Broadcom miss and Iran tensions test market resilience as Fed faces mixed data

Global markets entered the week with optimism regarding a potential resolution to the three-month Iran conflict and sustained artificial intelligence momentum, but those hopes were quickly tempered by a significant earnings miss from Broadcom. The chipmaker’s shares slumped more than 12 per cent on Thursday after reporting sales of over $22 billion for the previous quarter, a figure that fell short of expectations despite a 55 per cent rise in its share price during the quarter. The shortfall wiped approximately $300 billion in market value, dragging down the Nasdaq and halting the S&P 500’s nine-session winning streak, although the broader index managed to close higher on the day.

Despite the Broadcom setback, enthusiasm for technology remains a dominant force in equity markets. Nvidia unveiled a new chip designed to integrate AI capabilities directly into personal computers, while Microsoft announced an AI-designed quantum computing chip with commercial utility expected by 2029. Additionally, Anthropic filed for an initial public offering, and chip designer Marvell Technology surged more than 25 per cent after Nvidia’s chief executive suggested it could become the next trillion-dollar company. Google’s parent company, Alphabet, also announced an $80 billion equity offering, with Berkshire Hathaway subscribing to $10 billion of the shares.

In foreign exchange markets, the Japanese yen approached the 160-per-dollar threshold, raising questions about the efficacy of intervention strategies. Authorities had previously spent more than $73 billion in recent weeks to support the currency, prompting scrutiny over whether such measures are failing to stabilise the exchange rate. Meanwhile, in the commodities sector, Brent crude prices rose over 4 per cent on Monday following reports that peace negotiations between the United States and Iran had been halted, although the US later disputed these claims. Despite military strikes in the Gulf, oil prices remained below $100 per barrel, even as US gasoline stockpiles fell at a near-record pace ahead of rising summer demand.

The US labour market presented a contradictory picture, complicating the outlook for monetary policy. Job openings rose to a five-year high in April, and private-sector payrolls beat forecasts with a rise of 122,000 in May. However, initial weekly jobless claims unexpectedly increased by 6.1 per cent, and corporate layoffs jumped 11 per cent, with nearly 40 per cent of these reductions attributed to AI-driven efficiencies. The Federal Reserve now faces inflationary pressures from both energy costs and substantial AI capital expenditure, with the May nonfarm payrolls report scheduled for release on Friday.

Amidst these macroeconomic shifts, broader market dynamics continue to evolve. China’s seaborne crude oil imports slumped to their lowest level in almost a decade in May, helping Asia adjust to supply disruptions, while indications suggest a growing number of ships are transiting the Strait of Hormuz under the radar of satellite tracking systems. As the new Federal Reserve Chair Kevin Warsh prepares for the central bank’s meeting later this month, the combination of mixed employment data, geopolitical risks, and high capital expenditure in the tech sector creates a complex environment for investors navigating the coming months.