Market Updates

Weekly Market Update Monday 9th October 2023

Over the last week markets endured a choppy period in which bond yields moved higher and equity markets moved lower. Continued strength in economic data, tough talk from the US Federal Reserve and the ongoing conflict in Gaza saw equities fall over the week, with US equities falling 2.5%, whilst 10 year US Treasuries continued to touch levels last seen in 2007.

Another key driver of higher US Treasury yields has been the expanding Government deficit, as increased fiscal spending has enlarged the need for Government funding through debt issuance. With the total amount of US Treasuries issued in auctions expected to climb to over $3 trillion this year, higher than at any year over the past decade, this comes at a time when the Federal Reserve is reducing its holdings of US Treasuries as part of its Quantitative Tightening programme.

In the UK consumer price inflation unexpectedly held at 6.7% in September, remaining the highest of any major advanced economy and keeping alive the possibility of another rise in interest rates. A rise in petrol prices between August and September was the main factor stopping a fall in the annual rate, however, core inflation and services prices – were also robust, which is likely to leave some Bank of England policymakers worried about longer-term price pressures.

Subdued expectations for US earnings season were scaled back slightly as a second week’s batch of quarterly results came in. As of Friday, third-quarter net income was expected to decline 0.4% compared with the same period a year earlier, based on S&P 500 companies that have already reported combined with projections for those still scheduled to report. In the previous week, analysts had forecast growth of 0.4%.

US equities fell, 2.5% over the week whilst US technology also fell, 3.2%, and almost re-entered bear market territory as it finished 19.5% lower than it’s 2022 peak. European equities ended 3.44% lower, UK equities 2.6% lower, amid uncertainty about the outlook for interest rates and fears that the conflict in the Middle East could escalate. Chinese equities fell 3.4% despite the announcement that the economy grew at a faster-than-expected pace in the third quarter, expanding by 4.9% year on year. The stronger figures partly reflect increased consumer spending, which rose by 5.5% in September.

The US 10-year Treasury yield crossed 5% during the week whilst European government bond yields also broadly climbed as investors weighed the prospect that interest rates could remain higher for longer due to sticky inflation. Germany’s benchmark 10-year government bond yield rose, ending the week just shy of 2.9%. In the UK, the yield on the benchmark 10-year government bond rose to 4.65% after inflation data came in as unchanged instead of slowing further.

Amid escalating geopolitical tensions, oil rose 2.2% over the week to close at $89 per barrel whilst the price of gold rose more than 3% to the highest level in five months. Gold futures on Friday were trading just below $2,000 per ounce.

Weekly Market Update Monday 9th October 2023

Equity market performance was mixed over the week as investors looked to Friday’s US jobs data for signs of how resilient the US labour market has been and what that might mean for interest rate expectations moving forward.

The U.S. labour market’s resilience continued to dampen the near-term prospects of a recession, as the gain of 336,000 jobs in September was the biggest in eight months and roughly double the number that most economists had been expecting. In addition, prior monthly estimates of jobs growth were revised upward and September’s unemployment rate was unchanged at 3.8%. One silver lining for markets can be found in the wage data. Average hourly earnings rose at a year-over-year pace of 4.15% in September, the fourth consecutive month of moderation and the lowest rate of growth since June 2021. While the acceleration in the rate of job growth may argue for the Fed to put in one last rate hike next month, the moderating pace of wage gains should be a helpful factor in driving ongoing moderation in inflation ahead.

US equities posted a small gain for the week whilst US technology recorded an almost 2% gain. European stocks ended 1.18% lower as bond yields surged amid worries about an extended period of higher interest rates, whilst the UK’s FTSE 100 also fell 1.49% as energy companies suffered from a declining oil price over the week. Stocks in Japan fell over the week, down 2.7%, as economic data releases showed that real wages and consumer spending continued to fall in August, weighing on sentiment. Whilst Chinese markets were closed last week, factory activity returned to expansion for the first time since March, the latest signal that the economy may have bottomed.

The higher for longer narrative around interest rates continues to weigh on fixed income markets as they endure one of their worst periods on record. The yield on the benchmark 10-year U.S. Treasury note spiked to another 16-year high of around 4.89% before settling at 4.79% to end the week. The yield on Germany’s 10-year government bond slipped back below 3% but remained near a decade-plus high. In the UK, the yield on the benchmark 10-year UK government bond held near its highest levels since August 2008 at 4.6%, on signs of sticky inflationary pressures.

Prospects of lower global demand for petroleum weighed on oil prices, and U.S. crude dropped to around $83 per barrel for a nearly 9% weekly decline, the biggest since March 2023. As recently as September 27, oil traded as high as $94—a year-to-date high. The price of gold fell on Thursday to its lowest level in seven months, with gold futures trading at around $1,816 per ounce, down from a recent peak of about $1,945 on September 20.

Weekly Market Update Monday 11th September 2023

In a reversal of last week’s opening, this week was one in which we saw good news for the economy being digested as bad news for markets.

U.S. stocks on Wednesday sustained their biggest setback of a holiday-shortened week after an economic report fuelled fears that inflationary pressures could be regaining momentum, potentially leading to further interest-rate increases. The U.S. economy’s services sector expanded for an eighth consecutive month, exceeding most economists’ expectations taking activity levels to their highest since February. Meanwhile, Thursday’s weekly jobless claims report came in lower than expected, indicating continued strength in labour demand despite August’s solid increase in the unemployment rate from 3.5% to 3.8%. Defying expectations for a small increase, the number of Americans applying for unemployment in the previous week fell to 216,000, the lowest level in six months. Continuing claims fell to 1.68 million, the lowest level since mid-July.

In corporate news, a decline in Apple, the most heavily weighted stock in the S&P 500 Index, drove part of the market declines after news that Chinese government employees would no longer be able to use iPhones. Investors also may have been discouraged by reports that the upcoming iPhone 15 will be significantly more expensive than current models. Novo Nordisk became Europe’s most valuable listed company, after its treatment for weight loss, Wegovy, was made available in Britain. The Danish pharmaceutical group’s market capitalisation stood at $428 billion at the close of business on September 4th, putting it ahead of LVMH, the world’s biggest luxury-goods firm.

In the UK, Governor Andrew Bailey said on Wednesday, the Bank of England is “much nearer” to ending its run of interest rate increases but borrowing costs might still have further to rise because of stubborn inflation pressures. UK 10 year Gilts closed the week with a yield of 4.43% whilst UK interest rates remain at 5.25%, expected to rise to 5.5% later this month.

The US jobless numbers sparked a rise in short-term bond yields, with the yield on the two-year U.S. Treasury note briefly crossing back above the 5% threshold on Thursday afternoon before closing the week at 4.97%, whilst 10-year Treasuries closed at 4.26% as the yield curve continued to steepen.

In equities, the major U.S. stock indexes fell between 1% to 2%, giving up most of the ground they had gained in the previous week. European stocks ended 0.76% lower on fears that elevated interest rates could be pushing the economy into a slowdown, whilst the UK’s FTSE 100 advanced 0.18%. Chinese stocks retreated by 0.53% as the latest economic indicators reinforced concerns about the country’s weakening outlook.

Meanwhile in commodities, the price of U.S. crude oil rose on Friday to the highest level since last November, eclipsing $87 per barrel. The price has climbed nearly 10% over the past two weeks amid renewed oil supply concerns, adding to inflationary pressures across the broad economy.

Weekly Market Update Monday 4th September 2023

The week appeared to be one in which bad news for the economy was considered good news for stock prices, given the interest rate implications. On Tuesday, the S&P 500 Index marked its most substantial single-day increase since June. This surge followed news that job openings unexpectedly fell by 338,000 in July and hit their lowest level since March 2001.

US non-farm payrolls expanded by 187,000, modestly surpassing the consensus estimate of a 170,000 increase. However, a cumulative downward revision of 110,000 for the preceding two months suggested a notable deceleration in hiring momentum. In August, the unemployment rate rose to 3.8% from July’s 3.5%, primarily due to a substantial estimated addition of 736,000 to the labour force. Surprisingly, according to the household survey, employment increased by 222,000 despite a pronounced uptick in the unemployment rate.

In response to cooling labour market conditions, financial markets continued to anticipate a pause in the Federal Reserve’s interest rate hikes. The market’s pricing of potential rate cuts was extended to May 2024, with an increased likelihood of a cut in March following the release of softer US jobs data.

Across the board, major US large-cap stock indexes reported weekly gains, with the NASDAQ and S&P 500 leading the way, up by 3.2% and 2.5%, respectively, while the Dow Jones gained 1.4%. The Europe 600 Index closed 1.49% higher, buoyed by hopes of an impending peak in interest rates, supported by estimates indicating that the core inflation rate in the eurozone remained steady at 5.3% in August, slightly lower than July’s figure. In the UK, the FTSE 100 recorded a positive return of 1.79%. Japan’s stock markets also saw gains during the week, with the Nikkei 225 Index rising by 3.4%. Chinese stocks followed suit, boosted by a series of government stimulus measures aimed at revitalizing the economy.

After surging above 5.00% the previous week, the yield on the 2-year US Treasury bond retreated. Diminishing medium-term expectations for rate hikes triggered a rally in 2-year notes, bringing their yield to approximately 4.89% by the end of the week, down from the previous week’s closing yield of 5.06%, which had nearly reached a year-to-date high set in early March. In the UK, softer economic data pushed the yield on UK 10-year sovereign bonds to near one-month lows, ending the week at 4.4%. Sovereign bond yields across the European Union also saw declines throughout the week. Meanwhile, UK house prices experienced a notable 5.3% decline in August, marking the largest drop since July 2009.

In the realm of commodities, oil prices surged during the week, with WTI prices climbing by 7.6%, driven by positive stimulus announcements from China. Additionally, gold posted a 1.5% positive return.

Weekly Market Update Monday 28th August 2023

During the past week, remarks made by Jerome Powell, chair of the Federal Reserve, added to speculation surrounding the trajectory of interest rates, prompting investors to analyse potential outcomes. Despite this uncertainty, equity markets overall showed gains throughout the week, with growth stocks notably outperforming their value counterparts.

At this year’s Jackson Hole symposium, Chair Powell addressed the speculation that the Federal Reserve might tolerate or raise its inflation target, a notion proposed by some academics and market participants. Powell acknowledged the recent reports of subdued inflation but emphasized that this is merely the initial phase of a larger process.

The Federal Reserve is prepared to further increase interest rates if necessary, aiming to maintain higher borrowing costs until inflation shows sustained progress towards the central bank’s target. Powell’s statements indicated a possibility of an extended period of below-average economic growth and a softening labour market as prerequisites for achieving these goals. While Powell mentioned a cautious approach to future rate hikes, he did not imply that the ongoing robustness of economic expansion would inevitably lead to stricter monetary measures.

Economic indicators revealed a deceleration in U.S. economic activity during the week. Data from Thursday disclosed a significant 5.2% drop in new orders for durable goods in July, marking the largest monthly decline in over three years. Additionally, a separate report on Wednesday depicted a decline in business activity to a six-month low. In the housing sector, increased mortgage rates led to a decline in U.S. sales of existing homes for July, reaching the lowest point for that month since 2010. Sales in July fell by 2.2% compared to June 2023 and showed a 16.6% decrease from July 2022, according to the National Association of Realtors.

In corporate earnings news, Nvidia, an American chipmaker, reported remarkable revenue of $13.5 billion in the second quarter of 2023, doubling its earnings from the corresponding period of the previous year. The company, known for selling its high-priced h100 chips, projected $16 billion in sales for the upcoming third quarter. Nvidia also pleased investors by announcing a stock buyback of $25 billion.

U.S. equities concluded the week with a 0.8% increase, with the technology sector driving a 2.3% gain, largely attributed to Nvidia’s strong earnings report. In Europe, stocks climbed 0.66%, aided by a drop in European natural gas prices and increasing expectations of a potential peak in interest rates. Meanwhile, the UK’s FTSE 100 rallied by 1.05%. In contrast, Chinese stocks faced a decline as investors grew more pessimistic about the country’s economic outlook, resulting in the country’s blue-chip index trading at its lowest level since November 2022.

After reaching its highest intraday level since late 2007 on Tuesday, the yield on the 10-year U.S. Treasury note retraced to end the week with relatively little change at 4.24%. Eurozone bond yields decreased, with 10-year German sovereign yields finishing lower. Economic data indicating a weakening European economy prompted financial markets to adjust their expectations regarding future interest rate hikes. In the realm of commodities, oil prices on Friday hovered around $80 per barrel, a decrease from the previous $84 as of August 9, when oil prices reached their highest point for the year.

Weekly Market Update Monday 21th August 2023

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The primary U.S. stock indices experienced a decline of over 2%, with both the S&P 500 and the NASDAQ marking their third consecutive weekly drops. This downward trajectory comes after a three-week period of gains that concluded in late July, right in the middle of the quarterly earnings season.

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In the UK, the annual inflation rate eased in July to 6.8% from June’s 7.9%, primarily due to decreased energy and food costs. However, underlying price pressures remained robust, with the core inflation rate, which excludes items like food, energy, alcohol, and tobacco, remaining steady at 6.9%. Services prices, considered by the Bank of England (BoE) as a key indicator of underlying domestic inflation, accelerated to 7.4%, reaching their highest point since March 1992.

The UK’s wage growth picked up speed, intensifying the pressure on the Bank of England (BoE) to further raise interest rates. Average weekly earnings (excluding bonuses) increased by 7.8% during the three months ending in June, up from 7.4% in the preceding three months. Concurrently, signs of a slowdown in the labour market became apparent, as the unemployment rate unexpectedly rose to 4.2%, up from 3.9% in the previous three months.

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In the real estate sector, Country Garden, a prominent Chinese developer, incurred a loss of $7.5 billion in the first half of the year and halted trading of certain bonds after missing coupon payments earlier in the month. Meanwhile, Evergrande, a struggling property giant, sought bankruptcy protection in the United States, citing ongoing restructuring efforts in Hong Kong, the Cayman Islands, and the British Virgin Islands. Despite having 1,300 projects across 280 Chinese cities, the real estate unit of the group reported a combined loss of $81 billion over the past two years.

China’s central bank reduced its medium-term lending-facility rate to 2.5%, marking the second cut in three months, as new economic data highlighted China’s faltering economy. Industrial production and retail sales in July fell short of expectations, and nationwide unemployment rose to 5.3%.

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The global equity markets mirrored the decline in the U.S., with international equities mostly following suit. European stocks retreated by 2.34%, driven by concerns of extended periods of higher European interest rates. The UK’s FTSE 100 Index also dropped by 3.48%. In Hong Kong, the benchmark Hang Seng Index plummeted by 5.89% due to China’s economic challenges, while Japanese stocks fell by 3.2% despite Q2 GDP figures exceeding expectations.

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Within the Fixed Income market, the yield of the 10-year U.S. Treasury bond briefly surpassed 4.32% on Thursday, reaching its highest level since November 2007. Yields slightly receded on Friday, with the 10-year bond closing the week around 4.25%. However, this spike in the 10-year yield does not necessarily signal a resumption of rate hikes by the Federal Reserve. The increase in longer-term rates did not correspond with a similar rise in short-term rates, evident from the recent steepening yield curve. Meanwhile, the price of U.S. crude oil declined by 2%, reaching around $81 per barrel, breaking a seven-week streak of gains. Prior to this recent positive streak, the commodity was trading below $70 per barrel.

Weekly Market Update Monday 14th August 2023

Following a robust initial surge at the beginning of the year, the markets have retraced somewhat in August so far. The S&P 500 has seen a decline of approximately 3% since its recent peak on July 31. Digging deeper, the Nasdaq has experienced a decrease of over 4.0% during this timeframe, and the prominent “Magnificent 7” large-cap stocks have encountered a downturn exceeding 5.0%. The sectors that had been driving the upward momentum appear to be taking a breather, a development we regard as a positive sign, allowing investors to assimilate substantial gains.

In the United States, inflation, as gauged by the Consumer Price Index, registered at 3.2% in July, slightly below the market’s expectations. Core inflation, excluding energy and food components, exhibited a 0.2% increase for the month, mirroring the rate observed in June. This suggests a moderation in price pressures, a shift that could prompt the Federal Reserve to contemplate a pause in its rate hike strategy.

The initial enthusiasm surrounding the CPI data seemed to diminish as the day progressed, resulting in a mixed performance in the stock market on Friday. This followed the news of a 0.3% rise in producer prices for the month, slightly surpassing expectations. Year-over-year, producer prices climbed by 0.8%, a figure notably below the Federal Reserve’s targeted consumer inflation rate of 2%. Notably, July marked the first annual rise in the producer price inflation rate in over a year.

China witnessed a significant drop in exports, with a 14.5% decline in July compared to the previous year, marking the most substantial contraction since February 2020. Imports also experienced a decrease of 12.5% over the same period. These declining figures for imports and exports, released on Tuesday, contributed to the country’s ongoing economic challenges, which have led to deflation for the first time in over two years.

Turning to the UK, the gross domestic product (GDP) expanded by 0.5% sequentially in June, surpassing the consensus forecast of a 0.2% growth. This expansion was primarily driven by notable increases in the manufacturing and construction sectors. The GDP for the second quarter exceeded expectations, with a 0.2% growth compared to the previous three months. This was partly fueled by better-than-anticipated private consumption, and business investments also displayed robust growth, defying predictions of a minor contraction.

Although the markets experienced gains at the start of the week, both the S&P 500 (-0.27%) and NASDAQ (-1.87%) incurred losses for the second consecutive week by the close of Friday’s trading. The Dow experienced a sharp decline on Tuesday but managed to rebound, finishing slightly higher compared to the previous week at +0.69%. In European markets, Germany’s DAX declined by 0.75%, Italy’s FTSE MIB fell by 1.09%, and the UK’s FTSE 100 Index dropped by 0.53%. In Asian markets, the Nikkei 225 Index gained approximately 0.9%, while Hong Kong’s benchmark Hang Seng Index saw a decline of 2.38%.

Weekly Market Update Monday 7th August 2023

Major US markets closed lower as investors digested a US credit downgrade and weaker jobs report. The Nasdaq, S&P 500 and Dow ended the week 3%, 2% and 1% lower respectively.

The Labor Department announced early Friday that the U.S. created 187,000 jobs in July. That’s a slight increase from the revised 185,000 jobs added in June, but slower than the 200,000 increase analysts were expecting and the smallest increase in more than a year. The jobs report shows the unemployment rate edged down to 3.5% from 3.6%, whereas hourly wages rose 0.4% in July from the month before, faster than the 0.3% analysts expected suggesting a relatively tight labour market.

Ratings agency Fitch unexpectedly downgraded the U.S. credit rating on Tuesday from AAA to AA+. The agency cited the recent debt ceiling standoff and concern over rising federal debt as factors leading to an “erosion of governance.” This marks the second credit downgrade in U.S. history after a similar decision was made by Standard & Poor’s in August of 2011, a decision that has not yet reversed.

Looking at earnings, 84% of the companies in the S&P 500 have reported Q2 2023 earnings to date. Among the companies that released second-quarter results, 79% exceeded net income expectations, topping the five-year average of 77%. However, with this quarter’s earnings season coming to an end, it leaves fewer opportunities for potential good news driven surges.

In local currency terms, the pan-European STOXX Europe 600 Index ended 2.4% lower. Higher U.S. bond yields and some disappointing European earnings reports deflated investor enthusiasm for riskier assets. Germany’s DAX dropped 3.1%, France’s CAC 40 Index lost 2.1%, and Italy’s FTSE MIB slid 3.1%. The UK’s FTSE 100 Index fell 1.7%.

The BoE raised its key interest rate by a quarter of a percentage point to a 15-year high of 5.25%. It warned that rates were likely to stay high for some time, saying “the MPC [Monetary Policy Committee] will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target.”

With global investor risk appetite dampened by a U.S. sovereign credit rating downgrade, Japan’s stock markets fell over the week. The Nikkei 225 Index registered a 1.7% loss and the broader TOPIX Index was down 0.7%. Chinese stocks on the other hand rose as Beijing’s supportive stance offset concerns about the latest batch of disappointing economic data. The Shanghai Stock Exchange Index gained 0.4% while the blue-chip CSI 300 was up 0.7%.

Yields on the 2yr UST ended the week at 4.76% while the 10yr yield fell 14bps to 4.03%. A miss on the headline non-farm payrolls number could prompt some tempering of expectations for how long the Fed will keep rates at restrictive levels, however, inflation data due to come out later this week will set the tone for US treasuries.

Oil prices rose on Thursday after news that Saudi Arabia’s voluntary production cuts would extend to September and possibly beyond. Oil prices declined earlier in the week but rebounded on supply concerns, ending the week at over $80 per barrel. Brent rose 1.3% on Friday to settle at USD 86.24/b and WTI was up 1.6% to USD 82.82/b, not far off its year-to-date high of USD 83.26/b recorded in April.

Weekly Market Update Monday 31st July 2023

US stocks continued their positive momentum helped by cooling inflation, strong GDP growth, and resilient tech earnings. The S&P 500 posted its third positive weekly result in a row, gaining 1% whereas the Nasdaq added about 2%. The Dow Jones climbed for the 13th trading day in a row, marking the index’s longest positive streak since 1987. The streak ended on Thursday, and the Dow finished up nearly 1% for the week.

Data from the US was positive at the end of the week as the U.S. Federal Reserve’s preferred gauge for tracking inflation showed that consumer prices increased in June at the slowest monthly pace in more than two years. The Personal Consumption Expenditures (PCE) Price Index rose at a 3.0% annual rate, down from 3.8% in May. Excluding volatile food and energy prices, core inflation climbed 4.1% in June versus 4.6% in May.

More positive news as second-quarter U.S. GDP growth surprised to the upside, indicating an economy that remains at above-trend speed. The annualized growth figure came in at 2.4%, well above estimates of 1.8%, and accelerated from last quarter’s 2% growth rate. This data gives support to a US economy that is absorbing the impact of monetary tightening, prompting another quarter percent hike at the Fed’s July FOMC meeting, bringing the fed funds rate to a range of 5.25% to 5.5%. Going forward, the hope is that the economy may have cooled enough for the Fed to back off its aggressive interest rate-hiking campaign with markets pricing a pause on rate hikes from here on out followed by rate cuts in 2024.

On the earnings front, of the 254 companies in the S&P 500 that have reported earnings for Q2 2023, 78.7% have reported earnings above analyst estimates. This compares quite favourably to a long-term average of 66.4% and prior four quarter average of 73.4%. Strong earnings reports from chip companies Intel and KLA corp triggered a broad rally in some of the big-name tech companies that have contributed so much to the market’s healthy performance this year. Alphabet was up 2.7%, Amazon gained more than 3%, Meta Platforms jumped more than 4%, Microsoft was up nearly 2.5%, and Tesla rose more than 4%. While a large chunk of the market’s performance can be attributed to these mega cap growth names, if these stocks were to level off or drop, the market will have trouble finding substitutes to keep the index pushing higher, simply because of the size of the hole that will need to be filled.

European markets were up 0.4%, with UK stocks climbing by 0.5%. Asian stocks recorded a week that was on par with the tech heavy Nasdaq as the MSCI AC Asia Pacific index rose 2.0%. Hang Seng ended Friday up 4.4% on the back of stimulus talks coming from China while gains were softer in Japan with the Nikkei ending Friday 1.4% higher followed by the shock decision of BOJ to allow the 10-year yield to rise by 1%.

On the back of the U.S. Federal Reserve’s latest interest-rate increase, the yield of the 10-year U.S. Treasury bond closed above 4.00% on Thursday for the fourth time this year. The yield pulled back slightly on Friday, when it was trading around 3.97%, well above the previous week’s closing level of 3.85%.

Oil prices rose for the fifth week in a row last week with Brent adding 4.8% over the course of the week to USD 84.99/b while WTI added 4.6% to USD 80.58/b. Oil prices have found some support from evidence of tightening supplies from Saudi Arabia and economic stimulus in China.

Weekly Market Update Monday 24th July 2023

As the second-quarter earnings season in the US picked up momentum, optimism surrounding moderate inflation’s potential to avert a severe recession propelled equity markets higher for the week. However, technology stocks lagged behind the broader market due to mixed earnings announcements affecting the sector.

Last week saw stocks continuing their upward trajectory, building on the impressive gains of 2023, bringing the S&P 500 within 6% of its all-time high. Corporate earnings releases provided an additional boost as quarterly results indicated that companies were effectively navigating the challenges posed by high but declining inflation and robust yet moderating demand. Notably, 79% of S&P 500 companies that reported earnings so far exceeded earnings per share forecasts. Nevertheless, investors should remain cautious, recognizing that we are still early in the earnings season, and results may become more nuanced in the upcoming weeks.

In the UK, inflation in June fell to its slowest pace in over a year, leading to a weaker pound against other currencies and a lift in the stock market. However, with inflation still at 7.9%, well above the Bank of England’s 2% target, there remain concerns. Economists had anticipated a drop in the Consumer Price Index (CPI) rate to 8.2% for the 12 months to June from May’s 8.7%, indicating a move away from the 41-year high of 11.1% seen in October. The pound fell against the dollar, euro, and yen, as interest-rate futures suggested that investors no longer expect UK rates to peak above 6%.

China reported that its economy grew at an annual rate of 6.3% in the second quarter of the year, which fell well below most economists’ forecasts, raising concerns about the country’s post-pandemic economic rebound falling short of expectations. Quarter-on-quarter, GDP expanded at a slower pace of 0.8%, compared to the 2.2% growth recorded in the first three months of 2023.

In the US, value stocks outperformed growth stocks, with the Dow Jones rising 2.1% and the S&P 500 climbing 0.7% over the week. In the UK, the FTSE 100 Index gained 3.08%, partly due to the depreciation of the British pound against the US dollar, as the index includes many multinational companies with overseas revenues. Homebuilders, landlords, and real estate-related services were among the top gainers, as investors considered the possibility of limited increases in UK borrowing rates. The STOXX Europe 600 Index also rose, ending the week up 0.95%, as revised figures showed that the Eurozone narrowly avoided slipping into a recession in the first quarter of the year. In Japan, the Nikkei 225 Index declined by 0.3%, while in China, the CSI 300 and the Hang Seng Index fell by 1.98% and 1.74%, respectively.

In fixed income markets, the yields on two-year US Treasury notes increased during the week. However, the yield on the benchmark 10-year US Treasury note remained relatively stable, leading to a further inversion of the yield curve as investors priced in the likelihood of another Federal Reserve rate hike. In the UK, yields on 10-year government bonds declined following the reassuring inflation figures, with the yield ending the week at 4.27%.