World stocks fall in semiconductor rout; oil rises on Middle East escalation

NEW YORK/LONDON - Share indexes tumbled around the world on Friday (July 17), as heavyweight chip stocks plunged for a third consecutive day as investors reduced bets on artificial intelligence, with China's Moonshot releasing a large AI system.

Meanwhile oil prices rose to their highest levels in more than a month as the United States and Iran risked further escalation as they expanded their attacks to hit key infrastructure. The United States struck bridges in Iran, and Tehran responded by hitting a power and desalination plant in Kuwait.

In the contested Strait of Hormuz, where the renewed conflict has again cut off global energy supplies, US Marines boarded a tanker, and another ship was reported to have been hit by a projectile.

In its third straight day of losses, the Philadelphia semiconductor index ended down 1.6 per cent on Friday, putting it 20 per cent below its most recent record close, reached on June 22, after earlier falling 23.5 per cent below the record.

Adding fuel to existing worries about rich valuations and the sustainability of AI capital spending growth was the unveiling by Chinese AI startup Moonshot of Kimi K3, which it said was the world's largest open-weight AI system, delivering performance close to US giant Anthropic's frontier model.

Wall Street's indexes pulled away from their session lows early in the day as some investors "felt this would be a good time to at a minimum start aggressively covering some recent shorts, or do some buying," according to Michael James, managing director and equity sales trader at Rosenblatt Securities.

But he described the market as "extremely emotional and sentiment driven."

"We're still down on the day and that's not going to instil confidence come Monday morning. It's a very shaky environment right now," he said.

On Friday, the Dow Jones Industrial Average fell 406.55 points, or 0.77 per cent, to 52,146.42, the S&P 500 fell 76.08 points, or 1.01 per cent, to 7,457.69 and the Nasdaq Composite fell 361.70 points, or 1.40 per cent, to 25,520.24.

For the week, the S&P 500 ended down 1.55 per cent while the tech-heavy Nasdaq fell 2.9 per cent and the Dow lost 0.93 per cent.

MSCI's gauge of stocks around the globe fell 13.17 points, or 1.17 per cent, to 1,108.52 on the day.

Earlier the pan-European STOXX 600 index ended down 0.34 per cent. Losses were more severe in Asia, with MSCI's broadest index of Asia-Pacific shares excluding Japan finishing down 2.7 per cent, while Japan's Nikkei tumbled four per cent, putting it 12 per cent below its recent peak.

In energy markets, US crude settled up 4.48 per cent, or US$3.54 (S$4.60), at US$82.49 a barrel while Brent settled at US$88.10 per barrel, up 4.59 per cent, or US$3.87 on the day.

Energy stocks were the only US industry sector to gain ground on Friday. Also, Mona Mahajan, head of investment strategy and asset allocation at Edward Jones, noted that defensive assets such as government bonds were in demand, while safer equity sectors such as utilities fell less than higher growth industries.

In the bond market, longer-dated US Treasury yields dipped on Friday after the latest round of economic data and were set for a weekly decline as markets have largely priced out any chance of a rate hike from the Federal Reserve at its policy meeting later this month.

The yield on benchmark US 10-year notes fell 1.55 basis points to 4.554 per cent, from 4.569 per cent late on Thursday while the 30-year bond yield fell 2.39 basis points to 5.0731 per cent.

In currencies, the dollar held steady on Friday but ended the week lower as tame US inflation data led traders to cut bets on Fed rate hikes.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.05 per cent to 100.76, with the euro down 0.03 per cent at $1.1437.

Against the Japanese yen, the dollar strengthened 0.03 per cent to 162.43.

In precious metals, gold rose on Friday, but was showing its biggest weekly loss in six as escalating US-Iran tensions drove energy prices higher, fuelling inflation fears and expectations of eventual US interest rate hikes.

Spot gold rose 0.99 per cent to US$4,009.19 an ounce while US gold futures rose 0.79 per cent to US$4,017.20 an ounce.

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