There is a striking contrast at the moment between the turmoil in US equities and the relative calm across European markets. Still, the numbers speak for themselves: while Europe notched up an 11th consecutive session with moves of less than 1%, Wall Street ran through the full range of emotions because of semiconductors. Yesterday, the iShares Semiconductor ETF, better known by its ticker SOXX, initially rose 4%, then fell as much as 7% at its intraday low, before closing down 1.6%. Rather like being trapped in a washing machine on a violent spin cycle.

Until recently, the rhythm of US markets was three steps forward and half a step back. In recent days, it has looked more like one step forward and two steps back. Volatility is rising, as shown by yesterday's drawdown in SOXX, in other words the gap between the day's high and low: more than 11%. To be perfectly fair, while the Nasdaq was working itself into a lather, the Dow Jones held up reasonably well. It even ended the session up 0.17%. The explanation is straightforward: of the 10 major sectors that make up the indices, only two fell on Tuesday, technology and energy. Energy is in the firing line because, in the United States, it has become a proxy for data-centre build-out, and therefore for AI. The Dow outperformed thanks to its old guard: retail, with The Home Depot, consumer names, with Coca-Cola, Nike, Procter & Gamble and McDonald's, and healthcare, with Johnson & Johnson and UnitedHealth.

The resurgence of doubts over the AI cornucopia is accompanied by considerable confusion in the Middle East, where tensions have flared again after Iran shot down a US combat helicopter. Washington carried out retaliatory strikes overnight. Oil, meanwhile, is reacting less and less to each day's convulsions. With Brent trading around $90 to $95 a barrel, it appears to have found an equilibrium level for the current risk backdrop. That is better than $120 or $150, but still too high to allay inflation fears, which will come roaring back into focus this afternoon with the publication of US inflation figures for May. The market expects prices to have risen 4.2% year on year, after 3.8% in April. Core inflation, which strips out the most volatile items, is expected to climb to 2.9%, from 2.8% in April. This is therefore a crucial release, exactly one week before the Federal Reserve's next monetary policy decision, the first of the Kevin Warsh era. Tomorrow's producer-price data for May should not be dismissed lightly either. The April reading showed a much sharper increase than expected, helping to wipe out expectations of rate cuts in 2026.

As the United States struggles in Iran and the AI theme finds itself running short of fresh fuel, the path of interest rates is taking on ever greater importance. Not just as a market narrative, but because rates that stay high, or rise further, mean higher financing costs. In recent years, the traditional link between high rates and growth-stock underperformance had broken down, because those growth companies did not need to tap the market for funding and the technology leaders were flush with cash. But now that Amazon, Microsoft and their peers are investing more than they are generating, and the private-debt market is under severe strain, the cost of borrowing is once again becoming a decisive factor. That means monetary policy is too.

To round things off, and to pull these threads together, Oracle reports after the close tonight. The group embodies much of what has just been discussed: a legacy business under pressure from AI, an expensive technological pivot under way, and layer upon layer of borrowing. Investors are waiting to see the numbers and to hear what sort of story management sets out. Oracle's release will carry all the more weight because it falls outside the usual earnings-season crush, thanks to the company's unusual financial year, which ends in late May.

In markets that have already closed, or are close to doing so, technology is falling again, taking 2% off Japan's Nikkei 225 and 3% off Taiwan's TAIEX. Unsurprisingly, South Korea's KOSPI is down 6%. Australia is flat, while Hong Kong is off 1.1%. Europe is pointing lower.

Today's economic highlights:

On today's agenda: China's monthly and yearly inflation rates, along with the PPI; industrial production in Italy; in the United States, the MBA 30-Year Mortgage Rate, monthly and yearly inflation rates, CPI, and EIA crude oil and gasoline stock changes, followed by the monthly budget statement; in Canada, the BoC interest rate decision and press conference. See the full calendar here.

  • GBP / USD: US$1.34
  • Gold: US$4,213.47
  • Crude Oil (BRENT): US$91.04
  • United States 10 years: 4.53%
  • BITCOIN: US$63,320.1

In corporate news:

  • London Stock Exchange seeks to challenge a trading data overhaul.
  • F&C Investment Trust reports net asset value per ordinary share.
  • Ceres Power seeks GBP100 million via a new shares offering.
  • Savannah Resources halts work on a portion of its project in Portugal following legal action.
  • LSEG's capital reduction takes effect following shareholder and court approval.
  • UniCredit has increased its stake in Commerzbank to 37.68%, with the contribution ratio reaching 10.9%.
  • Germany would be a key partner for the GCAP fighter jet project, according to Leonardo's CEO.
  • ING Groep is launching a subscription-based banking model across its global markets.
  • S&P upgrades Telecom Italia's rating to BB+ with a stable outlook.
  • Julius Baer raises €500 million through a senior debt placement.
  • Avolta secures a contract extension at a US airport.
  • Euronext adds Aalberts to the AEX index and CGS to the AMX.
  • OpenAI is considering leasing a data centre in Ohio with support from Nvidia, according to The Information.
  • The European Commission has ordered Meta Platforms to restore access to WhatsApp for competing AI tools.
  • Super Micro Computer is set to raise $7 billion through a share issue to meet demand for AI servers
  • Starbucks is considering several options for its Japanese subsidiary, including a sale of its stake, according to Bloomberg.
  • IBM's CEO believes that AI will not necessarily lead to job cuts.
  • Boeing trails Airbus in terms of deliveries and orders in May.
  • Lockheed Martin has secured a $153.9 million contract extension from the US Navy.
  • CME Group is launching futures contracts on the Nasdaq CME Crypto Index.
  • General Motors will allow EV owners to sell electricity back to the grid and is focusing on sodium-ion batteries for its energy storage business.
  • Simon Property is launching a bond issue.
  • Samsung Electronics is investing $175 million and becoming the largest shareholder in a US genetics company.
  • Japan's Asics is considering spinning off its Onitsuka Tiger brand.
  • The partnership between WeChat and smartphone manufacturers threatens Apple's market share in China, according to Jefferies.
  • Today's key earnings releases: Oracle Corporation, Flughafen Zürich, Pennon Group, Workspace Group, WH Smith, Frontier Developments, H-Power, Motorpoint Group.

See more news from UK listed companies here

Analyst Recommendations:

  • Londonmetric Property Plc: Morgan Stanley maintains its underweight recommendation and reduces the target price from GBX 205 to GBX 195.
  • Great Portland Estates Plc: Barclays maintains its underweight recommendation and reduces the target price from GBP 2.90 to GBP 2.85.
  • Admiral Group Plc: Keefe Bruyette & Woods maintains its outperform rating and raises the target price from GBX 3500 to GBX 3650.
  • Reckitt Benckiser Group Plc: Barclays maintains its overweight recommendation and reduces the target price from GBP 60 to GBP 56.
  • Unilever Plc: Barclays maintains its overweight recommendation and raises the target price from GBP 55 to GBP 56.50.
  • J Sainsbury Plc: Barclays maintains its overweight recommendation and reduces the target price from GBP 3.60 to GBP 3.55.
  • Intercontinental Hotels Group Plc: Goldman Sachs maintains its buy recommendation and raises the target price from GBX 165 to GBX 188.
  • Berkeley Group Holdings Plc: Goldman Sachs maintains its sell recommendation and reduces the target price from GBX 3170 to GBX 3085.
  • Sse Plc: Goldman Sachs maintains its neutral recommendation and reduces the target price from GBX 2791 to GBX 2678.
  • Breedon Group: Investec maintains its buy recommendation and reduces the target price from GBX 405 to GBX 365.