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Global equities: strong half, cautious turn

Global shares are edging lower after one of the strongest quarters in years, as investors take profits and reassess how long the AI-driven rally can persist. Asia is on the back foot, with Korea’s chip-heavy market leading the pullback and Japan’s Nikkei also softer, highlighting how concentrated positioning in semiconductors and AI-beneficiaries can amplify intraday swings.

The second quarter of 2026 still marks a standout period for risk assets, with major US benchmarks delivering their best quarterly gains in several years and European indices also closing the half near recent highs. Across regions, the tone moving into the second half is more cautious than euphoric, as outsized first-half returns and elevated AI-sector exposure prompt rotation into lagging sectors and non-US markets.

US markets: chips wobble after stellar run

US indices remain an important anchor for global sentiment, with the S&P 500, Nasdaq Composite and Dow Jones Industrial Average all starting July near record territory following a powerful first-half rally. A choppy mid-week session saw the S&P 500 and Nasdaq slip modestly while the Dow was little changed, as profit-taking hit technology shares and semiconductor names in particular.

Chipmakers, which have been the primary engine of 2026’s advance, were among the biggest drags, underscoring the sensitivity of AI-linked trades to any hint of demand or valuation fatigue. At the same time, selective strength in individual growth franchises reminds investors that leadership within technology is rotating rather than static, encouraging more diversified positioning across sectors and regions.

Policy, inflation and FX: data in focus

Central-bank policy remains central to cross-asset pricing, with the Federal Reserve still signalling caution on inflation even as markets debate the timing and extent of possible rate cuts later in 2026. Incoming US labour-market and inflation data are critical for the path of real yields, the dollar and broader risk sentiment, with any upside surprises likely to challenge expectations for a smooth policy pivot.

In Europe, moderating headline inflation has reduced near-term rate-hike risks, supporting risk assets even as growth concerns linger. On the currency side, a firm dollar and elevated US yields have pushed the yen towards multi-decade lows, reinforcing carry trades and influencing flows into both developed- and emerging-market assets.

Commodities and crypto: range-bound but reactive

Energy prices remain contained, with crude benchmarks consolidating at lower levels that help temper headline inflation while raising questions about the underlying strength of global demand. Gold is stabilising after a sharp recent correction, trading in the vicinity of the 4,000-dollar mark per ounce as higher real yields and a stronger dollar encourage more tactical positioning around that pivot band.

Crypto markets are firmer, with Bitcoin holding around the 60,000-dollar area after recovering from sub-60,000 levels, as traders balance tighter dollar liquidity and elevated volatility in AI-exposed equities against the appeal of digital assets as a high-beta macro and innovation proxy. Broader sentiment remains measured rather than euphoric, but deep derivatives markets and well-defined technical levels keep digital assets capable of short, sharp moves around key US data releases and policy headlines.