Last week, U.S. stock markets displayed a mixed performance, but tech-heavy indexes continued to shine. The S&P 500 and Nasdaq Composite both reached new all-time highs, buoyed by strong second-quarter corporate earnings and consistent consumer spending. Conversely, the Dow Jones Industrial Average and the S&P MidCap 400 Index ended the week slightly lower, showcasing a divergence in market performance.
The backdrop of impressive corporate earnings set a positive tone for the week. Major banks like JPMorgan Chase and Citigroup reported results that surpassed expectations, underscoring resilience within the financial sector. Corporations spanning various industries, including household names like PepsiCo, United Airlines, and Netflix, also topped their forecasts, a move that rejuvenated investor sentiment and pointed to sustained economic vitality.
Adding fuel to the tech sector’s fire, NVIDIA secured U.S. government approval to export its AI-focused H2O chips to China. This green light helped the company maintain its $4 trillion market cap milestone, reinforcing optimism around tech stocks amid ongoing global demand for cutting-edge technology.
However, the week was not without its challenges. Inflation data revealed a slight uptick, with the Consumer Price Index (CPI) climbing 0.3% in June, marking the most significant monthly increase in five months. Year-over-year, inflation hit 2.7%, with core inflation — excluding volatile food and energy prices — rising to 2.9%. Analysts pointed to new tariffs, particularly impacting consumer goods and footwear, as a partial driver of this increase. Retail sales offered a silver lining, rebounding by 0.6% in June, suggesting that consumer demand remains robust despite inflationary pressures. But markets were momentarily shaken by political turbulence as rumors surfaced that President Trump might dismiss Federal Reserve Chair Jerome Powell; a quick denial from the White House helped calm investor nerves.
In the bond market, a slight dip in short-term Treasury yields contrasted with stable longer-term yields. Investment-grade corporate bonds outperformed their Treasury counterparts, backed by healthy demand for new issuances, showcasing a market still eager for stable investments despite broader economic concerns.
European Markets: Stubborn Inflation and Recovery Signals
Turning our gaze across the Atlantic, European equity markets showed mixed results. The pan-European STOXX Europe 600 Index maintained its steadiness, while country-specific performance diverged. Italy’s FTSE MIB and the UK’s FTSE 100 saw modest gains, with the latter benefiting from a weaker pound that aids multinational companies with overseas revenues. In contrast, German and French indexes remained largely unchanged.
Yet, the UK faced challenges as inflation rose unexpectedly, reaching 3.6% in June, spurred by increased transportation and fuel costs. Services inflation lingered at a stubbornly high 4.7%, signaling persistent underlying price pressures. The labor market showed signs of softening, with an uptick in unemployment to 4.7% — the highest level in four years. Furthermore, wage growth moderated, falling to 5.0% year over year when excluding bonuses.
In the eurozone, however, there were glimmers of hope. Industrial production rebounded in May, exceeding expectations with a monthly increase of 1.7%, largely driven by gains in energy and consumer goods output. The region’s trade surplus expanded to €16.2 billion, reflecting both rising exports and reduced imports. In Germany, optimism surged as the ZEW index, which gauges investor sentiment, climbed to its highest level in over three years. With two-thirds of analysts predicting an economic improvement, this confidence was bolstered by anticipated fiscal stimulus and progress in trade negotiations between the U.S. and the European Union.
Asia & Emerging Markets: Political Risk and Growth Constraints
Asian markets recorded modest gains, with investors in Japan eyeing the upcoming July 20 Upper House election with the potential to reshape fiscal policies, particularly in government spending. The 10-year Japanese bond yield rose to 1.53%, fueled by expectations of a more fiscally supportive government. Interestingly, inflation cooled slightly in June, with core CPI at 3.3%, down from May’s numbers. However, Japan’s exports faced challenges, declining for the second consecutive month due to reduced shipments to both the U.S. and China.
Meanwhile, in China, economic data presented a mixed picture. The economy grew 5.2% in Q2, slightly slower than the previous quarter but still above forecasts, which might alleviate the immediate urgency for further stimulus. The reality, however, remained challenging. Deflationary pressures lingered, with the property sector continuing to struggle as new home prices dipped once again in June and residential sales plummeted over 12% from the previous year, marking the steepest decline seen in 2025 thus far.
In Hong Kong, the Hang Seng Index rallied nearly 3%, buoyed by technology stocks and growing optimism regarding potential policy support, indicating that investors are keenly attuned to geopolitical dynamics and economic shifts across the region.
As global markets respond to a complex interplay of corporate resilience, inflationary pressures, and evolving trade relations, investors remain watchful for signs of stability and opportunity as we navigate the second half of the year.
