U.S. markets delivered a mixed performance during the week as investors rotated away from some of the largest technology and artificial intelligence (AI) stocks.
While the Nasdaq Composite and S&P 500 declined, the Dow Jones Industrial Average and Russell 2000 posted gains, reflecting stronger performance among value-oriented and smaller companies.
Economic data showed inflation remains a key concern. The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, increased to its highest annual level since 2023.
However, consumer spending and personal income also rose more than expected, suggesting that households continue to spend despite higher prices. Growth was supported by increased demand across healthcare, financial services, housing, utilities, and energy.
Business activity also strengthened in June. Both the manufacturing and services sectors expanded, indicating continued economic resilience, although companies remained cautious about hiring due to higher operating costs and ongoing uncertainty.
Supply chain disruptions linked to tariffs and geopolitical tensions also continued to place pressure on businesses.
Meanwhile, first-quarter U.S. GDP growth was revised higher, highlighting a stronger economy than initially estimated. In bond markets, Treasury yields moved lower as oil prices declined and inflation data broadly matched expectations. Investment-grade corporate bonds performed well, although higher-risk bonds faced pressure as investors remained cautious about monetary policy and market valuations.
European Market
European markets ended the week largely unchanged, with investors balancing improving inflation expectations against renewed weakness in global technology stocks. While the UK’s FTSE 100 delivered positive returns, Germany, France, and Italy recorded modest declines.
Encouragingly, inflation expectations across the eurozone continued to ease. The European Central Bank’s latest consumer survey showed expectations for inflation over the next year fell to their lowest level in three months. Consumers also became less pessimistic about the region’s economic outlook. Lower oil prices further supported sentiment by reducing concerns that the ECB may need to continue raising interest rates.
Business activity across Europe presented a mixed picture. The eurozone’s overall Purchasing Managers’ Index (PMI) improved, signalling that economic conditions are gradually stabilising. Manufacturing remained in expansion despite slowing slightly, while Germany continued to struggle as private sector activity weakened for a third consecutive month amid persistent economic uncertainty.
Political developments also attracted attention in the UK following Prime Minister Keir Starmer’s resignation after months of political pressure. At the same time, new data highlighted ongoing challenges for the British economy. Retail sales declined sharply as consumers remained cautious in response to higher prices, while manufacturing orders weakened to their lowest level since 2020, reflecting continued softness across the industrial sector.
Asia Market
Asian markets experienced a more challenging week as global technology stocks came under pressure, particularly companies linked to artificial intelligence. Japan and China both recorded market declines after early optimism surrounding AI-related shares faded later in the week.
In Japan, falling oil prices provided some relief by easing concerns over energy costs for one of the world’s largest energy importers. This helped support government bond prices while reducing inflationary pressures. However, inflation in Tokyo continued to accelerate, reinforcing expectations that the Bank of Japan could continue gradually raising interest rates as it seeks to normalise monetary policy.
The Japanese government also unveiled a long-term investment strategy worth approximately JPY 370 trillion, targeting sectors such as artificial intelligence and semiconductors. The initiative aims to strengthen the country’s industrial competitiveness and drive sustainable economic growth over the coming decades.
In China, equity markets declined as technology stocks followed the broader global sell-off. The People’s Bank of China introduced a new liquidity management framework designed to improve the effectiveness of monetary policy while leaving key lending rates unchanged for a thirteenth consecutive month.
Meanwhile, Premier Li Qiang reaffirmed China’s commitment to innovation, advanced manufacturing, and economic openness during the World Economic Forum’s Summer Davos meeting. His remarks reinforced Beijing’s focus on strengthening long-term economic growth despite ongoing trade tensions with both the United States and Europe.
Looking ahead
As markets continue to navigate shifting economic conditions, inflation trends, and geopolitical developments, investors will remain focused on upcoming data and central bank signals for further direction.
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