As of 12:00 Germany time (CEST, UTC+2)
TL;DR: Markets ended July with a partial recovery in the AI trade, led by strong results and guidance from Amazon and Microsoft. The rebound was not clean. Apple sold off after warning that component shortages are weighing on its outlook, while long-end Treasury yields climbed to fresh multi-year highs as investors rebuilt expectations for further Federal Reserve tightening. The market is rewarding AI spending when it produces visible cloud growth and cash generation, but it is punishing companies where the cost side of the cycle is becoming harder to ignore.
In Asian Equity Markets stocks recovered sharply after several sessions of extreme volatility. South Korea’s KOSPI jumped almost 18 percent in a record rebound, though the index remains far below its June peak after July’s forced selling in chip-linked positions. The move showed that investors are still willing to buy AI exposure when sentiment turns, but it did not fully erase the damage from the earlier selloff. The region remains highly sensitive to whether U.S. megacap earnings confirm demand for AI infrastructure or expose more pressure on margins and supply chains.
In European Equity Markets stocks were little changed as stronger global technology sentiment was offset by higher yields and uneven earnings. The pan-European STOXX 600 slipped slightly, while investors continued to separate companies with credible pricing power and cash generation from those exposed to higher funding costs. Europe has benefited from a broader sector mix than the U.S. technology-heavy indexes, but the region remains exposed to higher energy prices, weaker consumer demand and rising government-bond yields.
In U.S. Equity Markets stocks rose as Amazon and Microsoft pulled investors back into the AI trade. Amazon reported its strongest cloud growth in more than four years, while Microsoft had already reassured markets with strong cash-generation guidance. Those results mattered because they showed AI spending can still be rewarded when it supports revenue growth and operating leverage. Apple moved in the opposite direction, falling more than 7 percent after its forecast pointed to component shortages caused by data-centre demand straining global supply chains.
In Commodities Markets oil remained a source of inflation pressure despite the improvement in equity sentiment. Crude prices finished higher on the day and closed July with their strongest monthly gain since March. The market continues to price disruption risk around the Strait of Hormuz, while attacks around Bab el-Mandeb have made the shipping backdrop more difficult. The oil shock has eased from last week’s extremes, but it has not disappeared as a macro constraint.
In Currency Markets the yen remained in focus after Japanese authorities intervened to support the currency. USD/JPY moved toward 159 after the intervention, but analysts remain sceptical that currency action alone can create a durable turn without higher Japanese rates. The Bank of Japan held policy steady while signalling that inflation risks are skewed to the upside. The dollar index traded just below 100, with the euro around $1.15 as markets balanced U.S. rate risk against Japan’s currency action.
In Bond Markets the long end continued to sell off. The U.S. 10-year Treasury yield rose toward 4.71 percent after touching its highest level since January 2025, while the 30-year yield moved above 5.25 percent to its highest level since mid-2007. The pressure followed public comments from the three Fed policymakers who dissented in favour of a hike at this week’s meeting. Markets now price a much higher probability of a September move, keeping financial conditions tight despite the Fed’s decision to hold rates unchanged.
The Cross-Asset Read
Friday gave the market a clearer split inside the AI trade.
Amazon and Microsoft showed what investors still want to own: cloud growth, cash generation and a credible link between AI spending and returns. That is why the broader U.S. market rallied even with yields moving higher.
Apple showed the other side of the same cycle. AI data-centre demand is absorbing components and tightening supply chains, creating shortages for downstream hardware companies. That makes the AI buildout both a growth driver and a cost shock.
The bond market remains the main constraint. A 30-year Treasury yield above 5.25 percent raises the hurdle rate for every long-duration earnings story. Strong results can still work in that environment, but only if they show current cash flow rather than distant optionality.
The immediate flag is the U.S. 30-year yield at 5.30 percent and Brent near the high-$80s. If the 30-year breaks above 5.30 percent while oil keeps rising, even strong AI earnings may struggle to broaden the rally. If yields stabilise and crude stops adding to the inflation premium, the Amazon and Microsoft reaction can become a stronger base for August.
The AI trade is not broken.
The market is becoming much more selective about who gets paid for it.
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