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Global Markets Weekly Update

Our analysts recap activities across global markets in our weekly report.

Review the performance of global stock and bond markets over the past week, along with relevant insights from T. Rowe Price economists and investment professionals.


Exceptionally narrow advance continues on falling interest rates

The S&P 500 Index continued to climb to record highs, although the market’s gains remained notably narrow. As measured by Russell 1000 indexes, growth shares outperformed value stocks by 415 basis points (4.15 percentage points), while the small- and mid-cap benchmarks recorded losses. 

The technology-heavy Nasdaq Composite ended the week 73.71% off its lows since the market began its rebound in mid- to late-2022, while the more value-oriented and narrowly focused Dow Jones Industrial Average had gained less than half of that amount, 32.79%. Markets were closed Thursday in observance of the Independence Day holiday, and T. Rowe Price traders noted lighter trading volumes as the week progressed.

Expectations for lower interest rates, fed by signs of weakening growth and easing inflation pressures, seemed to remain a major factor in favoring growth stocks by placing a lower implied discount on future earnings. On Monday, the Institute for Supply Management (ISM) posted its lowest reading of manufacturing activity (48.5, with levels below 50.0 indicating contraction) since February. A separate reading also showed a surprise contraction in construction activity. 

Activity slumps in services 

More surprising may have been a sharp downturn in the ISM’s gauge of current services sector activity, reported Wednesday, which plunged a full five points into contraction territory, from 53.8 in May to 48.8 in June—its lowest level since soon after the start of the pandemic lockdowns in early 2020. Respondents to the survey noted that high gas prices and worries over elevated restaurant menu prices seemed to be weighing on consumers, but the survey’s chief researcher and some other observers expressed hope that the drop would prove an anomaly. Notably, S&P Global’s rival survey still indicated continued expansion and even a slight acceleration in the sector, rising from 55.1 to 55.3. 

Likewise, the week’s important jobs data offered mixed evidence on the health of the economy. On Tuesday, the Labor Department’s so-called JOLTS report revealed that job openings rose slightly to 8.14 million in May, but from a downwardly revised 7.9 million in April—the lowest level in over three years. Similarly, payroll processor ADP’s tally of private sector job growth, released Wednesday, fell more than expected, from 160,000 in May to 150,000 in June. 

Uruçi: Labor market loosening...

Chief U.S. Economist Blerina Uruçi observes that the JOLTS data showed sustained loosening in the labor market, with both quits and hiring back to pre-pandemic levels. In addition, the number of unemployed workers per job vacancy has fallen to 1.2 from about 2.0 during the peak of the labor market tightness in 2022.

The closely watched official jobs report from the Labor Department, released Friday, confirmed a slowdown in job growth, with June job gains falling 12,000 to 206,000, although the drop was smaller than consensus expectations. Notably, however, an increase in government jobs and a rise in health care employment helped compensate for weakness in private sector hiring, with employment at hotels, restaurants, and retailers falling slightly and perhaps indicating some weakness in discretionary spending. Employment at temporary help agencies—sometimes considered an advance indicator of overall employment trends—also fell by 49,000 jobs. 

While June employment growth was a touch stronger than expected, May and April data were revised down significantly. In addition, the unemployment rate ticked higher to 4.1%. Elsewhere in the report, annual wage inflation fell to 3.9%, data consistent with the JOLTS quits rate, a leading indicator that has been suggesting further moderation in wage pressures. 

Index Friday's Close Week’s Change % Change YTD
DJIA 31,097.26 -403.42 -14.42%
S&P 500 3,825.33 -86.41 -19.74%
Nasdaq Composite 11,127.84 -479.78 -28.87%
S&P MidCap 400 2,295.89 -38.51 -19.22%
Russell 2000 1,727.76 -37.96 -23.05%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price Associates’ presentation thereof.

...but a cooling labor market is not necessarily a weak one

In Uruçi’s view, however, labor market cooling is not the same as weakness, as the unemployment rate is increasing in part because of higher labor supply and increased migrant flows. Nevertheless, she believes that Federal Reserve policymakers will be concerned about the unemployment rate continuing to tick higher, which could tip the balance toward a September cut if it were to increase further in the next two reports—should monthly core inflation prints remain in the 0.1% to 0.2% range.

The upside to the slowing economy was some evidence of falling inflation pressures. The ISM data showed slowing growth in input prices for both services providers and manufacturers, in particular, ameliorating some recent upward pressures in both. Our traders noted that some reassuring remarks from Fed Chair Jerome Powell at a European banking conference on Tuesday also appeared to reassure investors. While stating that inflation was unlikely to hit the Fed’s 2.0% target until late 2025 or 2026, he acknowledged that the Fed had “made quite a bit of progress” in bringing it lower.

Powell’s comments and the week’s economic data appeared to drive a decline in long-term U.S. Treasury yields over the week. (Bond prices and yields move in opposite directions.) Activity in the overall bond market was generally light over the holiday-shortened week, however, with light issuance in the investment-grade corporate market and none at all in the high yield segment.


In local currency terms, the pan-European STOXX Europe 600 Index ended 1.01% higher. Political jitters eased as the far right in France failed to win an outright majority in the first round of legislative elections on June 30. Meanwhile, the Labour Party won the UK general election on July 4 with a large majority. Major stock indexes also rose, with France’s CAC 40 Index climbing 2.62%, Germany’s DAX gaining 1.32%, and Italy’s FTSE MIB putting on 2.51%. The UK’s FTSE 100 Index added 0.49%.

Labour wins UK election; French far right leads ahead of second round 

In the UK, Sir Keir Starmer’s Labour Party won a resounding victory in the UK’s general election, ending 14-years of turbulent Conservative rule. Rachel Reeves will be the country’s first female Chancellor of the Exchequer (finance minister).

The week was marked by heightened political uncertainty after Marine Le Pen’s far-right National Rally won the largest share of the vote in the first round of the French parliamentary election, inflicting heavy losses on President Emmanuel Macron’s Ensemble, which came in third, behind the left-wing New Popular Front. 

ECB’s Lagarde slightly hawkish; minutes show division over June cut

Speaking at the European Central Bank’s (ECB’s) annual retreat in Portugal, ECB President Christine Lagarde appeared to strike a slightly more hawkish tone. She said that Europe is “still facing several uncertainties regarding future inflation, especially in terms of how the nexus of profits, wages and productivity will evolve and whether the economy will be hit by new supply-side shocks.” She added: “It will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed.” Meanwhile, minutes from the ECB’s June meeting showed some members opposed the first rate cut since 2019 because wage growth had surprised to the upside and inflation seemed to be stickier. 

A final estimate of eurozone inflation confirmed that the year-over-year change in consumer prices ticked lower in June to 2.5%. However, a crucial services component remained stubbornly high, likely reinforcing the ECB’s case for caution.

German manufacturing weakens unexpectedly; French industrial output falls

Germany’s manufacturing base weakened further in May. Seasonally adjusted orders fell 1.6% sequentially, while industrial production contracted 2.5%. Industrial output in France also declined, dropping 2.1%.


Japan’s stock markets gained ground, with the Nikkei 225 Index climbing 3.36% and the broader TOPIX Index advancing 2.65% in local currency terms. Both indexes hit all-time highs during the week, propelled in part by weakness in the Japanese yen, which is typically a tailwind for export-focused industries. The yen strengthened a bit later in the week.

The yield on Japan’s 10-year sovereign bonds climbed to about 1.1%—its highest level since 2011—before easing somewhat with U.S. Treasury yields later in the week.

Annual pay increases by most in over 30 years

Data from Japan’s biggest union group indicated that its members achieved an average wage increase of 5.1%, the biggest uptick in 33 years. The final figure, which included more small businesses, came in below the initial estimate of a 5.28% wage hike but still highlighted the strong upward momentum in wages.


Consumer spending contracts unexpectedly in May

Household spending declined 1.8% year over year in May, well shy of a consensus estimate that called for outlays to increase 0.1%. On a sequential basis, consumer spending fell 0.3% compared with expectations for a month-over-month uptick of 0.5%. Weakness in the yen appeared to weigh on spending, especially demand for overseas package tours. Meanwhile, rising prices drove a 3.1% decline in outlays for food relative to year-ago levels.

First-quarter GDP revised lower

In the first three months of the year, Japan’s economy shrank by 2.9% year over year, a sharper contraction than the first estimate that put the decline in gross domestic product (GDP) at 1.8%. The government attributed this revision to corrections in construction orders. The annualized change in GDP was also lowered for the fourth and third quarters of 2023.


 Chinese equities fell as underwhelming manufacturing data reinforced concerns about the slowing economy. The Shanghai Composite Index and the blue chip CSI 300 both registered modest losses for the week. In Hong Kong, the benchmark Hang Seng Index gained 0.46% during a holiday-shortened week, according to FactSet. Markets in Hong Kong were closed Monday for the Special Administrative Region Establishment Day.

China's manufacturing sector shrank in June for the second consecutive month, government data showed. The official manufacturing purchasing managers’ index (PMI) reached 49.5 in June, unchanged from May, as new orders and exports declined. The figure missed the 50-mark threshold separating growth from contraction. The nonmanufacturing PMI, which measures construction and services activity, rose to a below-consensus 50.5, down from 51.1 in May. 

Separately, the private Caixin/S&P Global survey of manufacturing activity edged up to a better-than-forecast 51.8 in June from 51.7 in May, marking its eighth monthly expansion. However, the Caixin services PMI was 51.2 in June, missing economists’ forecasts and slowing from 54 in May. The mixed PMI readings reflected the uneven performance of China’s economy this year amid a yearslong property slump that has hit domestic consumption and rising trade tensions that threaten the manufacturing sector. 

In other news, the value of new home sales by the country’s top 100 developers fell 17% in June from the prior-year period, easing from a 34% decline in May, according to the China Real Estate Information Corp. The data boosted hopes that China’s housing market, now in its fourth year of a downturn, may start to gain traction after the government announced a sweeping rescue package in May.  

Other Key Markets

Türkiye (Turkey)

Inflation may have peaked, but tight monetary policy likely through year-end

On Wednesday, the Turkish government reported that headline inflation, as measured by the consumer price index (CPI), increased at a month-over-month rate of 1.6% in June. This was below broad expectations for a 2.2% increase. According to T. Rowe Price sovereign analyst Peter Botoucharov, the underlying monthly pace of both headline and core CPI inflation (which excludes food, energy, alcohol, and tobacco costs) slowed to 2.9% and 2.4%, respectively, from above 4% in March and from 3% in May. In year-over-year terms, the headline CPI moderated to 71.6% in June from 75.4% in May, while core inflation fell to 71.4% from 75.0%.

Botoucharov believes that inflation in Turkey peaked in May and has turned the corner, and he anticipates a sharp drop in headline CPI in the third quarter, supported by base effects. While he believes inflation could fall below the central bank’s main policy rate—which is currently 50%—to the 42% to 45% range by the end of the year, he expects monetary policymakers to maintain a tight policy stance at least through the end of 2024.


Officials keep rates steady, expecting consumer price growth “in the coming quarters”

On Wednesday, the Polish central bank concluded its scheduled two-day monetary policy meeting and decided to keep its key interest rate, the reference rate, at 5.75%. Other interest rates controlled by the central bank were also left unchanged.

According to the post-meeting statement, policymakers claimed that “a gradual economic recovery” is continuing, yet “activity in the industry and construction sectors” is “weakened.”

In the labor market, unemployment is low, but wage growth is “still running” at a “high level.” As for inflation, central bank officials cited a 2.6% annual consumer price index inflation rate in June versus 2.5% in May. 

Policymakers concluded that “despite the observed economic recovery, demand and cost pressures in the Polish economy remain relatively low.” However, they note that “demand pressure in the domestic economy is stimulated by a marked wage growth” and, looking ahead, they believe consumer price growth is likely to increase “in the coming quarters” and be above the central bank’s inflation target, driven by “raised energy prices.” As a result, policymakers decided to leave interest rates at current levels.


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