Daily Market Outlook, August 19, 2026

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Missive - Semis Slide As Yields And Oil Pressure Risk

The pullback in semiconductor stocks has become the main market story, with investors cutting exposure to one of the year’s most profitable trades just as higher bond yields and renewed geopolitical stress tighten the backdrop for risk assets. Treasuries have steadied after the recent global bond selloff, but the broader tone remains defensive: AI-linked equities are under pressure, oil is above $91/bbl, and futures point to further losses in Europe and the US.

In Seoul, Samsung Electronics and SK Hynix both fell more than 7%, extending the global semiconductor rout after US chipmakers sold off sharply on Tuesday. The Philadelphia Semiconductor Index dropped 5%, its largest one-day decline since late July, while the Asian semiconductor index fell more than 3.5%. The move is especially painful because Korea had been one of the clearest beneficiaries of the AI trade, with chip stocks rallying hard earlier this month as investors returned to the theme.

The broader equity damage is significant. MSCI’s Asia Pacific index fell 2.2%, while South Korea’s Kospi dropped around 6%. Equity-index futures suggest the weakness will extend into European and US trading. The pressure is not just about profit-taking. Rising borrowing costs matter for the AI complex because the trade is built around heavy capital expenditure, long-duration earnings expectations and high valuations. When long-end yields rise, the discount-rate hit lands hardest on the parts of the market where future growth is most richly priced.

The positioning backdrop made the sector vulnerable. Recent flow data showed semiconductor ETF outflows continuing even as broad large-cap Tech demand remained solid. SOXL, SMH and SOXX together saw heavy redemptions last week, while levered semiconductor exposure was also cut. That suggested investors were already trimming the most crowded and volatile AI expressions. This week’s price action looks like that caution turning into a broader unwind.

Oil is adding to the pressure. Brent crude rose for a fourth consecutive day, moving above $91/bbl after gaining 4.5% over the prior three sessions. The lack of progress in the US-Iran standoff, together with ongoing concern around the Strait of Hormuz, is keeping a geopolitical risk premium in crude. That complicates the market’s preferred narrative from last week, where softer US inflation and weaker payrolls had reduced near-term Fed hike expectations. Higher energy prices do not immediately overturn that, but they raise the risk that disinflation becomes less comfortable over the coming months.

Treasuries edged higher after the recent selloff pushed 10-year yields close to their highest levels since early 2025 and 30-year yields to peaks last seen in 2007. The 10-year Treasury yield slipped 1bp to 4.69%, while Japanese 20-year government bond yields also eased. The move looks more like a pause than a reversal. The long end is still wrestling with heavy fiscal supply, term-premium pressure and the inflation implications of higher oil. A modest Treasury bounce may help stabilise sentiment, but it does not remove the broader duration problem facing equities.

The Canadian dollar strengthened after the Trump administration delayed 50% tariffs on billions of dollars of Canadian goods for three days following intense negotiations in Washington. The delay reduces immediate trade-friction risk, but only temporarily. Markets will still need clarity on whether this is a genuine de-escalation or simply more time for negotiation. Gold hovered around $4,350/oz after its largest drop in nearly a month, caught between safe-haven demand from geopolitical risk and the pressure of higher real yields.

UK July CPI did not deliver any major surprise. Headline inflation rose 2.86% y/y, effectively matching the 2.9% consensus estimate and close to the 2.83% projection in the Bank of England’s July Monetary Policy Report. The rise was driven mainly by the Ofgem price-cap increase, partly offset by further moderation in food inflation. That composition matters: this was largely an energy-price effect rather than evidence of broadening domestic price pressure.

Core inflation was a touch firmer than expected at 2.6% y/y versus the 2.5% survey estimate, but it was unchanged from the prior month and follows notable downside surprises in April and May. Most discretionary services categories improved, including recreation, restaurants and hotels. The main pickup came from furniture and household goods, where base effects were unhelpful. Services inflation fell to 3.4% y/y from 3.6%, in line with expectations but still welcome for the MPC.

This report should not shift the Bank of England from its current steady stance. The labour market remains softish in the background, which is weighing on private-sector wage growth, and there is no evidence of second-round effects from the energy-price increase. Inflation is likely to rise further over the next few months, but the profile should turn lower again around October. That path should keep most rate setters comfortable with an extended hold, especially as the rise in market rates has already tightened financial conditions.

Macro to Micro: the semiconductor selloff is the pressure point for global risk assets, but the underlying drivers are broader. Higher long-end yields are challenging expensive growth valuations, oil above $91/bbl is reviving inflation concerns, and geopolitical risks remain unresolved. Treasuries have paused, but not enough to declare the duration shock over. The UK CPI report supports BoE patience, with headline inflation lifted by energy but no clear second-round effects. For markets, the immediate issue is whether the AI unwind remains a sector rotation or becomes a wider risk-off event.

Overnight Headlines

UAE Says Iran Fired Two Missiles At Country As War Drags On
Iran Eyes Military Targets In Europe If Trump Escalates War, Insiders Say
Trump Pauses 50% Canada Tariffs For Three Days Subject To A Deal
Trump Pushes For Kim Jong Un Meeting This Year
China Widens Use Of $1.6T Fund To Spur Spending On Homes
China Eases Limits On Nvidia H200 Chips As AI Race Escalates
Mizuho Markets Head Expects BoJ To Raise Rates Soon, More Often
Japanese Stocks Slide As Bond Market Anxiety Hits AI Sentiment
RBA's Hauser Warns Of Higher Rates If Inflation Risks Crystallise
Wall Street Sees No End In Sight To The Global Bond Selloff
Oil Edges Up On Uncertainty Over Exports Through Hormuz
Gold Holds Losses As Bond Selloff, Hormuz Limbo Weigh On Outlook
Anthropic Prepares Supervoting Power For Founders As It Readies For Mega-IPO
SEC Unveils Crypto Plan As Agency Moves Ahead On Digital Assets

FX Options Expiries For 10am New York Cut

(1BLN+ represents larger expiries and is more magnetic when trading within the daily ATR.)

EUR/USD: 1.1600 (EU1.68b), 1.1450 (EU908.2m), 1.1945 (EU703.2m)
USD/JPY: 164.00 ($743.7m), 158.00 ($710.1m), 165.00 ($400m)
USD/CAD: 1.3910 ($732.1m), 1.3700 ($580m), 1.3900 ($468.6m)
USD/BRL: 5.1500 ($819.9m), 5.0000 ($460m), 5.0500 ($318.3m)
AUD/USD: 0.7125 (AUD450.9m), 0.7100 (AUD305.3m)
GBP/USD: 1.3450 (GBP571.6m), 1.3350 (GBP443.1m), 1.3125 (GBP380m)

CFTC Positions as of 14/7/26

Bitcoin: net long position of 3,865 contracts
Swiss franc: net short position of -32,462 contracts
British pound: net short position of -56,221 contracts
Euro: net short position of -60,010 contracts
Japanese yen: net short position of -42,085 contracts
CBOT US 5-year Treasury futures: net short position reduced by 84,963 contracts to 1,240,756
CBOT US 10-year Treasury futures: net short position reduced by 64,190 contracts to 915,053
CBOT US 2-year Treasury futures: net short position increased by 16,815 contracts to 1,021,043
CBOT US UltraBond Treasury futures: net short position increased by 11,798 contracts to 326,783
CBOT US Treasury bonds futures: net short position increased by 3,335 contracts to 179,607
S&P 500 CME: equity fund speculators reduced net short position by 58,046 contracts to 261,531; fund managers raised net long position by 4,954 contracts to 942,062.

Technical & Trade Views

SP500 - 7620 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bullish
Above 7620 Target 7870
Below 7600 Target 7485

DXY - 100 weekly bull/bear level

Daily VWAP Bearish
Weekly VWAP Bearish
Above 99 Target 100
Below 98.90 Target 97.30

EURUSD - 1.15 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bullish
Above 1.1550 Target 1.17
Below 1.1480 Target 1.1420

GBPUSD - 1.35 weekly bull/bear level

Daily VWAP Bullish
Weekly VWAP Bullish
Above 1.35 Target 1.3690
Below 1.34 Target 1.33

USDJPY - 160 weekly bull bear level

Daily VWAP Bullish>Bearish
Weekly VWAP Bearish
Above 155 Target 160
Below 155 Target 152

XAUUSD - 4200 weekly bull bear level

Daily VWAP Bearish
Weekly VWAP Bullish
Above 4200 Target 4400
Below 4100 Target 3570

BTCUSD - 64k weekly bull bear level

Daily VWAP Bullish
Weekly VWAP Bearish
Above 64k Target 71k
Below 61k Target 52.2k