By Jamie McGeever
ORLANDO, Florida, July 20 (Reuters) – Escalating tensions in the Middle East finally weighed on Wall Street on Monday, after investors had earlier bought back beaten-down chip stocks ahead of some big tech earnings reports later this week, while the war jitters lifted oil prices, bond yields and the dollar.
In my column today, I look at how the intense volatility in South Korea’s chip-heavy stock market has spilled over to Wall Street. The benchmark KOSPI is tanking. Can the main U.S. indices withstand the heat?
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. Chipmakers head for big profit gains, but will it be enough?
2. ‘I couldn’t breathe’: South Korea’s frenzied stock trading exposes margin loan risks
3. Could AI chip boom make ASML Europe’s first trillion-dollar firm?
4. China leaves benchmark lending rates unchanged for 14th consecutive month in July
5. Canada’s annual inflation rate cools below forecast on cheaper fuel
Today’s Key Market Moves
• STOCKS: South Korea -4.5%, Japan -4%. Europe -0.4%, UK -0.7%. Dow -0.6%, S&P 500 -0.2%, Nasdaq flat.
• SECTORS/SHARES: Eight sectors on the S&P 500 fall, three rise. Healthcare, materials -1%, comms services +0.7%. Paramount -2%, hits 17-year low; Warner Bros. Discovery -3.8% to 2026 low. Global Payments +6%, Microsoft +2%, Oracle -4%.
• FX: Dollar up broadly vs G10 FX, but slips vs key EM units — BRL, MXN, KRW all +0.5% or more.
• BONDS: UK gilt yields up broadly, curve steepens ~4 bps. U.S. yields +4-6 bps across the curve.
• COMMODITIES/METALS: Oil +1%, Brent pops back above $90/bbl. Gold slips, hugs $4,000/oz.
Today’s Talking Points
* $4 a gallon gas
The average price of gasoline in the U.S. is back above $4 a gallon, according to the AAA, following the spike in global oil prices sparked by the re-escalation of the U.S.-Iran war. This comes just as the U.S. holiday and “driving season” ramps up, and so Americans already facing affordability issues will feel the squeeze.
It’s also bad timing for Fed Chair Kevin Warsh — any breathing room he thought he might get from the recent soft CPI and PPI prints might be reduced. Last week, several Fed officials — Beth Hammack, Lorie Logan, Jeffrey Schmid and Philip Jefferson — warned that current inflation dynamics are still pointing towards higher rates.
* New broom Burnham
Britain has its seventh prime minister in a decade, with Andy Burnham replacing Keir Starmer on Monday and pledging to end these years of instability. Promising the biggest changes in the last 40 years — “a new political model and a new economic model” — is fine rhetoric, but whether he can deliver on it remains to be seen.
What is certain is Burnham has delivered a major surprise already, naming former defense minister John Healey as the new Chancellor of the Exchequer. Markets had expected Shabana Mahmood, and took Healey’s announcement slightly negatively — sterling dipped, and the 10-year gilt yield ended the day 8 bps higher back above 5.00%. More money for defence seems likely now, but will that mean less for other areas like health and welfare?
* M&A (in)activity
Paramount Skydance must put its $110 billion acquisition of Warner Bros. Discovery on hold for a couple of weeks, a U.S. federal judge ruled on Monday, after a California-led coalition of states argued the merger would irreparably harm competition. The judge will hold a hearing on August 3 on whether the deal should be delayed throughout the course of the lawsuit, which could take months to reach a final ruling.
Meanwhile, PayPal’s board is said to believe a $53 billion takeover bid by rival Stripe and private equity firm Advent International undervalues the company and also faces regulatory as well as financing hurdles. But shares in the U.S. payments giant have held their gains from last week when news of the bid first broke, suggesting investors think this is a goer.
What could move markets tomorrow?
• Developments in the Middle East
• Taiwan exports (June)
• UK jobs, earnings (May/June)
• Potential policy announcements from new UK PM Burnham
• Germany ZEW index (July)
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever; Editing by Nia Williams)
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