Global Markets Weekly Update

U.S.

Major U.S. stock indexes closed mixed in a week characterized by sharp swings tied to the Federal Reserve’s policy meeting, the ongoing U.S.-Iran conflict, and volatility in artificial intelligence (AI)-related shares. The Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 Index all advanced, while the S&P MidCap 400 Index declined and the Russell 2000 Index was little changed. Consumer discretionary led the S&P 500 sectors—supported by a late-week rally in Amazon shares after its better-than-expected earnings results—while utilities and real estate lagged.

Concerns about the sustainability of heavy AI investments continued early in the week, with many AI-related shares coming under pressure amid questions about elevated capital spending, financing arrangements, and rising competition. However, sentiment reversed sharply on Thursday after Microsoft reported stronger-than-expected growth in its Azure cloud business and issued an encouraging outlook, helping support a broad rebound in recently weak technology stocks, though volatility continued through the end of the week. 

Fed holds rates steady in 9–3 vote

The Federal Reserve left the federal funds rate target range unchanged at 3.50% to 3.75% on Wednesday. However, three policymakers dissented, voting instead to raise rates, highlighting growing concern within the central bank about inflation remaining above target.

The Fed made no notable changes to its policy statement, while Chair Kevin Warsh offered limited guidance on the conditions that could prompt a future policy adjustment. The lack of clarity appeared to contribute to volatile trading following the decision. Stocks fell sharply on Wednesday, while the Treasury yield curve steepened as short-term yields declined and long-term yields rose. The yield on the 30-year U.S. Treasury bond rose above 5.2% for the first time since 2007 and continued climbing to about 5.26% by Friday afternoon. 

June inflation cools; GDP growth declines

Meanwhile, the Federal Reserve’s preferred inflation measure provided some relief. The Bureau of Economic Analysis (BEA) reported that its core personal consumption expenditures (PCE) price index, which excludes food and energy, rose 0.1% in June—below expectations for 0.2% and down from May’s 0.3% increase. Core prices were 3.3% higher than a year earlier compared with 3.4% in May. The headline PCE price index declined 0.1% for the month but remained elevated at 3.7% year over year. Personal spending rose 0.3%, while personal income increased a weaker-than-expected 0.2%.

The BEA also reported that real gross domestic product (GDP) increased at a 1.5% annual rate in the second quarter, below consensus expectations for 2.1% and down from 2.1% in the first quarter. The deceleration reflected a downturn in government spending and slower growth in investment and exports, partly offset by an acceleration in consumer spending. 

Consumer confidence dips 

The Conference Board reported that its Consumer Confidence Index fell to 90.8 in July, down from 92.2 in June and below estimates for around 92.1. The month-over-month drop was driven by the third straight month of deteriorating views of current business and labor market conditions, while consumers’ outlook for conditions in the short term was unchanged but remained pessimistic overall.

Europe

The pan-European STOXX Europe 600 Index ended the week up 0.73% in local currency terms and hit a new intraday high on Friday morning. Key drivers included better-than-expected corporate earnings and a partial recovery in sentiment toward AI-related stocks later in the week. Brent crude oil remaining below USD 100 a barrel also helped. Among major stock indexes, Germany’s DAX gained 2.11%, France’s CAC 40 Index rose 1.64%, and Italy’s FTSE MIB tacked on 0.71%. The UK’s FTSE 100 Index climbed 1.23%.

Eurozone economic growth surprises to the upside in Q2; inflation ticked higher in July 

Eurozone GDP grew 0.4% sequentially in the second quarter—firmly above market expectations for a 0.2% expansion. AI-related investment and robust government spending helped offset the drag from the U.S.-Iran conflict and higher energy costs. Among the eurozone's large economies, Spain posted the strongest growth, with its GDP expanding 0.7%.

Meanwhile, annual inflation in the eurozone ticked up to 2.9% in July, in line with expectations and up from 2.8% in June. Services inflation rose to 3.3%, while inflation for non-energy industrial goods climbed to 0.9% from 0.7%.

Germany's jobless rate rises in July, but the economy grew faster than expected in Q2

The unemployment rate in Germany rose to 6.4% in July, with the number of unemployed people increasing to more than 3 million. A consensus estimate had pegged the jobless rate at 6.3%. Inflation climbed to 2.8%. In the second quarter, the economy expanded by 0.2% sequentially, exceeding expectations for 0.1% growth. Exports increased; household consumption remained subdued; and capital investment fell.

Bank of England keeps rates unchanged

The Monetary Policy Committee of the Bank of England (BoE) voted to keep the central bank’s base interest rate at 3.75% but noted that further reescalation of the conflict in the Middle East could prolong energy price volatility.

The UK Nationwide House Price Index increased 1.8% year over year in July—a slowdown from the 2.2% recorded in June. 

Japan

Japan’s stock markets fell over the week, with the Nikkei 225 Index declining 0.39% and the broader TOPIX Index down 0.20%. There was uncertainty about the human and economic impact of the strong earthquake that hit the Kumamoto Prefecture in the Kyushu region on Tuesday, the biggest in terms of magnitude since the Noto earthquake in January 2024, which caused some degree of supply chain disruption. In other developments, after the Bank of Japan (BoJ) kept its policy rate unchanged, the 10-year Japanese government bond yield slipped below 2.8%, while a sudden surge in the yen on Thursday prompted widespread speculation that authorities had again intervened to support the currency. 

BoJ keeps policy rate unchanged but leaves door open for September move

The BoJ held its policy rate steady at 1% in July, having raised it to its highest level since 1995 in June. One of the nine members of the policy board proposed an increase to 1.25%. In its Outlook for Economic Activity and Prices, the central bank indicated that underlying consumer price inflation is approaching its 2% target. As a result, it said it will continue to raise its policy interest rate and adjust the degree of monetary accommodation in response to changes in economic activity, prices, and financial conditions. The BoJ downgraded its forecast for consumer price inflation for fiscal year (FY) 2026 to 2.5% year on year, from 2.8%, attributing the decrease to the impact of government subsidies, and upgraded its outlook for economic growth marginally in FY 2026 to 0.6% from 0.5%.

The policy board judged risks to economic activity and prices to be broadly balanced but noted the need to attend to potential risks stemming from the impact of the situation in the Middle East, AI-related demand, and foreign exchange rates. Governor Kazuo Ueda said that it is necessary to be more mindful than before of upside risks to prices and that the board intends to have thorough discussions from the next policy meeting onward, which was viewed as keeping the door open for a move in September. 

Sudden surge in yen leads to speculation about currency intervention

A sudden surge in the yen on Thursday, where it advanced past JPY 160 against the U.S. dollar from the high end of the JPY 163 range, marked its biggest gain against the greenback on an intraday basis since December 2023. Although the yen then gave back some of its gains, Thursday’s surge led to widespread speculation that Japanese authorities had intervened to support the currency by buying yen and selling U.S. dollars. Authorities have repeatedly said that they stand ready to intervene at any time and remain in close communication with the U.S. on foreign exchange issues.

Tokyo inflation accelerates while nationwide retail sales growth slows sharply 

Among the week’s economic releases, the Tokyo-area core consumer price index rose 1.9% year on year in July, ahead of a consensus forecast of 1.8% and following a 1.6% increase in June, accelerating for the second consecutive month amid broadening price pressures stemming from the Middle East conflict. Meanwhile, retail sales grew 0.5% year on year in June, short of a consensus estimate of 3.1% and slowing sharply from a revised 5.0% in May, as consumer spending on fuel and machinery and equipment fell.

China

China equities diverged during the week as a global sell-off in AI-related shares weighed on mainland technology and growth stocks, while Hong Kong advanced, supported by strength in large internet platforms. The CSI 300 Index fell 1.31%, while the Shanghai Composite Index gained 0.47% and the Hang Seng Index rose 3.69% in local currency terms, according to FactSet.

Mainland equities initially advanced as memory-chip manufacturer ChangXin Memory Technologies (CXMT) surged following its stock market debut, but subsequently reversed as selling spread across semiconductor, optical-component, and other AI-infrastructure companies. Technology shares rebounded on Friday alongside renewed gains in global AI stocks following strong U.S. technology earnings, reducing but not erasing the CSI 300’s weekly decline. Hong Kong outperformed as investors rotated toward large internet platforms, including Tencent and Alibaba, while gains in more defensive areas, including banks and consumer staples, partly offset technology weakness on the mainland.

CXMT debut spotlights investor demand

CXMT’s shares closed approximately 466% above their initial public offering (IPO) price on their Monday debut, following Asia’s largest IPO so far in 2026. Based on the closing share price, the company had a market capitalization of approximately RMB 3.3 trillion, making it the most valuable A-share-listed company at the end of its debut session. More than RMB 140 billion of its shares changed hands during the day.

The debut helped underscore strong investor demand for a domestic semiconductor manufacturer aligned with China’s technology self-reliance objectives. However, the wider semiconductor complex weakened later in the week amid concerns about elevated valuations and the prospective returns from substantial AI-related capital expenditure. 

Politburo signals targeted policy support

China’s Politburo, a top decision-making body of the Chinese Communist Party, reaffirmed its commitment to a more proactive fiscal policy and a moderately loose monetary policy, while calling for stronger countercyclical adjustments and the full use of existing measures. Policymakers said that they would introduce pragmatic and effective new policies when appropriate, accelerate fiscal expenditure and the deployment of government bond proceeds, and take further steps to expand domestic demand.

The readout also reiterated support for advanced technologies and emerging industries, including AI and computing infrastructure. However, the readout did not include a broad new stimulus program, indicating that economic support is likely to remain targeted and incremental.

Business activity returns to contraction

China’s official manufacturing Purchasing Managers’ Index fell to 49.2 in July from 50.3 in June, below expectations and marking its first contraction since February. The production and new-orders components both weakened, while export orders returned to contraction. The nonmanufacturing index, which covers services and construction, declined to 49.0 from 50.2, its lowest reading since December 2022, while the composite index fell to 49.3 from 50.6.

Seasonal factors and extreme weather contributed to the slowdown, but the figures also pointed to continued weakness in domestic demand, investment, and construction. 

Other key markets

Indonesia

Central bank governor’s unexpected resignation raises questions over policy continuity

Bank Indonesia Governor Perry Warjiyo unexpectedly resigned for personal reasons two years before his term was due to end. The leadership change drew attention because the central bank has recently been balancing support for economic growth with efforts to protect the rupiah and contain inflation, including raising its main interest rate by a total of one percentage point since May. Indonesian markets weakened following the announcement as investors assessed whether the leadership transition could affect the central bank’s independence and future policy direction. The rupiah declined toward its recent lows, stocks moved lower, and government bond yields rose.

Senior Deputy Governor Destry Damayanti was appointed acting governor, while President Prabowo Subianto will nominate a permanent replacement who must undergo a parliamentary review and approval process. The central bank subsequently reaffirmed its commitment to currency stability, including intervention in foreign exchange markets and adjustments to its other monetary tools, but sentiment remained cautious as investors awaited greater clarity on the next governor and the balance between supporting growth and maintaining the rupiah’s stability. 

Peru

New administration emphasizes fiscal discipline, investment, and political stability

Keiko Fujimori was sworn in as Peru’s president on Tuesday, becoming the country’s first elected female head of state. In her inaugural address, Fujimori pledged to maintain responsible government finances, reduce unnecessary spending, and streamline regulations to encourage private investment. She also announced higher minimum wages and targeted social spending, while identifying crime, infrastructure needs, and the potential economic effects of El Niño as key challenges. The new administration appointed economist and former central bank director Elmer Cuba as finance minister, a choice viewed by investors as signaling continuity in economic policy. Cuba said his priorities would include closing Peru’s infrastructure gap, improving public services, and ensuring that economic growth delivers broader benefits.

Peruvian markets reacted positively to the administration’s early policy signals, which reinforced expectations that the government would preserve fiscal discipline and the central bank’s independence while seeking to attract investment. Investor confidence had already improved following Fujimori’s election, and the appointment of a technically experienced finance minister provided additional reassurance about economic policy continuity. However, market sentiment remained measured given Peru’s history of frequent political leadership changes, the new government’s lack of a congressional majority, and lingering risks from social unrest and severe weather.