WS #16025

Global risk sentiment has deteriorated sharply, driven by a confluence of geopolitical escalation and a sudden repricing of US monetary policy. The KOSPI logged its worst week since the 2008 Lehman collapse (-14.46%), signaling a severe de-risking event in Asia as AI capex fears collided with broader macro uncertainty. Simultaneously, US rate hike odds have plummeted from 55% to 13% following signals from Fed officials, shifting the market narrative from tightening to a pause, though this has not yet stabilized equities. Geopolitical tensions are escalating rapidly, with the US signaling conventional attacks on Iran and Trump criticizing Ukraine's strikes on Russian oil refineries as a "disgrace." This has created a volatile energy backdrop, further complicated by Zelensky's demand for $79 billion in aid and a congressional proposal to halt refinery strikes in exchange for Starlink expansion. While the Fed pause offers a floor for growth assets, the geopolitical premium remains elevated, pressuring defense and energy sectors while benefiting safe havens like Bitcoin, which saw $1.7B in ETF inflows over two days. In the technology sector, a rotation out of AI chip stocks is underway, with Intel and AMD dropping 3% as Bank of America warns that Nvidia, Broadcom, and Micron trade like Cisco post-dot-com bust. However, the thesis remains mixed: Nvidia held steady, TSMC received a $500 price target, and Morgan Stanley turned constructive on Tesla ahead of earnings. Corporate M&A continues in cybersecurity (Varonis/Proofpoint), while Apple insiders have sold $93.7M, contrasting with the recent iPhone Duo pre-order success.