U.S. stock markets ended the holiday-shortened week with mixed results as investors assessed signs of a cooling labour market and their potential impact on interest rates.
Major indexes, including the S&P 500, Nasdaq Composite and Dow Jones Industrial Average, advanced, supported by gains in communication services, financials and consumer discretionary stocks.
Smaller companies and mid-cap stocks, however, finished the week lower.
The main focus was the latest employment data. The U.S. economy added 57,000 jobs in June, significantly below expectations of approximately 110,000. Employment figures for April and May were also revised lower, suggesting that hiring momentum is gradually slowing.
The unemployment rate, however, edged down to 4.2%.
Private-sector employment data reinforced this softer picture, with employers adding fewer jobs than expected. Consumer confidence also remained subdued, reflecting growing concerns about job availability and current economic conditions.
Meanwhile, manufacturing activity continued to expand for a sixth consecutive month, although growth in new orders and production slowed. Bond markets came under pressure as Treasury yields moved higher, with the benchmark 10-year yield reaching approximately 4.49%. Overall, markets remain focused on whether weaker employment conditions could influence future Federal Reserve interest rate decisions.
European Markets: Lower Inflation Supports Investor Confidence
European stock markets recorded a positive week, supported by easing inflation pressures and lower oil prices. The pan-European STOXX Europe 600 Index gained 1.96%, while Germany’s DAX was among the strongest major markets, rising 3.69%. France, Italy and the UK also recorded gains.
A key development was the decline in eurozone inflation. Consumer prices increased by 2.8% in June compared with the previous year, down from 3.2% in May and below market expectations. Inflation also slowed across several major economies, including Germany, France and Italy. Although inflation remains above the European Central Bank’s 2% target, the softer reading may reduce pressure for further interest rate increases.
Economic data from Germany also provided encouragement. Retail sales rose 1.1% in May, outperforming expectations for a decline and recovering from April’s contraction. Meanwhile, unemployment across the eurozone remained stable at 6.2%, suggesting continued resilience in the regional labour market.
In the UK, final figures confirmed that the economy grew by 0.6% during the first quarter of 2026. The housing market also showed signs of continued growth, with house prices increasing 2.2% year over year in June. Overall, easing inflation and steady economic activity supported improved market sentiment across Europe.
Japan: Business Confidence Improves as Yen Volatility Continues
Japanese markets delivered mixed results during the week as investors balanced stronger business confidence against rising bond yields and continued currency volatility. The Nikkei 225 declined 0.91%, largely due to profit-taking in technology and semiconductor stocks following a strong artificial intelligence-driven rally. The broader TOPIX Index gained 1.30%, supported by financial and other economically sensitive sectors.
Business sentiment provided a positive signal. The Bank of Japan’s quarterly Tankan survey showed confidence among large manufacturers rising for a fifth consecutive quarter, reaching its highest level since 2018. Strong demand related to artificial intelligence and semiconductors, alongside continued corporate investment plans, supported the improvement. However, businesses remain concerned about higher energy costs and global trade uncertainty.
Industrial production increased 0.5% in May, although growth fell short of expectations. At the same time, Japanese government bond yields rose sharply as investors considered persistent inflation, elevated energy costs and the possibility of further monetary policy tightening.
The Japanese yen also experienced significant volatility. After weakening to around JPY 162.5 against the U.S. dollar, the currency recovered sharply amid speculation about possible government intervention. Interest rate differences between Japan and the U.S., inflation concerns and fiscal uncertainty are likely to remain important drivers for Japanese markets.
Looking ahead
As markets navigate shifting economic conditions, investors will continue to closely monitor inflation trends, labour market developments and central bank policy signals for direction in the weeks ahead.
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