Market Wrap US-Europe 16 July: Korea’s Rate Shock Reaches Wall Street With the Nasdaq Down 1.5 Percent While the FTSE Rises on 0.7 Percent UK Growth

By The Edge Research Team

The escalation’s bill crossed the Pacific on Thursday. Wall Street closed lower with the Nasdaq down 1.47 percent at 25,881.95 as the chip selloff that started in Seoul reached US screens, the S&P 500 off 0.51 percent at 7,533.77 and the Dow holding to a 0.20 percent dip at 52,552.97, while Europe split: the FTSE 100 rose 0.54 percent to 10,572.24 on a solid UK growth print and a softer pound, while the DAX spent a second day below 25,000, easing 0.34 percent to 24,915.49. The VIX jumped 6.76 percent to 16.73 and gold posted its first close below 4,000 dollars of the escalation, covered in our commodities wrap.

The US session traded the Bank of Korea’s morning hike as a preview rather than a local story. The Nasdaq’s 1.47 percent drop was chip-led, Nvidia falling 2.40 percent, and it erases Wednesday’s gain, while the S&P 500’s decline leaves the index down about 0.5 percent from its pre-blockade close, our calculation, a shallower toll than Seoul’s 8.8 percent but the same direction of travel. The 10-year Treasury yield edged up to 4.56 percent and traders now price a 53 percent chance of a US rate hike in September, per Reuters, the repricing that is doing more damage to risk assets than the strikes themselves, our reading.

The single-stock tape rotated its winners and losers. IBM bounced 3.72 percent to 219.05 dollars after its two-day collapse, still about 24.5 percent below its pre-warning level, our calculation, while Goldman Sachs gave back 4.91 percent to 1,095.46, trimming its post-earnings run to about 4.7 percent above where it traded before its blowout quarter, also our calculation. The rotation reads as positioning being unwound into the weekend rather than fresh news, our reading of the session.

Europe’s board split along the currency line. The FTSE 100 was the region’s clear winner, up 0.54 percent, with two supports underneath it: the UK economy grew 0.7 percent in the three months to May, a services-led print with the prior period revised up, per the Office for National Statistics, and sterling fell 0.47 percent to 1.3475, flattering the index’s dollar earners. The Euro Stoxx 50 added 0.29 percent to 6,283.61 and the CAC 40 was flat at 8,377.86, while the DAX eased 0.34 percent to 24,915.49, its second close below the 25,000 line it held through the escalation, with the European Central Bank’s 23 July decision now the continent’s live question.

In currencies and crypto, the dollar firmed a second day: the euro eased 0.19 percent to 1.1441 and sterling 0.47 percent to 1.3475, the yen slipped 0.13 percent to 162.39 per dollar, the Kuwaiti dinar held at 0.3075, and the Egyptian pound firmed a third straight day, up 0.16 percent to 50.40 to the dollar. Bitcoin fell 1.07 percent to 64,191 dollars, and Brent eased 0.68 percent to 84.37 in late trading, its first daily decline since the blockade was announced.

Further east, Thursday’s closes from our MENA-Asia wrap remain the reference: the Bank of Korea’s first hike since January 2023 sank the Kospi 6.37 percent while the Gulf closed its escalation week barely changed, TASI up 0.15 percent and down only about 1 percent from its pre-blockade close, and Cairo rose 0.70 percent after touching 52,993. The Qatar Stock Exchange remains suspended and resumes on Sunday, 19 July.

Why it matters: The week that began with a blockade is ending as a monetary event: the Kospi’s collapse, the Nasdaq’s chip slide, gold’s break below 4,000 and a 53 percent September hike probability are all the same trade, markets pricing the oil shock’s second round through interest rates. For the Gulf, the contrast is stark and favorable, the region’s equities closed their Sunday-to-Thursday escalation week nearly flat while the markets pricing its consequences fell harder, but the rate path being built in Washington and Frankfurt is the channel through which this eventually reaches dollar-pegged economies.

Outlook: US and European markets still have Friday to trade before the week closes, with the chip complex and the 10-year yield the tells. The regional week ahead opens with Qatar’s exchange resuming on Sunday, the region’s first new sentiment print since the escalation began, and carries the ECB’s 23 July decision with July’s oil price sitting inside it. In the US, bank earnings continue and the September meeting is now live in market pricing, while the IBM bounce against Nvidia’s slide keeps the AI-spending question at the center of the earnings season.

Table – US and Europe, 16 July closes, ranked by change:

Table – MENA and Asia equities, Thursday 16 July closes, for reference, ranked by change:

Table – Commodities, rates, volatility, FX and crypto, 16 July:

Price basis: Europe closing prints pulled 22:52 Kuwait time and US closing prints re-verified after the bell on 16 July via CNBC; commodity, FX and volatility figures are late-session quotes, not settlements; gold’s settlement is covered in our commodities wrap.

Sources: CNBC; Office for National Statistics; Reuters.

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