Weekly Market Recap

Equity markets

Last week, the MSCI All Country World Index (MSCI ACWI) lost -2.1% (97% YTD).

The S&P 500 Index finished the week -1.9% lower (8.0% YTD), as renewed weakness in large-cap technology and artificial intelligence (AI)-related shares weighed heavily on markets. The equal-weighted S&P 500 Index solidly outperformed its market cap-weighted peer. Large-cap growth stocks strongly underperformed their value counterparts, while small caps outperformed large caps. The Russell 1000 Growth Index returned -3.4% (0.9% YTD), the Russell Value Index 0.3% (16.3% YTD) and the Russell 2000 Index 1.0% (22.1% YTD). The technology-heavy Nasdaq Composite stumbled -4.6% (9.2% YTD).

In Europe, the MSCI Europe ex-UK Index ended the week with a -0.3% loss (9.8% YTD). After a positive start to the week, global technology stocks sold off on Friday amid concerns over elevated valuations in AI-related stocks. Most major stock indices retreated. Germany’s DAX Index gave back -1.3% (0.7% YTD), France’s CAC 40 Index slid -0.4% (5.4% YTD), and Italy’s FTSE MIB Index fell -2.8% (17.2% YTD). Switzerland’s SMI rallied 2.9% (10.0% YTD). The euro weakened against the US dollar, closing the week at USD 1.14 for EUR, down from 1.15.

The FTSE 100 Index in the UK rose 1.4% (7.7% YTD), while the FTSE 250 Index slipped -0.2% (4.8% YTD). The British pound was little changed against the US dollar, closing at USD 1.32 for GBP.

Japan's stock markets declined over the week. The TOPIX Index fell -2.0% (17.5% YTD), and the TOPIX Small Index was down -0.8% (14.7% YTD). AI-related technology stocks initially rallied after upbeat forecasts from leading US chipmakers bolstered confidence in the AI theme, but a global technology sell-off later in the week prompted profit-taking in the sector and weighed on Japan’s markets. In the currency markets, investors remained on watch for potential intervention by authorities to prop up the yen as it weakened toward the upper end of the JPY 161 range against the US dollar.

In Australia, the S&P/ASX 200 Index declined -0.7% (2.6% YTD) due to weaker commodity prices. Australian government bond yields moved lower amid abating inflation risk. The Australian dollar weakened against the US dollar by 1.6% as global investors entered risk-off mode.

In Canada, the S&P/TSX Composite was up 0.4% (11.5% YTD).

Emerging markets and other markets

The MSCI Emerging Markets Index dropped -4.4% (22.8% YTD). The Indian and Brazilian markets contributed positively, while the Chinese, Taiwanese and South Korean markets contributed negatively.

China equities ended the week lower as an early rally in AI and semiconductor-related shares gave way to a broader regional technology sell-off late in the week. The onshore CSI 300 Index, the main onshore benchmark, lost -1.3% (6.1% YTD), while the Shanghai Composite Index moved -1.3% lower (2.4% YTD). Hong Kong's benchmark Hang Seng Index fell -5.2% (-10.1% YTD), as weakness in large internet companies added to the broader decline in technology shares across Asia. The divergence also reflected differences in index composition, with mainland benchmarks carrying greater exposure to AI infrastructure and semiconductor companies, while Hong Kong indexes remain more concentrated in internet platforms and financials. The MSCI China Index, which primarily comprises offshore-listed stocks, lost -5.8% (-16.0% YTD).

In South Korea, South Korean equities fell sharply over the week, with the KOSPI Composite Index losing 7.1%, as a steep reversal in AI- and memory-linked shares overshadowed a midweek rebound. The KOSPI climbed higher to start the week, supported by strong gains in SK Hynix and Samsung Electronics, but selling pressure intensified as investors reassessed stretched valuations, heavy retail participation, and the role of leveraged products in amplifying market swings. SK Hynix briefly overtook Samsung Electronics as the country’s largest company by market value, buoyed by optimism about demand for high-bandwidth memory and expectations that a planned US listing could broaden foreign investors' access, before both chipmakers came under heavy pressure.

The sell-off added to scrutiny of South Korea’s increasingly volatile equity market. Trading halts were triggered twice during the week as leveraged single-stock exchange-traded funds tied to Samsung Electronics and SK Hynix, along with elevated retail margin debt, appeared to intensify index-level moves. Regulators were reportedly considering stabilisation measures, including potential limits on some leveraged products. Macro and policy concerns also remained in focus, with the Bank of Korea again signalling a hawkish stance, citing rising home prices, household debt, and leveraged investment activity as risks to financial stability, while the won weakened against a stronger US dollar.

In Romania, Romanian assets came under pressure earlier in the week as the country’s political impasse deepened, raising concerns about fiscal consolidation, access to European Union (EU) recovery funds, and sovereign credit risk. Investor concerns centred on the failure of prime minister nominee Adrian Veștea to secure parliamentary approval, prolonging a deadlock that has stalled efforts to form a stable government and advance reforms needed to unlock billions of euros in EU funding before an August deadline.

The political crisis followed the collapse of Romania’s pro-European coalition in May and left President Nicușor Dan trying to secure support for a minority government in a fragmented parliament. Three centre-right parties proposed European Parliament lawmaker Siegfried Mureșan as prime minister, while the Social Democrats put forward their leader, Sorin Grindeanu, leaving both camps short of a clear governing majority. Another failed attempt to approve a cabinet could increase the risk of early elections, an outcome that could benefit the far-right Alliance for the Union of Romanians, which has been leading in opinion polls. The uncertainty comes as Romania faces one of the EU’s widest budget deficits and the risk that further delays in fiscal adjustment could pressure its investment-grade credit rating.

Fixed income markets

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned 0.5% (1.3% YTD), the Bloomberg Global High Yield Index (hedged to USD) was flat (2.7% YTD), and the Bloomberg Emerging Markets Hard Currency Aggregate Index was little changed (1.6% YTD).

US Treasuries advanced during the week, with yields moving lower across most maturities as oil prices declined and the May PCE data came in roughly in line with expectations. Over the week, the 10-year Treasury yield decreased by -9bps to 4.37% from 4.46% (up 20bps YTD), dropping below 4.40% for the first time in over a month. The 2-year Treasury yield declined by -9bps, ending the week at 4.09% from 4.18% (up 62bps YTD).

US investment-grade corporate bonds also generated gains, while new issues were, on average, oversubscribed. Meanwhile, high-yield bonds were more pressured amid concerns over monetary policy and AI-driven equity valuations, heavy new issuance, slowing fund inflows, and broader risk-off sentiment.

Over the week, the 10-year German Bund yield decreased by -13bp, ending at 2.85% from 2.98% (flat YTD). The 10-year UK gilt yield decreased by -11bps, ending the week at 4.73% from 4.84% (up 26bps YTD).