Weekly Market Recap

Equity markets

Last week, the MSCI All Country World Index (MSCI ACWI) lost -0.5% (13.6% YTD).

The S&P 500 Index finished little changed, down -0.1% (12.7% YTD), in a week that featured the Federal Reserve’s first rate increase since 2023 and volatile oil prices resulting from escalation in the Middle East conflict. Artificial intelligence (AI)-related stocks largely shrugged off the warnings about safety risks from high-profile AI leaders over the previous weekend. Large-cap growth stocks outperformed their value counterparts, while small caps finished behind large caps. The Russell 1000 Growth Index returned 0.9% (4.7% YTD), the Russell Value Index -1.1% (21.2% YTD), and the Russell 2000 Index -1.5% (16.4% YTD). The technology-heavy Nasdaq Composite gained 0.7% (14.6% YTD).

In Europe, the MSCI Europe ex-UK Index declined -0.8% (8.9% YTD). European equities were volatile as escalating Middle East tensions drove oil and natural gas prices higher early in the week, reinforcing inflation concerns and putting upward pressure on bond yields. A sharp rotation out of AI-related stocks also weighed on sentiment before tech stocks rebounded as concerns about infrastructure spending moderated. Markets subsequently stabilised as oil prices retreated from their highs and investors digested monetary policy decisions in the US, Japan, and the UK.

Among major stock indexes, Germany’s DAX Index lost -1.0% (3.3% YTD), France’s CAC 40 Index retreated -1.4% (1.5% YTD), and Italy’s FTSE MIB Index fell -1.8% (18.2% YTD). Switzerland’s SMI added 0.2% (7.1% YTD). The euro weakened against the US dollar, closing the week at USD 1.15 per EUR, down from 1.16.

The FTSE 100 Index in the UK nudged up 0.1% (10.1% YTD), while the FTSE 250 Index of smaller companies rose 1.0% (10.4% YTD). The British pound depreciated against the US dollar for the week, closing at USD 1.34 per GBP, down from 1.35.

Japan’s stock markets rose over the week. The TOPIX Index gained 1.6% (21.5% YTD), and the TOPIX Small Index rallied 3.2% (21.7% YTD). AI-related shares recovered from a sharp early-week sell-off, while sentiment improved later in the week as oil prices retreated from earlier highs on easing concerns about immediate Middle East supply disruptions. The BoJ's widely expected rate hike was met with a split vote and no explicit guidance on the pace of further tightening. Meanwhile, the yen weakened past JPY 157 against the US dollar, from 153 at the end of the previous week, supporting exporters and helping lift the market into the end of the week.

In Australia, the ASX 200 Index slid -0.1% (4.0% YTD), weighed by a tightening global interest rate outlook. Australian government bond yields fell with the curve flattening, as markets price in a growth slowdown alongside the hawkish RBA narrative. The Australian dollar weakened 0.6% against the US dollar as elevated oil prices weighed on sentiment.

In Canada, the S&P/TSX Composite put on 0.4% (14.7% YTD).

Emerging markets and other markets

The MSCI Emerging Markets Index edged down -0.5% (23.9% YTD). Taiwan contributed positively, while South Korea, India and Brazil contributed negatively.

China equities were mixed over the week, with mainland shares outperforming Hong Kong following a technology-led rebound on Friday. The CSI 300 Index, the main onshore benchmark, was flat (-0.9% YTD), while the Shanghai Composite Index added 0.7% (0.3% YTD). Hong Kong's benchmark Hang Seng Index lost -0.2% (-0.9% YTD). The MSCI China Index, which primarily comprises offshore-listed stocks, edged down -0.1% (-10.3% YTD).

Early weakness was concentrated in AI-related shares and other growth stocks amid a regional technology sell-off, higher oil prices, and softer domestic demand and credit data, but losses narrowed later in the week as semiconductors and other technology shares rebounded sharply. Friday’s recovery broadened across mainland and Hong Kong technology shares, with semiconductors and other AI-related names leading, while the renminbi strengthened to its highest level in more than four years.

In Türkiye, equities fell sharply over the week as liquidity strains at several investment funds triggered heavy redemptions, forced asset sales, and broader concerns about market spillovers. Selling intensified through midweek, culminating in a sharp Wednesday decline that triggered a market-wide circuit breaker before equities rebounded on Thursday after authorities announced support measures. Pressure was particularly severe among smaller, less liquid shares tied to funds with concentrated holdings, where recent regulatory changes had prompted managers to reduce positions and intensified redemption pressures.   

Authorities responded with a broad package to contain the disruption. The Capital Markets Board ordered the liquidation of 131 funds managed by seven portfolio companies, representing more than TRY 890 billion or about USD 18 billion, in assets and appointed Türkiye İş Bankası and Ziraat Bankası to oversee the process. The central bank also said it would increase one-week repo funding when needed, revise banks’ borrowing limits, and reduce collateral haircuts to support liquidity. Separately, regulators launched investigations into alleged market manipulation, imposed trading restrictions and detained or arrested several fund and financial executives.   

In Brazil, markets were volatile as investors balanced further monetary easing and signs of cooling economic activity against renewed fiscal and election-related uncertainty. The Central Bank of Brazil unanimously cut the Selic rate by 25bps to 13.75%, its fifth consecutive reduction, while maintaining a cautious stance on further easing. Recent data supported the case for lower rates, with the central bank’s IBC-Br economic activity index falling 0.2% in July, more than expected, as agriculture and industry contracted.  

Fiscal concerns intensified after the government announced a 15% increase in benefits under the country’s social welfare program, Bolsa Família. Officials said that the additional spending could be accommodated within existing budget allocations, but the move nevertheless appeared to weigh on investor sentiment ahead of October’s presidential election. Higher global diesel prices also remained a potential inflation risk, widening the gap between international prices and those charged domestically by Petrobras and reducing incentives for private fuel imports.

Fixed income markets

Last week, the Bloomberg Global Aggregate Index (hedged to USD) was flat (-0.6% YTD), the Bloomberg Global High Yield Index (hedged to USD) gave back -0.3% (2.3% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index retreated -0.4% (-0.1% YTD).

Over the week, the 10-year Treasury yield increased by 3bps to 5.00% from 4.97% (up 83bps YTD). The 2-year Treasury yield rose by 12bps, ending the week at 4.75% from 4.63% (up 127bps YTD).

US investment-grade corporate bonds performed better than Treasuries for most of the week. Credit markets rallied following the Fed’s rate hike announcement. New investment-grade corporate issues were generally oversubscribed, reflecting strong underlying investor demand. The high-yield bond market was under pressure for much of the week as rising Treasury yields, oil-driven inflation concerns, and expectations for additional rate hikes heightened stress on lower-quality credit.

Over the week, the 10-year German Bund yield increased by 2bp, ending at 3.52% from 3.50% (up 66bps YTD). The 10-year UK gilt yield decreased by 5bps, ending the week at 5.29% from 5.34% (up 82bps YTD).