The monthly figures came in line with expectations: an advance to more than 4% for the headline figure and a rise to 3.4% y-o-y for the core figure. But because the figures were in line with expectations, US yields fell following the data release. The US 2-year yield, which best captures Federal Reserve (Fed) rate expectations, eased to nearly 4%, down from above 4.20% at the beginning of the week.

The pullback also came despite a rebound in oil prices following reports that a ship had been attacked in the Strait of Hormuz. That oil rebound, however, remained short-lived as US crude is softer this morning, consolidating around the $70pb level, with investors overlooking the rising geopolitical tensions and not pricing in the risk of further escalation into the weekend.

The latter — the relatively relaxed reaction to the latest Middle East news — along with Micron's blockbuster results, could have encouraged a risk rebound across US and global markets yesterday, but didn't.

On its end, Micron materialized its 15% after-hours trading jump and closed yesterday's session 15% higher, rewarded by a set of blowout quarterly results and very strong guidance thanks to robust AI demand.

But that was it. Early optimism across technology stocks remained very short-lived, jinxed by news from Apple, which warned of what's happening on the other side of the table.

The significant memory chip price increases led Apple to raise the prices of its products by as much as 25%. Apple tanked more than 6% as investors feared that the higher prices would reduce demand and may not offset the squeeze on profit margins. Other device makers like Dell, HP and Lenovo lost between 4% and 5%, while Samsung is down by more than 8% today, on worries that the massive rise in chip prices will eventually hit a wall.

As such, the Korean Kospi index is having one of those days: an 8% fall at the index level, a halted trading session and unbelievably high volatility.

Over in Japan, the Nikkei is down by more than 3% on the back of souring tech sentiment. SoftBank — a proxy for the AI trade — is down 13% on the Apple news and reports that OpenAI is looking to delay its upcoming IPO, possibly due to shaken confidence in mega AI IPOs following SpaceX's post-listing struggles, while CEO Sam Altman reportedly remains unwilling to accept a valuation below $1 trillion. Apple suppliers are also feeling the heat today.

Hang Seng near bear market

In Hong Kong, the Hang Seng index is now looking like a series of falling knives. The index lost nearly 20% since January peak pushing it to the edge of bear market, and just slipped into the medium term bearish consolidation zone, after falling below the major 38.2% Fibonacci retracement on January 2024 to January 2026 rally.

The Chinese technology giants have been unable to benefit from the Iran-war-led technology inflows, for several reasons. First, strong competition among Chinese tech companies is weighing on margins, and investors hate it. Second, consumer sentiment in China remains very poor, limiting appetite for Chinese markets despite strong tech-led exports. Third, the latest news that Alibaba may have copied Claude's model certainly doesn't help. Alibaba is down almost 5% today and has lost half of its valuation since October 2025 — the peak of the latest rally that was bolstered by the arrival of the DeepSeek model earlier in 2025.

The lack of appetite for Chinese equities is nothing new. Companies will have to convince investors that they are capable of transforming their technological advances into profits to attract fresh funds. That's not yet the case. What's even more interesting is that Chinese companies benefit from lower borrowing costs than their Western and Japanese peers. Alas, broader economic weakness continues to weigh on investor appetite.

Nearby, in Japan, heating inflation pressures gave a small boost to the Japanese yen this morning, pulling the USDJPY slightly lower, but didn't push yields higher. The 10-year JGB yield is significantly lower this morning, hinting that investors are selling equities and buying bonds in an effort to take some risk off the table into the weekend.

In this context, US and European futures are also in negative territory this morning, with tech-heavy US indices leading the losses.

The flight to bonds could continue amid this week's weakening sentiment, also supported by the sustainable decline in oil prices. The technology complex will probably remain under pressure, grappling with its own demons.

The easing in global yields should limit losses in the non-tech pockets of the market, where the valuation gap with technology peers has widened enough to make these companies increasingly attractive for the coming months. A sustainable fall in energy prices should reinforce the rotation narrative.

A quick word on El Niño

Europe is burning this month, grappling with very high temperatures, and this climate phenomenon is expected to slash crop yields, push soft commodity prices higher and fuel inflation through food prices this time.

Yet note that inflationary pressures resulting from higher food prices tend to be more contained than inflation driven by higher energy prices. Higher food prices hit a number of sectors, whereas higher energy prices affect almost every sector.

And because central banks generally look through the highly volatile food and energy components when making monetary policy decisions, El Niño — even a Super El Niño — would not have a material impact on policy decisions, and therefore on yields.

On the contrary, any economic weakness resulting from El Niño could further help ease yields and provide support to the market.

But if global risk sentiment continues to sour and the technology rout deepens, even the non-tech pockets of the market may not provide a refuge for investors looking to reduce their risk exposure.

In summary, we could be entering a period of rotation from tech to non-tech, and eventually from equities to bonds, as investors navigate an increasingly uncertain environment heading into the boiling hot summer months.