Strong second quarter for global equities
Global markets navigated a week dominated by geopolitical developments, shifting expectations for interest rates and continued volatility in the technology sector. Overall, major global equity indices advanced, as tensions in the Middle East eased and macroeconomic data pointed to a resilient global economy. In Europe, the MSCI Europe index advanced (as of the moment of writing), and investors in US stocks also had solid gains. The more growth and technology tilted Nasdaq outperformed the broad-based S&P 500 index this week.
The most impactful development was the agreement between the US and Iran to halt military strikes and resume negotiations. The de-escalation reduced concerns about disruptions in the Strait of Hormuz, a critical route for global energy supplies. As fears of supply shortages faded, oil prices declined. The reopening of shipping lanes could also ease inflation concerns and improve the outlook for global trade.
The second quarter of 2026 proved to be the strongest quarter for global equities in six years. This performance was supported by economic resilience and continued optimism surrounding artificial intelligence (AI). The Philadelphia Semiconductor index rose by more than 80% during the quarter, marking its best quarter on record. European technology shares benefited from strong gains in ASML and other chip-related companies.
However, enthusiasm surrounding AI investment moderated this week. Concerns emerged that some large technology companies may be overinvesting in datacentre capacity. Reports that Meta is considering a major cloud infrastructure business triggered a sharp sell-off in semiconductor stocks. As a result, the Philadelphia Semiconductor Index fell by more than 6% on 1 July. Major memory and chipmakers, including Micron, Intel and Applied Materials, posted steep declines. This highlights the market’s sensitivity to AI-related capital spending expectations.
Economic data generally remained supportive. Inflation surprised to the downside across Europe, with both German and eurozone inflation slowing more than expected. In the US, labour market indicators softened modestly, but continued to point to expansion. Manufacturing activity slowed somewhat, although falling input-price pressures suggested inflation risks may be moderating.
Central bank communication remained cautious. Federal Reserve officials stressed their commitment to price stability and refrained from signalling imminent rate cuts, while the European Central Bank acknowledged that lower energy prices have reduced inflation risks. Looking ahead, investors will closely monitor US employment data, the upcoming earnings season and developments in AI-related investment spending.