A look at the day ahead in European and global markets

By Stella Qiu, Australia Economics & Markets Correspondent

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The monstrous rally in Asian chipmakers this year is hitting a rocky patch. The jitters are evident in the sheer volatility of markets such as South Korea's KOSPI, where wild swings in chip giants Samsung Electronics and SK Hynix have become a daily event.

The index slid 6% on Thursday, taking it down 28% from its June peak and adding to the pain for some leveraged retail funds. The tumble tends to vindicate investors' doubts at a time when everyone is worried about the rising cost of AI capex — can this massive spending actually turn a profit?

Motorcyclists pass a Taiwan Semiconductor Manufacturing Company (TSMC) facility in Kaohsiung, Taiwan, May 15, 2026. REUTERS/Ann Wang

All eyes now turn to today's second-quarter earnings from Taiwan Semiconductor Manufacturing Co (TSMC), the world's foundry king for the advanced chips that Nvidia sells to power the AI revolution.

Expectations are for a nearly 60% surge in net profit for the quarter, and even if the chip giant beats that it may not be enough. It will take a flawless report, coupled with more than rosy guidance, to avoid being punished.

Just look at ASML's results.

Graphics are produced by Reuters

While the rotation from memory and hardware has left most Asian share markets in the red, European futures seem less troubled, heading for a flat open. 

Wall Street futures were 0.1% higher, after a stronger session overnight thanks to cooler inflation and robust bank earnings. Results from Netflix, GE and a few banks, including U.S. Bancorp and State Street, are due later. 

U.S. retail sales for June are seen rising a modest 0.2%, after May's 0.9% jump, but the control group is forecast at a solid 0.5%. Any weakness could support the dovish turn in Fed bond markets, offsetting concerns about demand.

Oh, and there's still the matter of a war going on in the Middle East, with the U.S. military conducting another wave of strikes on Iran and Tehran saying it targeted a gathering of U.S. troops.

That's why Brent is still up 18% in the past two weeks to $85 a barrel, and why central banks everywhere remain wary, with South Korea raising rates for the first time in 3-1/2 years.  

For now, bond investors are just relieved the benign CPI and PPI readings have seen pricing for a July hike from the Fed fade to just 10%, from more than 40% earlier this month.