Market Developments
US equities ended higher despite volatility around the Fed’s July meeting, with the S&P 500 and Dow each gaining 1.0% to fresh highs on resilient Q2 earnings. The Fed held rates at 3.50–3.75% for a fifth straight meeting, though a 9–3 vote highlighted growing hawkish dissent over sticky inflation, pushing the 30-year Treasury yield above 5.2%, highest since 2007. Earnings remained robust, with 86% of S&P 500 companies beating estimates and growth expectations revised up to 37% from 22%. Investor sentiment toward the Magnificent Seven was mixed this week. Microsoft (+8.5%) and Amazon (+8.0%) rallied on strong cloud performance, while Meta (-9.0%) fell on earnings miss and softer guidance amid elevated capital spending, and Apple (-4.0%) declined on separate cost and outlook concerns. Looking ahead, increasingly competitive and lower-cost Chinese models, including Kimi K3, are adding pressure to the economics of frontier AI models.
Globally, the markets diverged. The Eurozone surprised positively with Q2 GDP growth of 0.4% (vs. 0.2% expected), lifting the Stoxx 600 by 0.7% despite firmer inflation. Japan’s Nikkei declined 0.4% as a Kyushu earthquake and stronger yen weighed on sentiment, while China’s CSI 300 fell 1.3% as semiconductor and optical-component names led a broad selloff, although Hong Kong rallied 3.7% as investors rotated into large internet platforms such as Tencent and Alibaba. Indian equities rebounded strongly, with the Nifty 50 up 2.6% led by IT and Auto. Oil declined sharply (WTI -5.2%) after Iran signalled it would halt attacks if the US-brokered ceasefire holds, reducing but not eliminating the geopolitical risk premium.
