July 2026 was dominated by a sharp AI-driven tech selloff. Semiconductor stocks fell driven by concerns over AI investments and competition from Chinese startups. The Nasdaq 100 fell into correction territory, while the broader S&P 500 held up better, with its equal-weighted version hitting record highs as investors rotated into cyclicals. Geopolitical tensions with Iran pushed Brent crude higher again, stoking inflation fears and central bank hike bets.
Europe
European equities were broadly flat in July but outperformed other global markets. Energy stocks gained on higher oil prices following renewed US-Iran tensions, while technology stocks lagged as enthusiasm for the AI theme waned. Financials and communication services were also stronger. The ECB kept rates unchanged at 2.25%, but rising inflation and resilient economic growth increased expectations of a September rate hike. Meanwhile, Eurozone PMI data improved, signalling a recovery in economic activity, particularly in France and Germany.
UK
UK equities rose as investors shifted away from AI-linked companies, while the FTSE 100 reached a record intraday high. Inflation fell to 2.6%, but the Bank of England held interest rates at 3.75%. The economy grew by 0.1% in May, wage growth slowed and unemployment remained at 4.9%. Consumer confidence improved in July, while warm weather and the football World Cup helped retail sales rise by 1.0% in June.
US
US equities fell in July, weighed down by weakness in technology and large growth stocks as investors reassessed AI-related expectations and higher bond yields pressured valuations. Energy stocks outperformed on rising oil prices and Middle East tensions, while financials also gained. The Federal Reserve maintained interest rates but signalled ongoing inflation concerns, keeping the prospect of further tightening alive. Inflation eased, but economic growth and job creation slowed, while consumer confidence remained subdued despite continued expansion in business activity.
Asia
Asian equities declined in July, led lower by weakness in technology, semiconductor and AI related stocks in Taiwan and South Korea. China, India and Australia delivered positive returns, supported by improving sentiment, resilient economic activity and strength in selected sectors. Japan proved relatively resilient, benefiting from supportive domestic conditions and a weaker yen. The regional decline largely reflected profit-taking in AI-related stocks and valuation concerns rather than any significant deterioration in underlying corporate fundamentals..
Emerging markets
Emerging market equities declined in July, with technology-heavy markets in Korea and Taiwan leading losses as investors took profits in semiconductor and AI-related stocks. In contrast, China and India delivered positive returns, supported by improving sentiment, strong domestic demand and economic resilience. Latin America, South Africa and Eastern Europe also advanced, helped by stronger commodity prices and easing inflation. Overall, market performance was mixed, with regional returns driven by differing economic conditions, policy outlooks and sector exposures.
Fixed income
Bond markets weakened in July as rising oil prices and persistent inflation concerns weighed on sentiment. Government bond yields rose across major markets despite the Fed, ECB and BoE leaving interest rates unchanged. Inflation remained elevated in Europe, while growth stayed relatively resilient. Corporate bonds also delivered negative returns, although high yield debt outperformed investment grade due to its lower sensitivity to rising yields. Investors remained cautious amid uncertainty over the outlook for inflation and monetary policy.
Read the full report here
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important information
Views and opinions are based on current market conditions and are subject to change. This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
EMEA5755885
