The macro daily market update shows global equities rising on AI-driven earnings momentum and U.S.–Asia trade progress. While U.S. indices hit new highs, Europe and the UK face inflation headwinds, and China struggles with disinflation and property weakness. Commodities and crypto prices reacted to policy shifts and risk sentiment.
Macro Daily Brief: AI Earnings Fuel New Highs as Trade Talks Boost Market Sentiment
Macro Daily Market Update: U.S. Stocks Surge on AI Momentum
Market Performance
The S&P 500 closed at 6,363.35 (+0.07%), marking a fresh record high, alongside the Nasdaq Composite, which rose 0.18% to 21,057.96. In contrast, the Dow Jones dropped sharply by 0.70% to 44,693.91, under pressure from weakness in several large-cap non-tech names. The Russell 2000 fell by approximately 1.4%, signaling ongoing divergence between mega-cap growth and small-cap equities.
Corporate Earnings & Drivers
AI-heavy earnings continued to drive bullish momentum. Alphabet gained on stronger-than-expected earnings and plans to ramp up capital expenditure by $10 billion, mostly for AI infrastructure and server expansion. However, Tesla saw its stock decline by nearly 8%, as CEO Elon Musk warned of weak demand ahead and the impact of expiring EV incentives. IBM and Honeywell both reported earnings but disappointed investors with weak forward guidance, leading to significant declines (~8% and ~6%, respectively). UnitedHealth fell ~5% amid news of a U.S. Department of Justice investigation into past Medicare billing practices.
Macro Developments
Weekly initial jobless claims came in at 217,000, below expectations and reinforcing labor market resilience. Although services inflation and producer costs are creeping up, the Fed has shown no urgency to cut rates in the near term. Business surveys showed modest expansion, but price pressures are rising due to higher input costs from tariff-related supply shifts. Markets remain focused on the looming August 1 deadline, when the U.S. may impose 15% tariffs on imports from the EU, South Korea, and other trading partners if negotiations fail.
Yields & FX
The 10-year U.S. Treasury yield edged up to around 4.41%, reflecting stronger economic sentiment and reduced expectations for near-term Fed easing. The U.S. dollar remained firm, gaining slightly against the euro and yen.
Macro Daily Market Update: Eurozone and UK Face Inflation Challenges
ECB Policy & Economic Outlook
The European Central Bank left its benchmark deposit rate unchanged at 2.00%, pausing after eight consecutive rate cuts since Q3 2024. President Lagarde noted that inflation had stabilized around the ECB’s 2% target, with wage growth slowing and activity indicators improving modestly. Still, policymakers acknowledged that uncertainty remains high due to global trade tensions and fragile consumer demand across core economies.
In the latest ECB staff projections, 2025 inflation is expected to average 2.0%, down from 2.3% earlier this year. Growth forecasts were revised up slightly to 1.1% as Germany and France show signs of industrial recovery.
Market Reaction & Data
European equity markets were mixed. The Stoxx 600 was down 0.3%, while the FTSE 100 in London declined 0.4%, despite record earnings from Lloyds and other UK financials. Germany’s ZEW Economic Sentiment Index hit a three-year high at 52.7, signaling increased investor optimism. However, weak construction output and deteriorating manufacturing PMIs in Spain and Italy kept overall momentum capped.
UK Developments
The UK economy surprised to the upside as June CPI came in at 3.6% y/y, above expectations. Services inflation remained sticky at 4.7%, and the labor market showed signs of loosening, with unemployment ticking up to 4.7% and wage growth easing to 5.0% y/y. These mixed signals may complicate the Bank of England’s upcoming decision, though markets still lean toward a rate cut in August.
Macro Daily Market Update: China’s Disinflation Hits Property and Demand
Disinflation & Property Sector Concerns
China’s deflationary trends persisted. Producer Price Index (PPI) declined 3.6% y/y in June, extending its monthly contraction streak to 33 months. The Consumer Price Index (CPI) rose just 0.1% y/y, and fell 0.1% m/m, indicating ongoing weakness in domestic demand.
Housing Drag Continues
New home prices declined 0.3% m/m in June, the fastest rate in eight months, with year-on-year prices down 3.2%. Real estate sales also dropped sharply. The government has announced additional credit easing for developers and homebuyers, but so far, the measures have had limited impact.
Market Reaction
Equity markets were soft: the CSI 300 fell 0.2%, and the Hang Seng Index in Hong Kong dropped by 1.1%, under pressure from tech and property stocks.
Japan’s Trade Boost Fuels Nikkei Rally Despite Political Risks
Trade Boost and Market Rally
The Nikkei 225 surged 3.5% earlier this week to fresh highs, bolstered by a breakthrough in trade negotiations with the United States. The bilateral agreement includes tariff reductions on automobiles and industrial components, and introduces a $550 billion Japan-U.S. strategic investment fund aimed at semiconductor and green energy cooperation.
Political Risks Emerge
Despite market enthusiasm, political uncertainty increased following reports that Prime Minister Shigeru Ishiba may resign due to intra-party conflicts. Investors reacted with modest caution, trimming gains by end of day.
Rates & Currency
10-year JGB yields climbed to 1.6%, their highest level since 2008, on expectations that the Bank of Japan will begin tapering bond purchases as inflation persists above target. The yen weakened slightly but remained within the 156–158 range per U.S. dollar.
EMEA & Emerging Markets
Mixed Equity Action
Emerging markets saw modest losses as global risk appetite cooled. Currency depreciation and capital outflows hit South Africa and Turkey hardest. The MSCI EM index was down ~0.1%, with declines in LatAm offset by gains in India and Southeast Asia.
Geopolitical Developments
Russia escalated naval operations in the Black Sea, prompting fresh concerns over wheat exports. Meanwhile, South Africa’s new coalition government pledged fiscal restraint and central bank independence, reassuring bondholders.
Commodities & Crypto
Oil & Gold
- Brent crude rose slightly to $84.27/barrel, supported by improving trade sentiment and expectations of tighter supply from OPEC+.
- WTI crude closed around $81.56/barrel.
- Gold declined modestly to $2,368/oz, as risk-on sentiment reduced demand for safe havens.
Cryptocurrencies
- Bitcoin climbed 0.9% to $119,100, continuing its rebound amid ETF inflows and lower volatility.
- Ethereum surged 4.7% to $3,737, outperforming broader crypto indices on news of protocol upgrades and new staking activity.
Key Events Ahead
- U.S.–EU tariff decision deadline on August 1
- FOMC rate decision and Powell press conference next week
- Tech earnings from Apple, Amazon, Meta, and Microsoft
- Global July PMIs due by early next week
- Bank of Japan policy update
Summary
Markets reached new highs driven by AI earnings, U.S.–Asia trade progress, and resilient economic data in the U.S. and Europe. However, policy uncertainty, China’s weak price data, and geopolitics remain risks.
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