Chip Rout Deepens; Trump Talks Up Iran Diplomacy | Bloomberg Brief 07/28/2026

Chip Sector Slump and AI Concerns [00:00:00]

• A significant sell-off in the chip sector is gathering steam, with South Korean futures dipping on AI angst.
• A gauge of Asian chipmakers saw its worst decline in over a year, pressured by news of a Chinese state-backed company mass-producing DUV machines essential for AI chip making.
• Concerns also surround Nvidia's circular financing potentially inflating AI demand and valuations, with SK Hynix and Samsung Electronics earnings on the horizon.

  A very brutal sell-off in the chip sector in Asia today with a gauge of Asia chip makers seeing its worst decline in more than a year.

Broader Asian Market Declines [00:00:00]

• The broader Asian market is also experiencing declines, with South Korea's KOSPI index leading, down more than 10 percent and triggering two circuit breakers.
• The MSCI Asia is down about 3 percent and headed for a technical correction.
• A powerful earthquake hit Japan's Kyushu area, which is essential for chipmakers with many factories located there.

  And we see that pressuring the global peers around the region.

European Market Stability and Oil Prices [00:00:00]

• European markets are showing more stability, with the stocks here of 600 calmly up 0.3 percent.
• Oil prices are down, which is generally good for European assets, especially automakers.
• UK 10-year bond yields are down 10 basis points, outperforming German yields, potentially reflecting expectations of a less hawkish Bank of England.

  Now, it's a good day to be a little bit boring and also not have that much exposure to the AI trade that we're seeing here.

Swiss National Bank and Currency Movements [00:00:00]

• The Swiss National Bank plans to keep its key rate on hold at zero until the end of 2027.
• The Swiss franc has weakened against the euro for two consecutive days, reflecting the SNB's stance.

  And we can see here the Swiss franc weakening against the euro for kind of two days straight.

Oil and Gas Price Declines [00:00:00]

• Oil prices are lower, with Brent down almost 3 percent, trading just above $85 a barrel, and New York crude at $80 a barrel.
• European gas futures are also coming down, trading around $56.75 a megawatt hour.
• These declines are potentially helping the mood but not offsetting the lack of confidence in the chip trade.

  Brent down another almost 3 percent is trading just about $85 a barrel now with New York crude at $80 a barrel.

U.S. Market Futures and Fed Anticipation [00:00:00]

• Nasdaq 100 futures are pointed lower, continuing the sell-off that bled into Asia.
• Russell 2000 futures are not moving much, while S&P futures are pointed lower but not to the same extent.
• The Federal Reserve is set to begin its two-day meeting, with Citadel Securities suggesting a potential rate hike to bolster inflation-fighting credentials.

  As you can see, we are down a couple of basis points really across the curve, more so at the front end.

Johnson & Johnson Settlement and Unilever Guidance [00:00:00]

• Johnson & Johnson shares are up after the company agreed to pay $5.5 billion to settle claims that its products caused ovarian cancer, removing litigation overhang.
• Unilever has raised its guidance due to strong demand in the U.S. and India, confirming the success of its strategy to refocus on personal beauty.

  Moving on to Johnson & Johnson, which is also in a focus this morning after the company agreed to pay $5.5 billion to settle claims that some of its products cause ovarian cancer.

Iran-Oman Talks and Strait of Hormuz [00:00:00]

• Iran and Oman are discussing restarting shipping traffic through the Strait of Hormuz, which has dampened oil prices.
• This development comes as President Trump talks up negotiations with Iran.
• The Strait of Hormuz movement is still at a standstill or semi-standstill, despite the talks.

  Our understanding is that both sides have spoken about the possibility of restarting movement in the Strait of Hormuz.

U.S. Power Grid and Data Center Demand [00:00:00]

• Heat waves are causing power outages and threatening data centers in the United States.
• PJM, America's largest power grid, is warning that data centers may be temporarily dropped from the grid during high demand periods.
• The rapid growth of data center demand has caught PJM by surprise, leading to discussions on how to manage their power consumption and costs.

  PJM, America's largest power grid, warning that data centers that fail to secure enough power generation could be temporarily dropped from the grid during high demand periods.

U.S.-China AI Competition and German Economic Strategy [00:00:00]

• Beijing is setting a ceiling on new U.S. tariffs and warning against sanctioning Chinese AI firms.
• Germany is mapping out China's economic weaknesses to strengthen its negotiating position in case of a trade war.
• This is seen as a defensive mechanism for Germany, learning lessons from China's weaponization of critical minerals.

  Germany has has to decide really is it going to be a partnership with China or is there going to be a competitive threat.

Barclays Earnings and Market Movers [00:00:00]

• Barclays shares are dropping after second-quarter earnings showed it lagging behind U.S. peers in consumer banking and investment bank growth.
• Despite strong equities trading, the bank's performance was overshadowed by higher expectations set by Wall Street banks.

  Barclays shares are dropping the most in over a year after second quarter earnings showed it's lagging behind U.S. peers in consumer banking and investment bank growth.

Fed Rate Hike Speculation [00:00:00]

• Markets are pricing in rate hikes sooner as they await the Federal Reserve's decision.
• There is a non-zero chance of a hike, with data points suggesting potential inflationary pressures.
• A hike this week would emphatically end the forward guidance era for the Fed.

  The market may once again be underestimating the extent of the hawkish shift at the Fed.

Data Center Campus Development [00:00:00]

• Meta and BlackRock are developing a data center campus in El Paso, Texas, with a significant financial commitment.
• This development adds to the substantial capital being invested in the AI trade.

  Now, to put those kind of numbers into context, the numbers we were talking about yesterday for Nvidia's capital commitment to this new open AI data center was 600 up to $600 billion.

Boeing Earnings and Outlook [00:00:00]

• Boeing is expected to report earnings, with investors looking for signs of cash generation and progress on aircraft certifications.
• The company's CEO has indicated a positive path forward, but the company has not yet fully turned the corner.
• Supply chain issues, including engines and interiors, remain a factor affecting Boeing's operations.

  Will Boeing have generated cash in this quarter or will that be something we'll see in the second half of the year.

U.S.-China Trade Tensions and Tariffs [00:00:00]

• China has set a ceiling on new U.S. tariffs and warned Washington against sanctioning Chinese AI companies.
• This action comes ahead of a potential meeting between President Trump and Chinese leader Xi Jinping.
• The trade war between the U.S. and China remains a stable but tense situation.

  This is essentially China drawing a red line in the sand and saying, if you cross this, we're going to have a trade war again.

Iran-US Relations and Nuclear Program [00:00:00]

• Israeli Prime Minister Benjamin Netanyahu is meeting with President Trump to discuss Iran, including its nuclear program.
• The U.S. has maintained its naval blockade on the Strait of Hormuz, creating a double blockade situation with Iran.
• Iran has stated it will suspend attacks on the region and shipments in the Strait of Hormuz as a result of the U.S. stopping its attacks.

  He did say earlier in the week that he will ask President Trump to keep a, quote, constant, constant watch over the nuclear program in Iran, that Iran can never attain a nuclear program.

Semiconductor Industry Challenges [00:00:00]

• The global semiconductor industry faces challenges including China's rapid catch-up in AI technology and the financing of AI spend.
• Volatility at the stock level is significant, even as indexes reach new highs.
• Investors are concerned about the sustainability of AI demand and valuations, especially ahead of major earnings reports.

  So as you mentioned, whether it's through the chip equipment companies, whether it's developing the internal solutions, whether it's the chips or the memory or the financing of similar, it's all leading to those concerns I think for the momentum trade in AI just ahead of the significant earnings we get in the next couple of days from the big memory companies through to the to the hyperscalers.

Fixed Income Market Dynamics [00:00:00]

• Investors are focused on shorter to intermediate areas of the yield curve, showing caution on the long end.
• High issuance in the long-end space, including from hyperscalers, is making technicals more difficult.
• The development of data center campuses is driving significant issuance across various markets.

  So a lot of reasons to make the technicals on the long end of the curve a little more difficult at this point in time.

Global Central Bank Outlook [00:00:00]

• Markets are watching the Federal Reserve, Bank of England, and Bank of Japan for potential policy shifts.
• While no immediate moves are expected from the BOE or BOJ, hikes are priced in between now and year-end for both.
• Inflation and growth pictures in Europe will be key factors for central bank decisions.

  From a global perspective and what we like at this point in time, at this point in time is a diversification aspect.

10-Year Yield Forecast [00:00:00]

• The 10-year yield behavior is path-dependent, influenced by geopolitics, heat waves, and potential impacts on food prices and inflation.
• There is a possibility of yields being higher or lower, with a potential slowdown in growth being positive.
• Investors are showing interest in fixed income markets due to attractive yields and volatility in equity markets.

  So I think it's going to be really quite path dependent in terms of geopolitics, in terms of also, you know, what happens given the sort of heat waves that we've seen and what impact that might have on food prices and inflation going forward.