Nasdaq slides as chip selloff deepens despite TSMC results

Summary

The Nasdaq came under pressure as weakness in semiconductor shares outweighed strong corporate earnings, with the global chip selloff extending into Asia despite robust results from TSMC. The S&P 500 and Dow also finished lower, while investors continued to scale back AI-related positions. The US dollar was set for a weekly decline after softer US inflation reduced expectations of a near-term Federal Reserve rate hike, although renewed Middle East tensions supported demand for the currency. The pound remained on course for a third consecutive weekly gain as UK fiscal concerns eased.

Equities

The FTSE 100 closed 0.5% higher on Thursday at 10,572.2, outperforming many overseas markets as consumer-focused sectors led gains. The FTSE 250 also finished 0.5% higher, while investors continued to watch developments in the Middle East and the latest UK economic data, which showed only modest growth in May.

Rotork closed 66.8% higher on Thursday after Swiss engineering group ABB agreed a $5.5 billion takeover of the British automation specialist. Ocado fell 10.4% to its lowest level in 13 years after providing little evidence of progress in securing additional US partners for its technology business. Frasers Group slipped 1.9% after declining to provide financial guidance for the 2027 financial year.

Defensive sectors supported the London market. GSK rose 2.1% and AstraZeneca added 0.5% as pharmaceutical shares advanced, while banks gained 0.5% and oil and gas companies finished 0.8% higher. Consumer stocks also performed well, with beverage, retail and personal goods shares posting solid gains.

Wall Street closed lower on Thursday as weakness in semiconductor stocks outweighed encouraging economic data and another strong batch of corporate earnings. The S&P 500 fell 0.51%, the Nasdaq dropped 1.47% and the Dow Jones Industrial Average edged 0.20% lower.

UnitedHealth Group closed 1.2% higher after reporting earnings ahead of expectations and raising its full-year 2026 profit forecast, helping healthcare shares outperform the wider market. GE Aerospace fell 4.1% despite increasing its own 2026 profit outlook, while United Airlines lost 1.8% after higher oil prices weighed on its forward guidance.

Chipmakers remained under pressure despite Taiwan Semiconductor Manufacturing reporting a 77% jump in quarterly profit. US-listed shares of TSMC closed 2.3% lower, while memory-related companies suffered sharper declines. Intel fell 12.6%, with SanDisk, Western Digital and Seagate Technology also closing between 5.8% and 12.6% lower.

US economic data painted a mixed picture. Retail sales increased modestly in June, weekly jobless claims declined and manufacturing activity in the north-eastern United States strengthened, while housing data weakened as pending home sales and homebuilder confidence both fell amid elevated borrowing costs.

Forex & Commodities

The US dollar was little changed early on Friday, although it remained on course for a weekly decline after softer US inflation data prompted traders to reduce expectations of further Federal Reserve interest rate increases. The dollar index traded at 100.7, while the euro edged higher to $1.144. Sterling continued to strengthen, reaching $1.348 and heading for a third consecutive weekly gain as concerns over the UK's fiscal position continued to ease.

The Japanese yen remained under pressure at 162.4 per US dollar, close to its weakest level in four decades. Japan's finance minister repeated that the government stands ready to intervene if necessary, keeping currency markets alert for possible action.

Fresh US economic data released on Thursday showed retail sales rose slightly in June, supported by stronger online spending despite lower fuel prices reducing receipts at petrol stations. Separate labour market figures also pointed to continued resilience. Following this week's softer inflation readings, markets now assign only a limited probability to a Federal Reserve rate increase later this month, although expectations for a move before the end of the year remain.

Federal Reserve officials also delivered fresh signals on policy. Dallas Fed President Lorie Logan publicly called for a rate increase, while Vice Chair Philip Jefferson said he would support tighter policy if inflation fails to improve in the near term.

Spot gold recovered modestly early on Friday to $3,981 per ounce after falling to a two-week low, but it remained on course for its largest weekly decline in six weeks. Rising energy prices and renewed inflation concerns outweighed support from weaker US inflation data.

Oil prices continued to climb early on Friday as fighting between the US and Iran intensified. Brent crude traded at $84.93 a barrel, while West Texas Intermediate reached $79.76. Both benchmarks were heading for weekly gains of around 12%, reflecting ongoing disruption to oil flows through the Strait of Hormuz and growing concerns that the Red Sea export route could also face disruption.