As of 12:00 Germany time (CEST, UTC+2)
TL;DR: Markets turned defensive again on Wednesday as the AI trade failed another earnings test. SK Hynix reported a sixfold jump in quarterly profit, but its shares still fell sharply and the KOSPI extended its July rout. Oil also rebounded after renewed Middle East strikes, adding fresh inflation pressure before the Federal Reserve decision. Microsoft and Meta now carry the next test for whether AI spending can still be defended by revenue, margins and cash flow.
In Asian Equity Markets stocks weakened as South Korea’s semiconductor selloff continued. SK Hynix fell around 10 percent despite reporting a sixfold increase in quarterly profit, showing how far expectations had already moved. The KOSPI dropped nearly 6 percent after the previous day’s circuit-breaker decline and is now facing one of its worst monthly performances on record. Regulators also moved toward additional curbs on single-stock leveraged ETFs, underlining how much forced and retail-driven positioning has amplified the chip correction.
In European Equity Markets stocks moved lower as technology weakness offset pockets of earnings support. The pan-European STOXX 600 fell around 0.3 percent, while investors remained cautious ahead of the Fed decision and U.S. megacap earnings. Europe has less direct exposure to the most volatile AI names than South Korea or the Nasdaq, but it is still exposed through semiconductor equipment, industrial supply chains and higher energy costs. The renewed oil move also reduced the relief that lower crude had provided earlier in the week.
In U.S. Equity Markets futures were subdued before the most important evening of the week for both policy and technology. The Federal Reserve is expected to hold rates steady, but the decision is less predictable than usual because higher oil has revived inflation risk. Microsoft and Meta report after the close, and investors will be focused less on headline AI enthusiasm and more on whether spending is converting into margins, revenue quality and free cash flow. Alphabet and Tesla already made that question harder to ignore.
In Commodities Markets oil rose sharply after renewed airstrikes in the Middle East raised the risk of further disruption to already fragile energy flows. Brent moved back toward the $90 area after falling earlier in the week, while traders continued to monitor both the Strait of Hormuz and Red Sea shipping routes. The move matters because it keeps the inflation premium alive just as central banks are deciding whether they can pause or need to tighten again.
In Currency Markets the dollar was broadly steady ahead of the Fed, supported by higher oil and still-elevated U.S. yields. The euro held near the mid-$1.14 area, while the yen remained close to multi-decade lows. Japan’s position remains uncomfortable: lower oil had briefly reduced pressure on the import bill, but another crude rebound and wide rate differentials keep intervention risk in place. Currency markets are waiting for Warsh’s tone as much as the rate decision itself.
In Bond Markets yields stayed elevated as investors balanced recent inflation progress against renewed energy pressure. The U.S. 10-year yield remained around the high-4.6 percent area, while the front end stayed sensitive to any sign that the Fed could reopen the door to a September hike. The market is not fully pricing a move today, but it is no longer treating the Fed as an easy source of support. Higher crude has made the policy reaction function more uncertain.
The Cross-Asset Read
Wednesday’s problem is simple: earnings are no longer beating expectations fast enough to repair confidence in the AI trade.
SK Hynix delivered the kind of profit growth that would normally support the entire memory-chip complex. Instead, the stock sold off and the KOSPI weakened again. That tells us the market is looking past current demand and asking whether margins, pricing power and capex returns have already peaked.
The timing is difficult. Oil has bounced just as Microsoft and Meta are due to report, and the Fed decision arrives with inflation risk still tied to geopolitics. Investors wanted this week to be about lower crude and strong Big Tech numbers. Instead, it has become a test of whether earnings can offset higher energy prices, elevated yields and a loss of faith in the most crowded parts of AI.
The immediate flag is Brent at $90 and the U.S. 10-year yield at 4.70 percent. If Brent moves back above $90 while the 10-year holds near or above 4.70 percent, Microsoft and Meta will need very strong cash-flow signals to stabilise risk appetite. If oil stays below $90 and yields ease, the market has more room to separate good AI earnings from weak AI positioning.
The AI story is still alive.
The market is no longer accepting strong demand without proof of returns.
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