Global Markets Weekly Wrap KW 28 : US-China Trade Tensions, Sector Shifts, and Key Data

Global Markets Weekly Wrap KW 28 : US-China Trade Tensions, Sector Shifts, and Key Data 

United States

Investor Trends: Investors are showing a preference for value and small-cap stocks The Dow Jones Industrial Average performed strongly while value stocks outpaced growth stocks by 4.77 percentage points the largest margin since March 2023

Market Performance: Dow Jones rose by 286.63 points, up 6.89% year-to-date S&P 500 fell by 110.35 points, up 15.41% year-to-date Nasdaq Composite dropped by 671.51 points, up 18.09% year-to-date S&P MidCap 400 declined by 5.41 points, up 8.40% year-to-date Russell 2000 increased by 36.08 points, up 7.76% year-to-date

Sector Impact: Growth stocks were hit hard particularly semiconductor companies after potential export restrictions on advanced semiconductor technology to China were discussed by the Biden administration Major chipmakers including Taiwan Semiconductor Manufacturing Broadcom and NVIDIA saw significant declines

Political Influence: The prospect of a Republican victory in upcoming elections boosted value stocks with potential lighter banking regulations favoring financials and higher tariffs benefiting industrials and business services

Economic Data: Positive surprises included a 0.8% increase in retail sales (excluding gas and auto) a 3.4% rise in building permits and a 0.6% growth in industrial production for June However jobless claims rose to 243000 with continuing claims reaching the highest level since November 2021

Federal Reserve: Fed Chair Jerome Powell noted improved balance between inflation and labor market conditions The 10-year U.S. Treasury yield fluctuated ending the week higher due to concerns over the Microsoft disruption

Bond Market: Investment-grade bonds had steady performance with oversubscribed issuances High yield bonds improved due to strong macroeconomic indicators and expectations of Fed rate cuts

Europe

Stock Market: The STOXX Europe 600 Index fell 2.68% Major indexes in Germany France Italy and the UK also declined

ECB Policy: The European Central Bank held rates at 3.75% with future rate decisions dependent on economic data ECB President Christine Lagarde mentioned the possibility of a rate move in September and highlighted risks to economic growth and inflation

Economic Data: Increased household loan demand a decline in industrial production and stable UK inflation at 2% with strong pay growth were notable developments

Japan

Stock Market: The Nikkei 225 and TOPIX Indexes declined due to concerns over U.S. export restrictions on advanced semiconductor technology

Economic Data: The core CPI rose 2.6% year-on-year in June slightly below expectations The government lowered its GDP growth forecast for the fiscal year ending March 2025 from 1.3% to 0.9%

China

Stock Market: The Shanghai Composite Index increased by 0.37% while the CSI 300 rose 1.92% The Hang Seng Index in Hong Kong fell 4.79%

Economic Data: China's GDP grew by 4.7% year-on-year in Q2 below expectations Retail sales and industrial production data indicated economic weakness while property investment continued to decline

Other Markets

South Africa: The central bank kept interest rates at 8.25% with inflation expected to decline Economic growth remains below historical averages

Brazil: Inflation was lower than expected in June with core inflation stable around 3.5% The central bank is likely to maintain the Selic rate at 10.5%

Market Movers

U.S. Markets: Semiconductor underperformance led to declines in the S&P 500 and Nasdaq The Russell 2000 also fell after a brief rally

Equity Volatility: The VIX rose to 16.81 the highest since April U.S. Treasury yields ended the week slightly higher at 4.23%

Global IT Outages: A cybersecurity glitch caused significant disruptions affecting various industries worldwide

Retail Sales: Core retail sales in the U.S. rose 0.9% in June indicating strong consumer spending

Macro Trends

China's Economic Plans: Policy announcements during the Third Plenum were met with skepticism leading to downward revisions in GDP growth forecasts

Fed Commentary: Statements from Fed officials supported market expectations for potential rate cuts starting in September

U.S. Election Outlook: Increasing anticipation of a Trump victory has impacted market forecasts and equity valuations

Micro Trends

Semiconductor Sector: Sharp declines due to political and policy concerns

Luxury Goods: Declining demand in China affected European luxury brands

Retail Sector: Disappointing sales growth led to reduced expansion plans for major chains

Upcoming Events

U.S.: Initial Jobless Claims GDP Annualized QoQ Consumer Sentiment Personal Spending Manufacturing PMI

International: Bank of Canada Rate Decision France Manufacturing PMI Singapore CPI UK Manufacturing PMI Eurozone Consumer Confidence