Weekly Market Recap

Equity markets

Last week, the MSCI All Country World Index (MSCI ACWI) slid -0.3% (10.1% YTD).

The S&P 500 Index finished the week -0.6% lower (9.0% YTD) as concerns about the potential returns on heavy investment in artificial intelligence (AI) and a sharp rise in oil prices weighed on investor sentiment.

Corporate earnings were a major focus for investors during an otherwise light week of economic data, with 86 S&P 500 constituents reporting quarterly results. Shares of Alphabet and Tesla declined following their reports, with investors focusing on elevated capital spending and weaker cash flow, which appeared to help fuel broader concerns around big tech’s AI spending and weigh on technology stocks during the week. 

Large-cap growth stocks underperformed their value counterparts, while small caps underperformed large caps. The Russell 1000 Growth Index returned -1.5% (-0.3% YTD), the Russell Value Index 0.1% (19.0% YTD), and the Russell 2000 Index -1.1% (18.9% YTD). The technology-heavy Nasdaq Composite fell -2.1% (7.8% YTD).

In Europe, the MSCI Europe ex-UK Index ended the week up 0.3% (10.5% YTD). Investors weighed generally robust quarterly corporate earnings reports, heightened tensions in the Middle East, sharply higher oil prices, and an announcement by the Trump administration that it was imposing a fresh round of tariffs on dozens of its trading partners, including the European Union and the UK. Most major stock indices advanced. Germany’s DAX Index rose 1.1% (2.5% YTD), France’s CAC 40 Index added 0.4% (5.4% YTD), and Italy’s FTSE MIB Index edged up 0.1% (18.8% YTD). Switzerland’s SMI slipped -0.1% (11.2% YTD). The euro was little changed against the US dollar, closing the week at USD 1.14 for EUR.

The FTSE 100 Index in the UK rose 1.3% (10.1% YTD), while the FTSE 250 Index added 0.9% (8.0% YTD). The British pound weakened against the US dollar, closing at USD 1.33 for GBP, down from 1.35.

Japan’s stock markets advanced over the week. The TOPIX Index rallied 2.3% (19.1% YTD), and the TOPIX Small Index climbed 2.4% (16.1% YTD). Semiconductor and AI-related shares were volatile as investors weighed optimism about AI against concerns that heavy spending might not generate sufficient returns. Financials benefited amid rising Japanese government bond (JGB) yields and expectations of further BoJ monetary policy tightening. However, gains were capped as conflict in the Middle East, higher oil prices, and the latest US tariff developments dampened investors’ risk appetite.

In Australia, the S&P/ASX 200 Index edged down -0.3% (2.8% YTD) as sentiment weakened amid the US technology stocks sell-off post-earnings and continued US-Iran tension. Australian government bond yields moved higher with the curve modestly flattening, reflecting increasing inflation pressure. The Australian dollar remained flat against the US dollar.

In Canada, the S&P/TSX Composite gained 0.3% (12.9% YTD).

Emerging markets and other markets

The MSCI Emerging Markets Index rose 0.5% (17.5% YTD). The Chinese, Taiwanese, and Brazilian markets contributed positively, while the South Korean and Indian markets contributed negatively.

Chinese equities advanced over the week despite a broad regional sell-off on Friday, as renewed concerns about AI-related valuations and higher oil prices amid escalating tensions in the Middle East weighed on investor sentiment. The onshore CSI 300 Index, the main onshore benchmark, surged 2.7% (1.8% YTD), while the Shanghai Composite Index added 1.4% (-2.5% YTD). Hong Kong's benchmark Hang Seng Index gained 1.7% (-0.7% YTD). The MSCI China Index, which primarily comprises offshore-listed stocks, rose 0.9% (-10.1% YTD).

State-backed purchases helped drive a sharp rebound earlier in the week, particularly in semiconductor and other technology shares. Some of those gains were subsequently pared as valuation concerns resurfaced and Brent crude futures traded around USD 100 per barrel. In Hong Kong, weakness in large internet platforms offset part of Monday's rally.

In South Africa, markets weakened over the week as investors reassessed the monetary policy outlook after the South African Reserve Bank unexpectedly left its policy rate unchanged. Although inflation remained above the bank’s target, policymakers emphasised weak growth, subdued consumer and business confidence, and the risk that additional tightening could place further pressure on the economy. The decision was viewed as less hawkish than expected, weighing on the rand and pushing government bond yields higher as markets continued to assess whether further tightening may still be required if fuel and services inflation remain persistent. 

Sentiment was partially supported by the recent announcement of a USD 1.5 billion World Bank infrastructure loan focused on electricity, transport, and water-sector reforms. The financing reinforced evidence of gradual structural improvement, including reduced load shedding, higher renewable energy investment, and stronger freight activity. However, these longer-term reform developments were outweighed over the week by concerns around the near-term balance between elevated inflation and weak domestic growth. 

In India, markets weakened over the week as higher oil prices and renewed US-Iran tensions raised concerns about imported inflation, the current account balance, and the outlook for monetary policy. Equities declined, government bond yields rose alongside crude prices, and the rupee remained under pressure near record lows. India’s heavy dependence on imported energy amplified the market impact, while softer foreign demand and moderating overseas investment flows provided additional headwinds. The Reserve Bank of India reportedly intervened across offshore, spot, and forward currency markets to limit rupee depreciation, although market participants continued to view oil prices as the currency’s primary near-term driver.

Economic data presented a mixed picture. Preliminary business surveys showed activity expanding at its slowest pace in more than four years, with weaker growth in services and manufacturing as geopolitical uncertainty, higher input costs, and softer overseas demand weighed on sentiment. At the same time, the Reserve Bank of India maintained that domestic demand and industrial and services activity remained resilient, while identifying higher oil prices and an uneven monsoon season as the principal risks to inflation and growth. These competing signals reinforced expectations that the central bank would remain cautious, balancing external price pressures and currency weakness against evidence of slowing economic momentum.

Fixed income markets

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned -0.5% (0.1% YTD), the Bloomberg Global High Yield Index (hedged to USD) -0.5% (2.3% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index -0.8% (0.3% YTD).

US Treasuries posted negative returns as yields rose amid escalating conflict in the Middle East and higher oil prices, which helped stoke inflation concerns and increase market expectations for the Fed to raise rates in the near term. Over the week, the 10-year Treasury yield increased by 13p to 4.68% from 4.55% (up 51bps YTD), after climbing above 4.7% for the first time since January 2025 during the week. The 2-year Treasury yield rose by 15bps, ending the week at 4.33% from 4.18% (up 86bps YTD).

US high-yield bonds also generated negative returns as sentiment deteriorated amid a more risk-off backdrop driven by rising oil prices, sticky inflation concerns, rate-hike fears, AI-growth uncertainty, and the Iran conflict.

Over the week, the 10-year German Bund yield increased by 5bp, ending at 3.17% from 3.12% (up 32bps YTD). The 10-year UK gilt yield rose by 8bps, ending the week at 5.03% from 4.95% (up 56bps YTD).