The US market finished lower over the week, while the ASX 200 was broadly unchanged. Although inflation data came in below expectations, escalating tensions between the US and Iran and a broad-based selloff in semiconductor stocks weighed on risk sentiment driving market weakness.
The S&P 500 declined 1.6% over the week, led by a sharp selloff in semiconductor stocks as investors grew increasingly concerned about the scale of AI-related capital expenditure. Sentiment deteriorated further following the release of Moonshot's Kimi K3 model, reigniting efficiency concerns reminiscent of DeepSeek's January 2025 launch. The Philadelphia Semiconductor Index has now fallen more than 20% from its June peak, entering a technical bear market.1 Despite weakness in technology and rising geopolitical risks, the broader market received support from encouraging macroeconomic data. US CPI and PPI both surprised to the downside, falling 0.4% and 0.3%2 month-on-month respectively, leading to markets scaling back July rate hike expectations and a decline in two-year Treasury yields.3 Strong earnings from the Financials, Real Estate, and Consumer Staples sectors also helped offset some of the weakness in Technology, with each respective sector finishing the week higher.
The ASX 200 finished the week broadly unchanged as investors rotated towards more defensive areas of the market. Materials were the largest drag on performance, weighed down by a combination of idiosyncratic factors and broader risk-off sentiment, with the sector remaining the local proxy for AI-related positioning. Strength in Energy, supported by rising crude prices, helped offset weakness in Technology stocks, which followed the selloff in US semiconductor names. Utilities and Financials also outperformed, reflecting the ongoing broadening of market leadership.
In the world of commodities:
Gold: (GOLD) remained rangebound over the week. Prices initially moved higher following softer-than-expected inflation data, which supported expectations for a more accommodative policy outlook. Although renewed tensions between Iran and the US raised concerns around higher oil prices and inflation, gold proved relatively resilient, ending the week broadly unchanged around the US$4,000 level.
Brent Crude Oil: Geopolitical tensions remained elevated as the conflict between the US and Iran continued to escalate. Proposed US measures targeting cargo shipments through the Strait of Hormuz, alongside renewed blockades of Iranian ports, contributed to higher oil prices, with Brent crude rising to levels last seen in early June.4
Critical Minerals: The International Energy Agency (IEA) released its latest critical minerals outlook during the week, highlighting constructive long-term demand. Lithium (ACDC) is expected to experience the strongest growth, with demand projected to increase threefold by 2040.5 Demand for other key critical minerals, including nickel, graphite and rare earth elements (GMTL), is also forecast to rise significantly, with growth increasing from 50% to 90% over the same period.6
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