Market Developments
The US equities extended their advance for a second straight week, with the S&P 500 (+3.6%), NASDAQ (+5.1%) and Dow (+3.0%) reaching fresh record highs as the market broke out of its three-month trading range. The catalyst was reduced pressure on the Fed to raise rates, with July payrolls coming in well below expectations and September rate-hike odds falling to roughly 42% from over 55% earlier in the week. The move was reinforced by a resilient earnings season, with blended S&P 500 Q2 earnings growth tracking near 48%, or ~29% excluding one-off gains at Alphabet and Amazon, alongside a rebound in semiconductors, with SOXX gaining more than 7% for the week. Oil fell sharply (WTI down 7.7% to $78.2) on reports of progress toward reopening the Strait of Hormuz, though optimism eased mid-week on reports the arrangement could restrict passage for U.S. and Israeli vessels. Treasury yields fell in sympathy, with the 10-year down roughly 9bps to 4.65%, even as the yield curve remains historically steep following the Fed’s hawkish 9-3 hold on July 29, the most divided FOMC vote since 2016.
Globally, the performance was more mixed. European equities gained broadly (Stoxx 600 +1.7%) on resilient earnings and improving services PMIs, even as UK and German manufacturing stayed in contraction. Japan’s Nikkei rose 1.9%, helped in part by the yen giving back some of the prior week’s intervention-driven gains, with USD/JPY settling at 157.76 by Friday’s close. China diverged sharply: onshore benchmarks outperformed a weaker Hang Seng (-0.8%), as Beijing’s new tax on offshore insurance returns hit Hong Kong-listed financials, even as exports grew 23.9% year on year. India’s Sensex advanced 0.5% as the RBI held its repo rate at 5.25% in a dovish hold, characterising the energy-driven inflation shock as largely supply-side.
