Global Markets Weekly Update

U.S.

Major U.S. stock indexes finished the holiday-shortened week mixed, with the Nasdaq Composite, S&P 500 Index, and Dow Jones Industrial Average advancing while the Russell 2000 and S&P MidCap 400 Indexes declined. Within the S&P 500, the communication services, financials, and consumer discretionary sectors all posted strong gains for the week, while real estate, utilities, and energy shares finished lower. U.S. markets were closed on Friday in observance of the Independence Day holiday. 

Job growth slows in June 

On the economic data front, the Labor Department reported that the U.S. economy added 57,000 jobs in June, missing estimates for around 110,000 and marking the softest reading since February’s negative print. Prior months were also revised lower, with May’s gain cut to 129,000 from 172,000 and April’s revised to 148,000 from 179,000. The unemployment rate ticked down to 4.2%. Following the report, the probability of a rate hike at the Fed’s July meeting dropped from around 29% to about 18%, according to the CME FedWatch tool.  

On Wednesday, private payrolls firm ADP also reported that private employers added a lower-than-expected 98,000 jobs in June, down from 122,000 in May. The report noted that most job gains were in services-providing industries and that small firms accounted for over half of the month’s hiring. 

Meanwhile, the Labor Department’s Job Openings and Labor Turnover Summary showed that job openings rose modestly to 7.594 million in May, above consensus expectations and the highest reading since May 2024. Hiring and quits rates were unchanged from the prior month. 

Consumer confidence remains subdued; manufacturing activity dips

Other economic data from the week were somewhat mixed. The Conference Board’s consumer confidence index came in below expectations at 91.2 in June, although it improved slightly from May’s downwardly revised reading of 90.6. The report showed a modest improvement in expectations, but consumers’ assessment of current conditions weakened. The labor market differential also narrowed as the share of respondents saying jobs were “hard to get” rose to the highest level in more than five years. 

Elsewhere, the Institute for Supply Management reported that its manufacturing Purchasing Managers’ Index (PMI) dropped 0.7 points to 53.3 in June, missing consensus estimates for around 53.9 but registering the sixth straight month of expansion (readings above 50 indicate expanding activity). New orders and production slowed but remained in expansion, while the prices paid index fell sharply to 73.0 from 82.1, though the reading indicated rising prices for the 21st consecutive month.

Treasury yields rise

U.S. Treasuries generated negative returns as yields increased across most maturities, though shorter-term yields largely declined on Thursday following the weaker-than-expected payrolls report. (Bond prices and yields move in opposite directions.) After ending the prior week at 4.37%, the yield on the benchmark 10-year U.S. Treasury note rose to about 4.49% by Thursday afternoon. 

Investment-grade corporate bonds also generated negative returns but modestly outperformed Treasuries, and new issues were generally oversubscribed. Meanwhile, T. Rowe Price traders noted that high yield bond market sentiment was somewhat mixed, with cautious secondary market sentiment, wider spreads, and higher yields offset by resilient primary issuance and some support from issuer-specific news. 

Europe

Over the four days ended Thursday, July 2, the pan-European STOXX Europe 600 Index finished up 1.96% in local currency terms. Lower oil prices over the past month appeared to support sentiment as they have raised hopes that the economic fallout of the Middle East conflict on growth and inflation may be more benign than originally feared. Among major stock indexes, Germany’s DAX closed 3.69% higher, France’s CAC 40 Index rose 1.07%, and Italy’s FTSE MIB gained 2.27%. The UK’s FTSE 100 Index climbed 1.38%.

Eurozone inflation lower than expected, dampening expectations for an interest rate hike

The rate of consumer price inflation in the eurozone fell to 2.8% in June, a reading that was lower than the 3.2% recorded in May and market expectations for 3%. Inflation slowed in some of the region’s biggest economies, including Germany, France, and Italy. Although the headline inflation rate remained above the European Central Bank’s 2% target, the latest inflation data could ease the urgency for the central bank to act. 

German retail sales surprise on the upside

Retail sales in Germany rose unexpectedly in May, according to the latest data from Destatis, the Federal Statistical Office. Sales rose by 1.1% from the previous month, following a decline of 0.4% in April. Consensus estimates called for a decline of 0.11%.

Unemployment stable in euro area

The unemployment rate in the eurozone was 6.2% in May, largely unchanged from April, according to Eurostat, the statistics office of the European Union. The youth unemployment rate was 14.7% in the euro area.

UK GDP rises; house price growth accelerates

Final data released this week showed that the country’s gross domestic product (GDP) grew at a pace of 0.6% in the first quarter of 2026.

House price growth in the UK accelerated in June, according to the commonly cited Nationwide House Price Index. Prices rose 2.2% year over year, which was slightly lower than the 2.4% gain that had been expected. 

Japan

Japan's stock markets generated mixed returns through Thursday, with the Nikkei 225 Index declining 0.91% while the broader TOPIX Index gained 1.30%. The divergence reflected profit taking in high-priced technology and semiconductor stocks after a strong artificial intelligence (AI)-led rally, while rising bond yields and improving business sentiment, as reflected in the Bank of Japan's (BoJ) Tankan survey, supported financials and other cyclical sectors. 

Strongest Tankan reading since 2018 shows improved sentiment among large manufacturers 

The BoJ’s quarterly Tankan survey showed that sentiment among large manufacturers improved for a fifth consecutive quarter, with the index rising to 22 from 17, its strongest reading since 2018. The survey pointed to resilient corporate activity, supported by AI-driven semiconductor demand and robust capital expenditure plans, although respondents also highlighted higher energy costs and global trade uncertainty as growing headwinds.  

Separate data showed that industrial production rose 0.5% month over month in May, unchanged from April but short of consensus expectations for a 1.1% increase. Petroleum and coal products were among the main drivers, while notable drags were electric and information technology equipment.  

Bond yields climb on inflation and fiscal concerns 

In fixed income, the yield on the 10-year Japanese government bond rose to 2.78% from 2.60% at the end of the previous week. Elevated energy prices due to the war in Iran strengthened expectations that inflation would remain persistent, particularly given Japan's reliance on imported energy. Investors also continued to price in further monetary policy tightening by the BoJ as well as assessing the implications of the government's recently announced JPY 370 trillion (USD 2.3 trillion) public-private investment road map. Concerns over Japan's fiscal outlook and the prospect of increased government bond issuance added further upward pressure on yields.

Yen volatile as intervention speculation intensifies 

Early in the week, the yen broke through its weakest level in almost 40 years, depreciating to around JPY 162.5 against the U.S. dollar, before rising sharply on Thursday amid heightened speculation that Japanese authorities could again intervene in the foreign exchange market. Several factors have weighed on the yen, including fiscal concerns, the energy price shock caused by the conflict involving Iran, and the Japanese authorities' struggles to contain inflation. Downward pressure has also been exacerbated by the still-wide U.S.-Japan interest rate differential, which continues to reinforce carry trade activity and demand for the U.S. dollar. 

China

China equities were mixed through Thursday, as better-than-expected manufacturing data and improved short-term liquidity conditions appeared to help support sentiment earlier on, while a sharp global technology-led sell-off weighed heavily on mainland semiconductor and AI-related shares. The CSI 300 Index fell 1.15% in local currency terms, while the Shanghai Composite Index was broadly flat. In Hong Kong, the Hang Seng Index gained 1.69%. The pattern reflected rotation away from highflying technology and AI hardware names toward selected traditional and non-tech areas of the market. 

June PMI data point to resilient manufacturing activity

China’s June PMI data showed manufacturing activity back in expansion territory, suggesting continued resilience despite weakness in parts of the domestic economy. The official manufacturing PMI, which tends to have greater representation of larger companies, rose to 50.3 in June from 50.0 in May, supported by stronger production and new orders as well as continued strength in high-tech manufacturing. The nonmanufacturing PMI, which covers construction and services, edged up to 50.2 from 50.1 in May, above expectations for a modest decline. The private RatingDog manufacturing PMI, which is often viewed as capturing a greater share of smaller and export-oriented firms, eased slightly to 51.7 from 51.8 in May. The data supported China’s uneven-growth narrative, with high-tech and downstream manufacturing performing better than upstream segments and more domestic demand-sensitive areas. 

PBOC’s new liquidity tool supports sentiment without signaling broad easing 

Policy support also remained in focus after the People’s Bank of China (PBOC) launched overnight reverse repo operations this week. The central bank offered CNY 300 billion, or about USD 44 billion, through the new tool on Monday and CNY 600 billion on Tuesday, with Reuters reporting that the overnight rate was 1.25%. 

These operations were supportive for liquidity-sensitive sentiment and reinforced the PBOC’s effort to improve short-term funding management. However, the move appeared more consistent with a refinement of the monetary policy framework than the start of a broad easing cycle. Bloomberg reported that some analysts viewed the new overnight operation as part of a gradual shift toward an overnight-rate framework, while the seven-day reverse repo rate remained unchanged at 1.4%. For investors, that distinction matters: Liquidity management could help stabilize risk appetite, but it may not by itself resolve the domestic-demand weakness that continues to weigh on parts of the market.

Other key markets

Colombia

Markets weigh tighter monetary policy and incoming government’s fiscal plans

Colombian assets were focused on two major developments this week: a larger-than-expected central bank rate increase and early signals from the incoming administration on fiscal policy. Banco de la República raised its benchmark interest rate by 75 basis points to 12%, citing inflation that remains above target, elevated inflation expectations, and a tight labor market. The move supported local bonds by reinforcing expectations for tighter monetary policy, while also helping ease investor concerns about central bank independence following months of institutional uncertainty. Still, the divided vote—four board members supported the hike, two preferred a rate cut, and one favored no change—suggests that the policy outlook remains uncertain. 

The political backdrop also drew market attention after President-elect Abelardo de la Espriella named Miguel Gómez Martínez as finance minister, reinforcing expectations for a more market-friendly policy direction. The incoming government is expected to focus on fiscal consolidation through spending restraint and a review of public investment projects, while also discussing tax changes aimed at supporting investment and growth. Markets appeared to react in a mixed but measured way, with investors encouraged by the prospect of fiscal discipline but cautious about implementation risks, given the difficulty of passing reforms through a polarized Congress. The fiscal challenge remains significant: Colombia’s finance ministry recently revised its 2026 deficit target to 5.3% of GDP, while the independent fiscal rule committee estimates that the new government will need to cut spending by USD 5.6 billion in 2027 and by about USD 20 billion over its four-year term to avoid a further deterioration in public finances.  

Venezuela

Earthquake damage weighs on debt restructuring outlook; bonds sell off 

Venezuelan markets weakened this week as investors assessed the economic and financial impact of the devastating June 24 earthquakes. The quakes caused significant damage to housing, infrastructure, and essential services, with direct physical damage estimated at about USD 6.7 billion. The disaster also damaged Venezuela’s main international airport in Maiquetía, where commercial operations may not resume for months. Broader transport infrastructure, including ports, highways, and bridges near the epicenter, was also heavily affected. Relief efforts have become a key focus, with private companies helping fill gaps in the government response by providing machinery, food, supplies, temporary housing, and medical support. 

Markets reacted negatively, particularly in Venezuela’s distressed sovereign and Petróleos de Venezuela bonds. Most defaulted sovereign and state oil company bonds have fallen since the debt restructuring process began in mid-May, with the sell-off accelerating after the earthquake, as investors priced in the risk that earthquake-related damage could weaken recovery assumptions and lead to deeper debt relief in a restructuring. While the government had previously signaled an intention to complete the restructuring this year, the earthquake is expected to delay the debt sustainability analysis that investors are watching closely.