Chips and ships

• South Korea's chipmaker-heavy KOSPI index showed extreme volatility levels not seen since the 1998 LTCM crisis, prompting regulators to introduce new controls on leveraged ETFs
• U.S. military launched strikes on Iranian infrastructure and reimposed naval blockades after Iran closed the Strait of Hormuz, with Trump threatening to hit Iranian power grids and bridges
• U.S. inflation showed improvement with core CPI falling to 2.6% year-over-year from 2.9%, while major banks reported strong Q2 earnings driven by mega-IPOs and trading volatility

Market Summary: Chips and Ships

Key Market Developments:

Asian semiconductor stocks experienced severe volatility this week, with South Korea's KOSPI plunging 6% Thursday and down roughly 25% from its June peak. The index, dominated by Samsung and SK Hynix, posted its highest volatility since the 1998 LTCM crisis, partly attributed to leveraged ETF unwinding. Korea's financial regulator announced measures to control these products.

U.S. chip stocks also declined, with the Philadelphia Semiconductor Index down nearly 13% for the month, despite remaining up over 70% year-to-date. This follows blockbuster earnings from tech giants, suggesting investor concerns about the sustainability of AI capital expenditures.

Geopolitical Tensions:

U.S.-Iran conflict escalated significantly, with Iran closing the Strait of Hormuz and striking multiple U.S. military bases. The U.S. responded with airstrikes and a naval blockade. However, Brent crude remained relatively contained around $85/barrel—well below the $118 wartime high—indicating trader expectations of de-escalation. Oil futures rose only 12% this week.

China Economic Data:

China's Q2 GDP growth missed expectations and fell below Beijing's official target. While exports and imports topped forecasts in June (driven by semiconductor and auto shipments), domestic consumption remained weak with house prices down 3.5% year-over-year.

U.S. Economic Indicators:

Positive inflation news emerged as year-over-year inflation declined to 2.6% from 2.9%, with producer prices also softer than expected.

Banking Sector:

Major U.S. banks reported strong earnings, with JPMorgan and Goldman Sachs benefiting from mega-IPOs and trading desk activity driven by market volatility.