In a disappointing week for world markets, equities and bond yields declined due to recession fears in the US economy, interest rate hike by Bank of Japan and unwinding of carry trades in Japanese Yen. The recession fears were indicated by poor employment data. The markets marginally recovered by end of the week on positive unemployment claims data. BOJ officials also reassured the markets that further rate hikes will be implemented when markets are stable. Federal Reserve officials also indicated rate cuts could be implemented in September.

Global Updates
  • The MSCI All Country World Index plunged sharply this week after adverse economic reports, rising yen and unwinding of currency carry trades in Yen and Yuan. 
  • Poor employment numbers pushed a fear of recession in US markets for the global investors. Unemployment claims data reassured markets with 233,000 claims last week, down from the 250,000 claims in the previous week. Subsequently U.S., European and Asian markets recovered after the release of positive jobless claims data averted recession fears.
  • The Caixin China General Services PMI rose to 52.1 in July 2024 from 51.2 in Jue exceeding the market forecasts of 51.4. The expansion of service sector is accompanied by rise in employment, new orders and export sales.
  • WTI crude futures dragged to $73 per barrel due to fear of recession in the US and increasing geopolitical tensions in the Middle East.
  • Higher interest rates in Japan following rate hikes by Bank of Japan led to sharp rally in Yen, hurting the Carry trade in Yen and reducing expected profits of Japan’s export oriented industries. This combined with apprehensions of a recession in US markets led to the Nikkei 225 and Topix Index fell sharply this week.
  • Barclays strategists suggested that European technology stocks are currently undervalued and offer a buying opportunity.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq indices plunged this week after the release of higher-than-expected unemployment numbers stoked fears of an impending recession. The markets slightly recovered due to the release of positive unemployment claims data. Nvidia, AMD and other chip stocks rebounded later in the week.
  • The Nasdaq is accelerating the delisting of penny stocks, companies with shares trading below $1 per share, after the exchange was criticized for permitting risky companies to continue being listed using ‘reverse stock splits.’
  • Drugmaker Eli Lilly’s stocks soared following raised annual earnings outlook and strong second quarter earnings
  • Warner Brothers, Discovery and Disney’s stocks fell with decreasing subscribers for their cable services. The decrease has been attributed to lower incomes and disruption by streaming services like Netflix and Amazon Prime.
  • Exxon Mobil shares rose due to higher-than-expected second quarter profits of $9.2 billion. The higher profits of $2.14 per share were the outcome of rising oil prices and increasing sales volumes.
  • FTX Trading and Alameda Research have been ordered to pay $12.7 billion to fraud victims by the New York courts approving the order by the Commodity Futures Trading Commission.
  • U.S. government is investing $2.2 billion in revamping the national power grid and adding production capacity of 13 gigawatts to support industrial needs.
  • Charles River Laboratories, major outsourcer for pharmaceutical companies, has indicated decreased spending in R&D spending by pharma majors. This follows massive layoffs and cost cuttings by Pfizer, Bristol-Myers Squibb, Bayer and Novartis.
  • Voice generative artificial intelligence provider SoundHound AI’s stocks surged in a cool market. This followed its $80 million acquisition of the AI software firm Amelia.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index dropped sharply this week recovering marginally after release of jobless claims data.
  • The U.S. 10-year Treasury yield rose to 3.97% and the yield on the 2-year note rose to 4.02% over the week.
  • The U.S. Dollar Index dropped sharply to 103.16 this week.
Global Updates

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