Inflation Optimism Meets Semiconductor Fatigue: Global Market Rotation Underway

Unexpected cooling in US producer prices (PPI) combined with dovish signals from New York Fed President John Williams bolstered global risk appetite, though profit-taking in the semiconductor space created a stark divergence among major indices. While the S&P 500 climbed to a one-month high, the tech-heavy Nasdaq 100 slid into negative territory under the weight of chipmaker weakness.

Disinflationary Momentum and Fed Policy Trajectory

■US June Producer Price Index (PPI) rose by +5.5% y/y, coming in softer than the expected +6.2% y/y.

■Core PPI eased to +4.7% y/y, beating market consensus of +5.1% y/y, signaling a broader cooling of pipeline pressures.

■New York Fed President John Williams noted that while inflation remains high, there are encouraging signs that it has peaked and will continue to edge lower.

■The July Empire State Manufacturing Survey surged to 15.6, beating expectations of 9.2 and reflecting resilient economic activity.

The Chip Sector Paradox and Healthcare Sector Pressure

■Despite stellar earnings from Dutch lithography giant ASML confirming robust AI demand, profit-taking triggered a broader sell-off across semiconductor equities.

■Healthcare insurer Elevance Health plunged after issuing updated forward guidance that disappointed investors, despite beating Q2 expectations.

■US mortgage applications declined by -2.7% for the week ending July 10, as the 30-year fixed mortgage rate climbed to 6.65%.

Mixed Economic Data from China Limits Global Upside

■China's Q2 GDP grew at a +4.3% y/y pace, missing expectations of +4.4% y/y and marking the slowest expansion in 3.5 years.

■Conversely, industrial production outperformed at +5.3% y/y (vs. +4.6% expected), and retail sales surprisingly rose by +1.0% y/y.

From a global capital flows perspective, we are witnessing a classic mid-cycle asset rotation rather than a structural risk-off event. Dovish US macro data is capping treasury yields, providing a favorable backdrop for broader equities. However, the underperformance of the Nasdaq highlights that hedge funds are trimming overextended tech allocations to rotate into lagging, value-oriented sectors. While China's sluggish GDP growth remains a headwind for global cyclical assets, the underlying liquidity remains supportive of risk assets as the Fed's rate-cut path becomes increasingly clear.