
Europe and the UK face softer growth signals as inflation pressures ease
In Europe, inflation expectations eased, with the ECB’s latest consumer survey showing that 12-month inflation expectations declined to 3.5% in May, the lowest level in three months. With oil prices also moving back toward pre-conflict levels, this helped ease some of the inflation pressure facing the ECB.
In the UK, Prime Minister Keir Starmer announced his resignation on 22 June 2026. Domestic data was weaker, with retail sales volumes falling sharply in June and the CBI balance declining to -54 from -46 in May, while manufacturing order books fell to -45, their weakest level since 2020.
Asian markets remain sensitive to technology positioning and policy shifts
In Japan, inflation and Bank of Japan policy remained in focus. Tokyo core CPI rose to 1.6% year-on-year in June from 1.3% in May, the first pickup in eight months, keeping investors focused on whether the BoJ may need to tighten policy further.
Japanese equities weakened over the last week, with the Nikkei 225 falling 2.65%. Local AI and semiconductor-linked names remained sensitive to the broader global technology sell-off, which weighed on the index into the end of the last week.
In China, investor sentiment remained weak, with technology shares under pressure. Investors had favoured other Asian technology markets earlier in last week, but the broader semiconductor sell-off later weighed on the sector.
The softer tone was reinforced by weaker recent activity data, with Goldman Sachs lowering its second-quarter GDP forecast to 3.5% quarter-on-quarter annualised from 4.0%, although it kept its full-year growth forecast unchanged at 4.7%.
South Africa contends with pipeline inflation and softer growth
In South Africa, producer inflation was the main local data point, accelerating to 7.8% year-on-year in May from 4.8% in April. The increase pointed to renewed pipeline cost pressure in the economy, reinforcing the risk that higher input costs could still feed through into consumer inflation.
The growth backdrop also remained under pressure, with S&P lowering its South African growth forecasts for 2026 and 2027 to 1.3% and 1.5%, respectively, while raising its 2026 inflation forecast to 4.3%. This points to a less comfortable mix of softer growth and higher inflation.
South African markets ended last week weaker, with the JSE All Share Index lower. Financials were the weakest major sector, falling 3.06%, while Resources declined 2.18% and Industrials lost 1.30%. Listed property was the standout performer, rising 1.29%. The rand was broadly stable against the U.S. dollar at R16.41, while the South African 10-year government bond yield moved lower to 8.34%.
Week in Review: AI Pressure Tests Risk Appetite
IN THIS EDITION
AI-linked equities test investor risk appetite
The pullback in megacap technology and semiconductor shares highlighted the need for valuation discipline after a strong AI-led advance.
U.S. inflation and activity data keep policy expectations in focus
Sticky PCE inflation alongside firmer business activity kept the Federal Reserve’s policy path central to investor expectations.
Europe and the UK face softer growth signals as inflation pressures ease
Easing inflation expectations and lower oil prices offered some relief, but weaker UK indicators pointed to a more fragile regional backdrop.
Asian markets remain sensitive to technology positioning and policy shifts
Japan and China both felt pressure from the global semiconductor sell-off, while local inflation and activity data added to policy and growth uncertainty.
South Africa contends with pipeline inflation and softer growth
Higher producer inflation and downgraded growth forecasts point to a less comfortable domestic mix, even as the rand remained broadly stable and bond yields eased.
AI-linked equities test investor risk appetite
Global markets were volatile over the last week as attention shifted from oil relief to renewed pressure in technology and AI-linked shares. The sell-off began in U.S. megacap technology before spreading into semiconductors, with Korea’s KOSPI falling sharply and the SOX chip index declining around 8% as investors questioned how far the AI trade had already run.
Micron Technology’s strong earnings update briefly steadied sentiment, but the rebound faded quickly. That left investors debating whether the pullback was normal quarter-end volatility or a sign that positioning in AI-linked shares had become stretched.
U.S. inflation and activity data keep policy expectations in focus
Monetary policy uncertainty added to the pressure. U.S. PCE inflation rose to 4.1% year-on-year in May, while core PCE increased to 3.4%, keeping attention on whether the Federal Reserve may need to keep policy restrictive for longer.
U.S. equities were mixed over the last week. The Nasdaq fell 4.60%, and the S&P 500 declined 1.96%, weighed down by renewed pressure in large-cap technology and AI-linked shares. The Dow Jones, however, gained 0.60%, showing that the sell-off was concentrated in large-cap growth and technology shares.
On the data front, first-quarter U.S. GDP was revised higher to an annualised 2.1% from 1.6%, helped by lower imports, while consumer spending was revised down. Business activity also improved in June, with the composite PMI rising to 52.2, its highest level in five months, while manufacturing activity reached its strongest level since May 2022.
Europe and the UK face softer growth signals as inflation pressures ease
In Europe, inflation expectations eased, with the ECB’s latest consumer survey showing that 12-month inflation expectations declined to 3.5% in May, the lowest level in three months. With oil prices also moving back toward pre-conflict levels, this helped ease some of the inflation pressure facing the ECB.
In the UK, Prime Minister Keir Starmer announced his resignation on 22 June 2026. Domestic data was weaker, with retail sales volumes falling sharply in June and the CBI balance declining to -54 from -46 in May, while manufacturing order books fell to -45, their weakest level since 2020.
Asian markets remain sensitive to technology positioning and policy shifts
In Japan, inflation and Bank of Japan policy remained in focus. Tokyo core CPI rose to 1.6% year-on-year in June from 1.3% in May, the first pickup in eight months, keeping investors focused on whether the BoJ may need to tighten policy further.
Japanese equities weakened over the last week, with the Nikkei 225 falling 2.65%. Local AI and semiconductor-linked names remained sensitive to the broader global technology sell-off, which weighed on the index into the end of the last week.
In China, investor sentiment remained weak, with technology shares under pressure. Investors had favoured other Asian technology markets earlier in last week, but the broader semiconductor sell-off later weighed on the sector.
The softer tone was reinforced by weaker recent activity data, with Goldman Sachs lowering its second-quarter GDP forecast to 3.5% quarter-on-quarter annualised from 4.0%, although it kept its full-year growth forecast unchanged at 4.7%.
South Africa contends with pipeline inflation and softer growth
In South Africa, producer inflation was the main local data point, accelerating to 7.8% year-on-year in May from 4.8% in April. The increase pointed to renewed pipeline cost pressure in the economy, reinforcing the risk that higher input costs could still feed through into consumer inflation.
The growth backdrop also remained under pressure, with S&P lowering its South African growth forecasts for 2026 and 2027 to 1.3% and 1.5%, respectively, while raising its 2026 inflation forecast to 4.3%. This points to a less comfortable mix of softer growth and higher inflation.
South African markets ended last week weaker, with the JSE All Share Index lower. Financials were the weakest major sector, falling 3.06%, while Resources declined 2.18% and Industrials lost 1.30%. Listed property was the standout performer, rising 1.29%. The rand was broadly stable against the U.S. dollar at R16.41, while the South African 10-year government bond yield moved lower to 8.34%.
Market Moves of the Week
Chart of the Week
Source: Bloomberg (27 June 2026)
The chart puts the scale of the AI-led semiconductor rally into perspective. SK Hynix has been one of the biggest beneficiaries of demand for AI-related memory chips, with its gains far exceeding the technology rally seen during the dot-com period. This does not mean the AI trade is over, but it explains why investors became more cautious this week as markets questioned whether parts of the chip sector had moved too far, too quickly.
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