European Markets Dip Slightly as Wall Street Futures Turn Negative Amid Strong Dollar and Yen Weakness
European stock markets opened with modest declines on the morning of the report, with Germany's DAX down about 0.1% and the UK's FTSE 100 and France's CAC 40 each falling around 0.4%. In Asia, trading closed mixed: Japan's Nikkei rose approximately 0.6%, Hong Kong's Hang Seng gained similarly, Shanghai's index increased by 0.4%, while South Korea's Seoul exchange dropped about 2%. The Japanese yen weakened sharply against the US dollar, hitting a 40-year low amid rising US Treasury yields and expectations of an imminent Federal Reserve interest rate hike. The dollar climbed to 162.77 yen, well above levels that previously prompted intervention by Japanese authorities. Wells Fargo's Asia-Pacific macro strategist Chido Narayanan noted that Japan might intervene again to maintain credibility at these critical exchange rate levels.
Meanwhile, US stock futures were down by up to 0.7% following Wall Street's strong gains the previous day. The Nasdaq rose about 1.5%, the S&P 500 increased 0.8%, and the Dow Jones added 0.3%, closing the second quarter with its best performance since 2020. The S&P 500 climbed roughly 15% over the quarter, while the Nasdaq surged 21%, driven primarily by the technology sector, especially semiconductor stocks. The SOXX semiconductor ETF recorded its strongest quarter ever with a gain exceeding 90%, far outpacing the Nasdaq 100's 25% rise.
The rally was concentrated in semiconductor companies linked to artificial intelligence demand, with memory and storage chip makers leading the gains. Micron Technology's stock soared 301% in six months, making it the second-best performer in the S&P 500 year-to-date and pushing its market value above $1 trillion. Sandisk led with a 764% increase, followed by Western Digital, Seagate, and Intel, which rose 257% amid growing confidence in its turnaround plan. South Korea's SK Hynix is planning a $29.4 billion US stock offering. However, some major players like Nvidia and Broadcom lagged, with Nvidia up only 7% this year, making it the weakest performer in the semiconductor index.
Despite recent volatility, analysts have turned more optimistic about the semiconductor industry. Bloomberg data projects semiconductor profits to grow 49% by 2027, up from a 35% forecast in April, and revenue growth expectations have also increased to 37%. This growth rate significantly outpaces the broader S&P 500, which is expected to see 17% profit growth and 7.4% revenue growth by 2027. Nonetheless, last week's sharp 7.9% drop in the semiconductor index, the largest weekly decline since April 2025, highlighted ongoing concerns about demand sustainability. The index showed notable volatility, swinging from a 3.2% intraday loss to a 3.8% gain at close the following day.
