Markets Briefing: Chip Rout Deepens as Nikkei Futures Drop 5.16 Per Cent and Volatility Wakes Up
The AI unwind turned into a rout on Friday. Nikkei futures dropped 5.16 per cent to 63,390 as the rotation out of technology entered a second, harder day, with Seoul spared only by the calendar: the Korea Exchange is closed for Constitution Day, newly reinstated as a public holiday (BBG (swissinfo)). European volatility futures jumped 1.05 points to 18.30, and the VIX firmed 0.63 points to 19.14 ahead of an expected weaker Western open (BBG). Crude held near one-month highs after a sixth straight night of US strikes on Iran, keeping the inflation tail of the selloff alive (BBG).
Equities sold off across the open Asian markets, with the chipmakers at the centre. Kioxia extended a fall that has halved its market value in roughly a month, with leveraged retail positioning adding to the pressure (BBG), TSMC headed for its biggest one-day drop in over a year despite solid earnings as its higher spending forecast fed the capex scepticism (BBG), and the Hang Seng and CSI 300 fell 2.53 per cent and 3.24 per cent, with mainland sentiment not helped by Xi Jinping's AI-summit debut delivering diplomacy but no new stimulus (BBG) (BBG (swissinfo)). US futures pointed lower, the Nasdaq-100 contract down 1.59 per cent at 28,759.75 and the S&P 500 contract down 0.92 per cent at 7,508.25, with Netflix's after-hours slide on a slowing sales outlook adding a second front (BBG). Alphabet's drop on reporting that its flagship AI model is months behind schedule shows how directly the model race now prices into the megacaps (BBG). India was the outlier, the Nifty 50 adding 0.79 per cent to 24,262.80 on continued foreign equity inflows (Reuters). Crypto traded as a risk asset; bitcoin down 1.12 per cent at 63,055.10 (BBG (swissinfo)). Australian bank shares completed their round trip from the May budget shock, squeezing the largest short base in years (BBG).
Central banks supplied the week's other pivot. Vice Chair Philip Jefferson, the Fed's last scheduled voice before the pre-meeting blackout begins on Saturday, said policy is well positioned but that it could be appropriate to reconsider the stance if inflation does not start cooling soon, and framed the timing of AI's supply and demand shocks as critical for policy (BBG). Dallas's Lorie Logan became the first official this cycle to call outright for modestly higher rates, and Kansas City's Jeff Schmid called inflation too hot for too long (BBG), yet markets spent the week trimming hike bets after the soft CPI and PPI prints, with rate-options traders unwinding hedges for a 2026 tightening (BBG). In Tokyo, the government's final economic blueprint restored the language protecting the Bank of Japan's independence over policy tools, calming a nerve the earlier draft had exposed (Reuters).
The dollar was steady to firmer on the day but headed for a weekly decline as the hike-bet unwind dominated, the index at 100.760 (Reuters). The yen sat at 162.405, pinned near its weakest in four decades, even after Finance Minister Katayama escalated her language to a threat of decisive action at any time, the phrase that conventionally signals intervention, ahead of a Japanese holiday weekend that has hosted late-night operations before (BBG). The Antipodeans softened with risk appetite, the Aussie down 0.22 per cent at 0.69798 (Reuters), and the rupee at 96.34 sat within half a per cent of its record low despite resumed foreign inflows, with the central bank intervening only in measured size (Reuters).
The US 10-year yield eased 1 basis point to 4.547 per cent as the hike-unwind flows continued (BBG), and the 10-year JGB dipped 0.7 basis points to 2.714 per cent on the blueprint relief (Reuters). In the UK, major investors are pressing the Bank of England to slow or stop sales of long-dated gilts at this autumn's quantitative-tightening decision, arguing demand for long paper has structurally declined, the British leg of a global long-end debate (FT).
In commodities and geopolitics, WTI eased 0.80 per cent to 78.86, holding most of its weekly surge, as the US struck bridges around Bandar Abbas to sever supply routes to the naval base behind Iran's shipping attacks (WSJ), Hormuz transits stayed sparse with tanker flows running at well under normal volumes (BBG), and Kuwait, Jordan and Bahrain intercepted Iranian retaliation (BBG). Gold was up 0.17 per cent at 3,983.375, but copper fell 1.90 per cent and silver 0.55 per cent with the risk-off tone. Separately, Trump's prime-time address alleging Chinese election interference injected political risk into the September summit with Xi, though the absence of punitive measures tempered the immediate read (Reuters).
On the data run, New Zealand food prices rose 0.6 per cent on the month in June, cooling from 1.0 per cent in May and printing at the softer end of bank expectations, the last monthly price signal before Tuesday's second-quarter CPI. Thursday's US releases cut both ways for the Fed: the Philadelphia Fed's factory gauge jumped to a near five-year high with more than half of firms reporting input-cost increases (Philadelphiafed), while homebuilder sentiment matched its low for the year and pending home sales missed badly (BBG).
Ahead today: June US housing starts and building permits, import and export prices, industrial production and the preliminary July University of Michigan survey headline the afternoon, with the euro-area June final inflation reading and an ECB digital-euro appearance in the European morning, and sovereign rating reviews for Spain, Finland and Ireland after the close. The Fed's blackout begins tomorrow, so today's data lands in a committee that has said its last scheduled word. A soft Michigan inflation-expectations reading could extend the week's disinflation trade, while any fresh escalation in the Hormuz escalation could reprice the inflation tail the other way.
Time Stamp: 17 July 2026, 07:37 CET