Market Developments
US equities ended the week mixed as a late rally in semiconductor and AI-related stocks lifted the S&P 500 (+1.2% to 7,575.4) and Nasdaq (+1.7%), offsetting earlier weakness driven by renewed US-Iran hostilities and higher oil prices. The Dow Jones declined 0.5% to 52,637.0, with value stocks and small caps underperforming. Markets also digested the June FOMC minutes, which revealed a divided committee. While policymakers ultimately kept rates unchanged, some members argued for further tightening and most supported removing the Fed’s previous easing bias, reinforcing a more hawkish policy stance. Reflecting these concerns, the 10-year US Treasury yield rose 8bps to 4.56%, supported by both the Fed’s tone and rising oil-driven inflation risks.
Economic data was mixed, with the ISM Services PMI easing to 54.0, initial jobless claims declining to 215k, and existing home sales falling 2.4%. Geopolitical tensions escalated further over the weekend after Iran declared the Strait of Hormuz “closed until further notice” following a third round of US strikes, increasing concerns over energy markets and global risk sentiment.
Europe’s Stoxx 600 fell 1.8% as the ceasefire’s collapse revived ECB tightening expectations even as German inflation cooled to 2.3%; the UK saw a leadership transition take shape as Andy Burnham secured Labour backing to succeed Keir Starmer. Japan’s Nikkei fell 1.7% on energy-import sensitivity, while the 10-year JGB yield briefly touched its highest level since 1996 before retreating on verbal intervention from the Finance Ministry, which also helped stabilise the yen. In India, the Nifty 50 declined slightly (-0.3%) even as midcaps (+1.2%) and smallcaps (+0.7%) comfortably outpaced, with IT (+2.1%) the standout sector mover.
