Market Commentary

US markets slipped on Wednesday as investors questioned whether the artificial intelligence (AI)-led rally can be sustained. The S&P 500 fell 0.20% and the Nasdaq 100 dropped 1.50%, dragged down by a heavy sell-off in semiconductor names. Large chipmakers bore the brunt of the move amid growing concern that AI-driven capital flows have run ahead of fundamentals: Micron tumbled 10.60%, AMD shed 6.90% and Intel declined about 9%.

 By contrast, Meta jumped 8.80% after unveiling plans to launch a cloud arm designed to monetise surplus AI computing capacity. Other big tech players among the ‘Magnificent Seven’ extended their recovery: Microsoft rose 3%, Amazon added 1.40% and Alphabet climbed 1.10%, while the Dow finished largely unchanged as more cyclical sectors outperformed.

 On the data front, US manufacturing activity expanded for a sixth month, with input-cost pressures easing. Fed Chair Jeremy Warsh observed that inflation risks appear to have moderated, lessening the case for an immediate, more aggressive policy response.

 European shares eased after a robust end to the second quarter, as investors digested signs that US interest rates might remain elevated for longer and monitored progress in US‑Iran peace talks. The pan‑European Stoxx 600 closed about 0.40% lower, slipping back from its strongest quarterly gain since October 2020. Technology stocks led the pullback: the Stoxx tech index fell roughly 1.20% and tech valuations are now comparable with those on Wall Street.

 Among individual movers, chip‑equipment maker ASML eased 4.60% and semiconductor group Soitec slipped slightly. AI‑related industrial supplier Schneider Electric fell 3.10% after announcing a US$3.1billion all‑cash agreement to acquire Cognite Holding, a privately held AI software and industrial data firm. 

 Germany’s DAX was mixed to slightly weaker, reflecting the broader European pause following a cautious start to the third quarter. The FTSE 100 traded marginally lower, held back by weak commodity prices and its defensive sector mix.

 Asian markets closed mixed. Japan's Nikkei 225 rose 0.59%, extending recent gains as technology and AI-related shares advanced, supported by stronger business confidence among large manufacturers. Chinese markets were mixed, with the Shanghai Composite rising 0.45% while the Shenzhen Component declined 0.53% as investors remained cautious about the country's uneven economic recovery despite continued policy support.

 South African markets weakened on Wednesday as broad-based losses in financial and industrial shares outweighed gains in the resources sector. The JSE All Share Index declined 0.64%, while the Top 40 fell 0.65%. Financials led the decline, with the Financial 15 Index losing 1.86%, followed by the Industrial 25 Index, down 0.68%. In contrast, firmer precious metal prices supported resource stocks, lifting the Resources 10 Index by 0.84% and the Metals and Mining Index by 1.56%. The rand traded broadly unchanged against major currencies, ending the session at R16.40 against the US dollar, R21.76 to the pound and R18.66 to the euro.

 South Africa's seasonally adjusted Absa Purchasing Managers' Index (PMI) fell to 47.3 in June from 50.8 in May, signalling renewed contraction in manufacturing activity as weaker demand weighed on new orders. Despite the slowdown, business confidence improved following lower global oil prices after the interim US-Iran agreement.

 Brent crude oil fell to around $72 per barrel as markets monitored ongoing US-Iran negotiations and improving shipping flows through the Strait of Hormuz, while precious metals strengthened. Gold rose 1.97% to $4 086.33 an ounce, silver gained 3.01% to $60.33 an ounce, and platinum advanced 2.14% to $1 599.05 an ounce.