Markets endured a rollercoaster week, swinging from geopolitical fears, rising bond yields and a sharp technology sell-off to a powerful recovery as earnings and economic data steadied investor nerves.
Read this article to understand:
- What shifted the narrative on equity markets this week
- Why the broader equity market has remained healthier than headlines suggest
- How the uncertainty around interest rates is weighing on bonds
This week showed how quickly market narratives can shift. Middle East conflict concerns, uncertainty over interest rates and a sharp reassessment of technology shares drove significant swings across global markets.
The price of Brent crude fell sharply as fears of a wider regional conflict receded
It began with easing tensions around Iran, calming energy markets after heightened anxiety. The price of Brent crude, which had traded above $100 a barrel earlier in the month, fell sharply as fears of a wider regional conflict receded, reaching $88 a barrel by Friday morning. Signs of diplomatic engagement encouraged investors, although disruptions to shipping routes in the Gulf and Red Sea showed that the geopolitical backdrop remains fragile.
On Tuesday, doubts arose about the technology sector, whose strong performance in recent months has been one of the market’s strongest themes. Asian semiconductor shares came under significant pressure. South Korea’s KOSPI fell by more than ten per cent at one stage, with Samsung and SK Hynix suffering steep declines. Reports of rapid advances in China’s domestic semiconductor industry initially raised concerns that competition could be increasing faster than expected.
However, the sell-off was amplified by a wave of forced deleveraging, as investors who had borrowed money to increase their exposure to Korean technology shares were forced to cut positions as prices fell. This created a wave of selling that pushed the market lower and added to the sharp decline in semiconductor stocks.
Yet the broader market direction was more encouraging. Many sectors advanced and wider equity measures proved more resilient than headline indices suggested. One interesting feature of July has been the difference between the headline S&P 500 and its equal weighted counterpart. The traditional S&P 500, where the largest companies have the biggest influence, is down by 0.82 per cent for the month, while the equal weighted version, where every company counts the same, is up by 1.19 per cent. The gap suggests that weakness has been concentrated in a handful of large technology stocks. While technology has captured attention, a broader group of companies has quietly delivered solid returns.
Corporate earnings also provided a powerful boost. Microsoft reported cloud revenue growth of 43 per cent, its strongest pace in several years, restoring confidence in long-term demand for AI services. The results suggested that, despite growing concerns around valuations, corporate spending on AI infrastructure remains exceptionally strong. Investors added roughly $450 billion to Microsoft’s market value in a single session as the shares rose by close to 16 per cent on Thursday. The Philadelphia Semiconductor Index rose by more than eight per cent, while South Korea’s KOSPI staged a dramatic recovery, closing 18 per cent higher overnight on Thursday.1
Data reinforced the view that the global economy remains relatively firm
Economic data reinforced the view that the global economy remains relatively firm. US inflation was slightly softer than expected, employment indicators remained resilient and Eurozone growth surprised on the upside. China remained the exception, with disappointing data highlighting the uneven nature of the global recovery.
Meanwhile, a major test for bond markets came from the US Federal Reserve. Policymakers left interest rates unchanged, as expected, but offered little clarity on the path ahead. Investors hoping for greater certainty instead received a reminder that policymakers remain highly dependent on incoming economic data.
Bond investors responded by pushing longer-term yields higher, with the 30-year US Treasury yield reaching 5.2 per cent, its highest level since before the financial crisis. The move reflected concerns about inflation, government borrowing and the prospect that interest rates could remain high for longer than many investors had hoped.
Perhaps the week’s most compelling feature was the contrast between equities and bonds. Equity investors ended the week focusing on resilient growth, innovation and strong earnings. Bond investors remained cautious about inflation, government borrowing and higher borrowing costs. Determining which side ultimately proves correct may become one of the most important questions for investors in the second half of the year.2
Past performance is not a reliable indicator of future results.
References
- The companies mentioned are for illustrative purposes only and do not constitute an investment recommendation.
- Source of all the data for this article: Aviva Investors and Bloomberg. Data as of 31 July 2026.
