Stock markets retreated in sparse summer trading Friday, with the uncertain outlook for the Middle East war and the US economy prompting investor caution ahead of the weekend.
Oil prices turned higher, and investors braced for further volatility as US and Iranian officials insisted on control of the Strait of Hormuz, which has been largely shut to tanker traffic by Iran since the US and Israeli launched strikes nearly six months ago.
On Wall Street, where the S&P 500 hit a new record high on Thursday, stocks slipped into negative territory, and most European indexes ended lower after a mixed showing in Asia.
Weaker than expected US retail sales raised new questions about the prospects for the world’s biggest economy.
Total US retail sales were down 0.6% in July from the previous month, at US$763.6 billion, while a new US consumer sentiment survey by the University of Michigan showed confidence dropped by around eight percent in August, ending two months of gains.
“Although the early-month weakening in sentiment was pervasive across various demographic groups, notably large reductions were seen among older consumers, lower-income consumers, and those without a college degree,” said consumer survey director Joanne Hsu. “These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation.”
While the data fed into expectations that the Federal Reserve would not hike borrowing costs anytime soon, “investors should be careful what they wish for,” said Bret Kenwell, investment analyst at eToro.
“For the economy to stay resilient, consumers will need to do the same,” he said, noting that even though US petrol prices eased in July, “that relief did not translate into stronger spending elsewhere.”
And with the US-Iran conflict showing little sign of ending, worries about growth and stubborn inflation dominated attention across markets.
“We continue to monitor oil prices and developments in the Middle East as well as Treasury behaviour after the weak auction” earlier this week, said Cresset Capital’s Jack Ablin, who noted that trading volumes were light on a Friday in the middle of vacation season.
Away from the war, the technology sector and massive spending on artificial intelligence rollouts remained front and centre.
US chip manufacturing equipment group Applied Materials saw its shares slide more than 5% despite record quarterly sales of US$9.1 billion, with analysts saying investors had expected more.
But SanDisk surged 7.4% as markets cheered an investor presentation that outlined the company’s prospects with the growth of artificial intelligence.
In Asia, Seoul gained more than 2% Friday as shares in the chipmakers SK Hynix and Samsung recovered further following last month’s selloff.
The country’s Kospi index had tanked about 40% between hitting its June high and an intra-day trough on Aug 6 but has since rebounded more than 20%.
Friday also saw gains for Tokyo, where tech giants Kioxia, Advantest and Sony rallied along with the technology investment titan SoftBank.
