Morning Brew July 27 2021

Good morning.

Yesterday I asked whether risk sentiment would hold. The short answer was no.

Wall Street suffered its sharpest sell-off in months, with the technology-heavy Nasdaq 100 falling 6.4%, wiping roughly $2.5 trillion from its market value. The S&P 500 fell 4.4%, while the Philadelphia Semiconductor Index plunged more than 12%.

The immediate catalyst was growing uncertainty over the outlook for AI regulation and data-centre expansion following the Democrats’ sweep of Congress in the U.S. midterm elections. UBS estimates up to 30% of planned datacentre investments could be affected / delayed by regulation.  But investors are also confronting a broader question that has been building for some time: are the extraordinary amounts of capital being invested in AI infrastructure going to generate sufficient returns? 

The Nasdaq 100 index, composed of the biggest names in the broader index, fell 6.4%, erasing $2.5 trillion in market value. The Nasdaq Composite fell 5.5% on investor fears that the Democratic Party's sweeping midterm victory could stall AI infrastructure expansion and force a reckoning for smaller firms whose capacity to raise funds has already been limited by higher interest rates and tighter financial conditions.
The Nasdaq Composite fell 5.5% , the Philadelphia Semiconductor index fell more than 12% to touch its lowest level in more than six months. Nvidia  dropped 9% and Advanced Micro  dropped  17%.
Wall Street's fear gauge, the VIX index of expected price swings, posted its largest increase since December 2024. 

Nebius  another neocloud company, dropped 15% Data center operators Applied Digital , Cipher Digital  and IREN  tumbled more than 14% each. Amazon.com  and Alphabet  each slid 2.2% Microsoft  declined 3.6%
European equities initially touched record highs on Thursday before reversing as the US tech rout deepened. The Stoxx 600 closed down 0.38% at 654.87, the DAX fell 0.43% to 26,325.01, and the FTSE 100 lost 0.43% to 10,782.66. The CAC 40 bucked the trend, closing up 0.34% at 8,205.37. ASML slid 6.5% as the region's semiconductor stocks fell ~11% — their worst day since March 2020. Rheinmetall plunged 16.1% after cutting its FY2026 guidance due to delays in artillery ammunition testing. 
South Korea, Taiwan stocks plunge over 8% as chip names crater before recovering partially. 
 

Charu looked the implications of yesterday`s selloff: Investor Q&A: Panic, buying opportunity or time to rethink portfolios?

Rates, FX & precious metals

Government bonds attracted safe-haven demand as investors reassessed growth and risk. Yields are lower globally, with the UK around 5.13%, the U.S. 4.83%, France 4.78%, Germany 3.24%, Japan 2.64% and Switzerland 0.45%.

The U.S. Dollar Index is around 101.80, with EUR/USD around 1.12, GBP/USD near 1.3422 and USD/JPY around 157.80. The Swiss franc trades around 0.9140 against the euro and 0.8165 against the dollar.  Gold and silver have given back part of their recent gains and are trading around $4,040 and $51.50, respectively. Bitcoin bounced off the the 50 day moving average and fell 6k USD to 75600 this morning. 

Geopolitics

U.S. President Donald Trump said he met privately on Thursday with Russian President Vladimir Putin’s envoy, Kirill Dmitriev, after the Russian official appeared alongside representatives from Ukraine at a White House event.

Trump did not disclose the details of the discussion but suggested that a deal aimed at resolving the war in Ukraine could emerge soon.

Oil: 

The global oil market is increasingly focused on the balance between recovering supply and softer demand. Despite continuing geopolitical uncertainty, improving Middle Eastern flows and higher production elsewhere are contributing to concerns that the market could be moving back towards excess supply. J.P. Morgan estimates that the global oil market returned to a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October.

Oil prices are higher this morning but remain on course for a roughly 12% weekly decline, adding another element to an already volatile cross-asset environment.

Today: Nonfarm Payrolls take centre stage at 14:30 CET  
Consensus expectations are: Nonfarm Payrolls: +65k, Unemployment rate: 4.2% Average earnings: 2.9%

The University of Michigan Consumer Sentiment survey follows at 16:00 CET, with sentiment expected around 48.

Normally, payrolls would dominate the session. Today, however, investors and traders will assess  whether yesterday’s forced selling continues or buyers begin stepping back into the market.

A resilient labour report could support the economic outlook, but it may also keep upward pressure on rates. A weak report could reinforce growth concerns after yesterday’s equity rout. In this environment, the market reaction may matter more than the headline number itself.

Panic, reset or buying opportunity?

After a 12% one-day fall in semiconductors and a 6.4% decline in the Nasdaq 100, the temptation to make immediate portfolio decisions is understandably high.

But large price declines do not automatically make assets cheap, just as a violent sell-off does not necessarily mean that the underlying investment case has disappeared.

The key question is whether yesterday marks a valuation reset within an intact AI investment cycle or the beginning of a broader deterioration in earnings, credit conditions and economic growth.

For long-term investors, this is a moment to reassess concentration, leverage and portfolio diversification rather than react emotionally to a single trading session. For investors looking to add exposure, quality, balance-sheet strength, cash generation and gradual deployment matter more than trying to identify the exact market bottom in the long run statistically time in the market beats timing the market, even if a day like yesterday seems to blur that picture.

Trade and invest safely.

The Week Ahead

Monday, 9 November 2026

Macro: China CPI and PPI; U.S. wholesale trade; Bank of Canada Market Participants Survey.
Central banks: Speech by Andrew Bailey, Governor of the Bank of England.
Corporate earnings: Constellation Energy, KKR, Barrick Mining, Occidental Petroleum, Ferguson, Take-Two Interactive, NRG Energy and The Trade Desk.

Tuesday, 10 November 2026

Macro: U.S. CPI and core CPI; U.S. NFIB Small Business Optimism.
Central banks: Bank of Canada Summary of Deliberations.
Corporate earnings: Petrobras, TransDigm, Sea Limited, Vodafone, Alcon and Ecopetrol.

Wednesday, 11 November 2026

Macro: Final German CPI/HICP. Veterans Day in the U.S., with banks and the bond market closed while U.S. equity exchanges remain open.
Corporate earnings: Cisco Systems, Franco-Nevada, CGI, Ascendis Pharma and Tetra Tech.

Thursday, 12 November 2026

Macro: UK preliminary Q3 GDP; New Zealand Q4 inflation expectations; U.S. initial jobless claims and existing-home sales; Canada building permits.
Corporate earnings: Applied Materials, Ross Stores and Williams-Sonoma.

Friday, 13 November 2026

Macro: U.S. PPI and core PPI; UK Q3 business investment; Swiss producer and import prices; euro-area national GDP and inflation releases; Canada manufacturing sales.