The final week of July confirmed that there are currently two distinct categories of equities. Those following a relatively steady trajectory, and those driven almost entirely by sentiment. More precisely, by their exposure to artificial intelligence.

That dynamic explains why Amazon surged 15% while Apple fell 7.3% on Friday. Given the size of both companies, it goes without saying that such moves shift enormous amounts of capital.

Microsoft had already climbed more than 15% on Thursday. And that is before mentioning South Korea's KOSPI index, which tumbled 11% last Tuesday only to rebound 18% by Friday.

Beyond the spectacular rallies and equally memorable sell-offs, investors are likely to take away three key lessons as the summer reaches its halfway point.

First, July ultimately ended on a positive note for the technology sector, which recovered after a sharp sell-off at the start of the month. Admittedly, the Nasdaq 100 still lost 6.6% between 1 and 31 July, but the slide in semiconductor stocks came to a halt last Thursday, helped in particular by expectations of bargain hunting in a theme where attractive entry points have become increasingly scarce.

Second, assets with less direct exposure to AI have delivered respectable performances and, in any case, far less volatile ones. The S&P 500 and the Dow Jones Industrial Average both finished the month broadly unchanged. In Europe, the Stoxx Europe 600 gained 1.2% in July, marking its fourth consecutive monthly advance. The index is now up 9.6% since the start of 2026, or 11.7% including dividends.

Third, the conflict in the Middle East continues to influence oil prices, though its impact on equity indices has become more limited. Crude is under heavy pressure again this morning following the announcement of fresh talks between Iran and the United States beginning later today. Over the weekend, Donald Trump abandoned what he described as "the largest attack since the Second World War".

Brent crude has fallen 7%, returning to the USD 80-85 per barrel range. It is, of course, impossible to know whether this latest twist will ultimately lead to a lasting resolution of the conflict. What can be said is that it comes just as the semiconductor sell-off appears to have stabilised, adding another positive factor to the near-term outlook. Lower oil prices also help ease concerns over higher interest rates, which is invariably supportive for equity markets.

What You Need to Know to Start the Week

  • Japan confirmed that it intervened jointly with the United States to support the yen late last week.
  • OPEC+ will raise oil production modestly in September.
  • FIFA has abandoned plans to open the Football World Cup to private capital.
  • Kevin Warsh is reportedly considering reducing the frequency of Federal Reserve monetary policy meetings, according to The New York Times.
  • Luiz Inácio Lula da Silva, now 80, has formally announced his candidacy for Brazil's presidential election, seeking a fourth term.
  • The AI model race continues to intensify. On Friday, China's DeepSeek launched a public API for its most advanced model, V4 Flash, while rival Alibaba unveiled Qwen 3.8-Max, its most powerful AI model to date.
  • On the economic calendar, July's US employment report will be the week's main event, although investors will have to wait until Friday.
  • On the corporate front, the earnings calendar remains exceptionally busy, with more than 200 companies from the Stoxx Europe 600 and S&P 500 reporting. Among them are Palantir, SpaceX, Eli Lilly and Sandisk in the United States, alongside HSBC, Siemens Energy and Allianz in Europe.

Across Asia-Pacific, the divide described at the start of this column is equally evident. South Korea and, to a lesser extent, Taiwan and Japan have effectively become AI-driven equity markets. Elsewhere, trading patterns remain more conventional.

South Korea's KOSPI is down 5% this morning, following Friday's extraordinary 18% rally. Japan's Nikkei 225 has fallen 1% after gaining 4.2% at the end of last week. Australia and Hong Kong are edging 0.1% higher. India is also attracting attention, with the SENSEX posting a fourth consecutive session of gains.

European markets are expected to open higher.

Today's Economic Highlights:

On today's agenda: RatingDog Manufacturing PMI in China; monthly and yearly retail sales in Germany; annual inflation rate and procure.ch Manufacturing PMI in Switzerland; S&P Global Manufacturing PMI in Spain and Italy; in the United States, ISM Manufacturing PMI and ISM Manufacturing Employment. See the full calendar here.

  • GBP / USD: US$1.348
  • Gold: US$4,069.98
  • Crude Oil (BRENT): US$83.49
  • United States 10 years: 4.69%
  • BITCOIN: US$62,767.6

In corporate news:

From Europe

  • AstraZeneca is reportedly in talks over a USD 400 billion merger with Bristol Myers Squibb, according to the Financial Times.
  • The proposed merger between Deutsche Telekom and T-Mobile US is facing opposition from shareholders and regulators, according to Semafor.
  • Banca Monte dei Paschi di Siena is expected to launch a takeover bid for Banco BPM after failing to reach agreement on a merger. Crédit Agricole, a Banco BPM shareholder, remains in the wings.
  • Prysmian is acquiring Atkore for USD 3.8 billion (USD 95 per share), strengthening its presence in the United States.
  • Glencore has suspended its commercial relationship with Radiant World.
  • Holcim will sell its Philippine operations for USD 807 million.
  • Subsea 7 has secured a contract from Brunei Shell Petroleum and, together with Saipem, has received US regulatory clearance for their merger.
  • Sonae has acquired an 8% stake in a portfolio of shopping centres in Spain for EUR 120 million.
  • Webuild has launched a tender offer for the entire share capital of Trevi at EUR 4.50 per share.
  • The US Food and Drug Administration (FDA) has expanded the approval of Novartis' Pluvicto for the treatment of prostate cancer.
  • India has banned certain alcoholic beverages produced by Diageo and Inbrew for breaching flavouring regulations.

From North America

From Asia and the Rest of the World

See more news from UK listed companies here

Analyst Recommendations:

  • J Sainsbury Plc: RBC Capital Markets maintains its outperform recommendation with a price target raised from GBX 375 to GBX 400.
  • Pan African Resources Plc: Jefferies initiates a Buy recommendation with a target price of GBX 130.
  • Itv Plc: Barclays maintains its equalweight recommendation with a price target reduced from 0.80 to GBP 0.75.
  • Rentokil Initial Plc: Morgan Stanley maintains its overweight recommendation with a price target reduced from GBX 570 to GBX 500.
  • Shell Plc: Gerdes Energy Research LLC maintains its buy recommendation with a price target raised from 117 to USD 123.
  • Legrand: RBC Capital Markets upgrades to outperform from sector perform with a price target raised from EUR 150 to EUR 160.
  • Axa: Oddo BHF maintains its outperform recommendation with a price target raised from 50 to EUR 51.
  • Arcelormittal: Oddo BHF maintains its outperform recommendation with a price target raised from 70 to EUR 76.