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Low commodity prices overshadow Q2 earnings
ETFS Multi-Asset Weekly – Low commodity prices overshadow Q2 earnings
Highlights
Weak Chinese demand weighs on commodity prices.
European and US earnings garner momentum for equities.
US dollar appreciates as the Federal Reserve conditions the market for rate increases this year.
Commodities extended their declines this week and their impact was clearly resonated as the world’s leading energy and mining stocks across the globe posted losses in their Q2 earnings release. As these companies trim future revenue outlooks and cut capex and therefore reduce production, their impact should work their way back in the form of higher commodity prices. Greece’s stock markets are set to open today marking a slight hope of stabilization after weeks of riots, bank closures and emergency financing. Looking ahead the PMI Manufacturing data in the Eurozone, jobs data in the US and central bank meetings in Japan and UK will be the focus of next week’s economic calendar.
Commodities
Weak Chinese demand weighs on commodity prices. Copper stockpiles are at their highest in 18 months as reported by the LME. Amidst the backdrop of copper price trading at a 6 year low, the world’s largest producers namely Freeport McMoRan, First Quantum and Antofagasta planned to cut back on production as they struggle to remain profitable. Power restrictions, delayed projects and cost cutting threaten to curtail supply, which we believe will be supportive for copper prices. Despite the unexpected decline in stockpiles of 4.2m barrels to 459.7m against the market forecast for 850,000 barrel increase, oil continued to tread in bear market territory as negative sentiment on China’s growth prospects weighed on prices. Corn fell by 7.4% after the International Grains Council raised its estimate for Chinese corn production by 5m metric tonnes to an all-time high 225m tonnes, allaying concerns of bad weather damaging corn fields in the U.S. and Europe. Tin rose 8.6% last week on the back of lower Indonesian exports (the world’s largest supplier).
Equities
European and US earnings garner momentum for equities. Despite a volatile start to the week led by the decline in Chinese benchmark indices, corporate earnings in the US and Europe helped restore confidence in global equity markets. European & US stocks posted an 8.3% and 4.5% earnings surprise among the 65% and 70% of companies that reported so far on the Eurostoxx 600 and S&P 500 Index respectively. Investors are increasingly realigning their portfolio towards Europe over US equities as better valuations, lower euro and improving economic growth favor the region. Meanwhile MSCI China A-Shares ended the week 9.8% lower.
Currencies
US dollar appreciates as the Federal Reserve conditions the market for rate increases this year. In its latest statement the Fed said it needs to see “some further improvement in the labor market,” adding the modifier “some,” to its previous statement (indicating it is closer to the mark). This week’s US payrolls data will therefore carry a lot of weight in determining the timing of rate increases. Weak oil prices took its toll on the Canadian economy, with monthly GDP declining for a fifth consecutive month, supporting the Central bank of Canada’s July 15 decision to cut borrowing costs. The Canadian dollar depreciated 4.2% against the US dollar. Despite Swedish GDP beating expectations (3% vs 2.5% y-o-y expected), the Swedish Krona depreciated as the market expects interest rates to remain negative rates to maintain that pace of growth.
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• Top Performer: Defence (+$7.87 billion)
• Emerging Themes: Cybersecurity (+$318 million), Uranium (+$253 million)
European thematic UCITS ETFs posted a dramatic resurgence in the first half of 2025, with net inflows of $8.73 billion year-to-date, according to ARK Invest Europe’s latest quarterly update detailing H1 2025 European thematic ETF flows.
The turnaround marks a decisive reversal from the muted flows of 2024 ($308 million net outflows for the whole of 2024), as investors rotate back into forward-looking, innovation-driven themes with clearer earnings visibility.
Defence remains the dominant thematic allocation, capturing $7.87 billion in combined net inflows between Global ($4.81 billion) and European ($3.05 billion) defence ETFs underscoring its evolution from a tactical trade to a structural portfolio allocation. Maintaining its position as the defining technological theme, AI ETFs saw $904 million in net inflows, with investor appetite fuelled by relentless innovation in large language models, robotics, and autonomous systems.
In the same period, Cybersecurity ETFs continued to rebuild momentum after significant outflows in 2024 ($311 million net outflows for H1 2024), drawing $318 million, reflecting growing investor conviction in cybersecurity as a structural necessity amid rising digital threats.
Clean Energy ETFs saw outflows of $307 million. As policy momentum stalls in key markets, investors are increasingly selective within the energy transition space. Capital is rotating toward subsectors with clearer economic moats, such as nuclear and grid infrastructure. Supporting this sentiment, Uranium ETFs rank fifth at $253 million, reflecting growing investor interest in the nuclear sector as a potential solution to global energy needs.
Healthcare Innovation ETFs recorded net outflows of $279 million. The drawdown reveals investor caution around legacy biotech firms with uncertain drug pipelines and reimbursement risks. Interest is shifting toward AI-driven healthcare platforms offering faster innovation cycles and more scalable business models.
Electric Vehicles and Battery Tech ETFs saw net outflows of $203 million as investor enthusiasm cools amid subsidy rollbacks and plateauing EV demand in major markets. Persistent concerns around battery raw materials and production bottlenecks have further weighed on the theme.
Rahul Bhushan says, “After a cautious 2024, it’s evident that investors are re-engaging with innovation themes that offer clearer earnings visibility and resilience in an increasingly complex macro landscape. We’re seeing investor conviction in megatrends with structural tailwinds, particularly defence, AI, and energy security. Thematics are no longer just tactical bets, they’re core strategic exposures.”
2025/2024 Comparative Study
Thematics are back
After a weak 2024, investor appetite for thematic risk has returned in force:
• H1 2025 total net inflows: +$8.74B
• That’s a sharp reversal from -$791M in H2 2024 and only +$483M in H1 2024
• The rotation is clear: capital is moving back into forward-looking themes with stronger earnings visibility.
Defence is now a structural trade
• Global and Europe Defence saw a combined $7.87B in inflows in H1 2025 and $1.59B in June alone.
• This continues a multi-quarter surge as geopolitical tensions, rising military budgets, and renewed industrial policy drive long-term allocations.
• Defence is no longer a tactical trade—it’s becoming a core exposure.
AI inflows normalise, but conviction remains
• Artificial Intelligence ETFs drew $904M in H1 2025, following $1.47B in H1 2024.
• Inflows may be slowing, but investor conviction is holding firm.
• With earnings delivery now catching up to narrative, AI remains a centrepiece of thematic portfolios.
Cybersecurity shows signs of stabilisation
After brutal outflows in 2024 (-$311M H1, -$260M H2), cybersecurity ETFs finally saw inflows:
• $318M in H1 2025, including $67M in June.
• This rebound suggests investors are once again prioritising digital resilience in an AI-driven world.
Infrastructure themes are quietly regaining traction
• Global and Europe Infrastructure ETFs pulled in $284M in H1 2025, following modest gains in H2 2024.
• Infrastructure is benefiting from government stimulus, defence modernisation, and the reshoring trade.
Uranium’s steady climb continues
• $253M in H1 2025, after $216M in H2 2024 and $67M in June alone.
• Indeed, the $67M in June alone nearly matches the $66M pulled in during the entirety of H1 2024.
• A rare clean energy theme that’s bucking the downtrend, reflecting growing recognition of nuclear as a pragmatic decarbonisation solution.
Clean Energy sentiment is so bad, it might be investable
• Outflows across all periods: -$307M (H1 2025), -$505M (H2 2024), -$409M (H1 2024)
• June 2025: A mere -$8M
• Sentiment is arguably as negative as it’s ever been—yet structural drivers remain in place. The setup for a contrarian rebound is building.
About ARK Invest Europe
ARK Invest International Ltd (”ARK Invest Europe”) is a specialist thematic ETF issuer offering investors access to a unique blend of active and index strategies focused on disruptive innovation and sustainability. Established following the acquisition of Rize ETF in September 2023 by ARK Investment Management LLC, ARK Invest Europe builds on over 40 years of expertise in identifying and investing in innovations that align financial performance with positive global impact.
Through its innovation pillar and the ”ARK” range of ETFs, ARK Invest focuses on companies leading and benefiting from transformative cross-sector innovations, including robotics, energy storage, multiomic sequencing, artificial intelligence, and blockchain technology. Meanwhile, its sustainability pillar, represented by the ”Rize by ARK Invest” range of ETFs, prioritises investment opportunities that reconcile growth with sustainability, advancing solutions that fuel prosperity while promoting environmental and social progress.
Headquartered in London, United Kingdom, ARK Invest Europe is dedicated to empowering investors with purposeful investment opportunities. For more information, please visit https://europe.ark-funds.com/
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