Global capital markets went through a week of major developments. The most recent CPI print in the U.S. brought relief as it came in lower than expected. Despite the fall, the Fed kept rates unchanged in June, waiting for stable inflation rates closer to its target of 2%. The technology leaders in the U.S. had a strong week and powered the rally in the country’s equity market. Oracle signed deals with Microsoft, Google, and Open AI to develop their cloud infrastructure, Nvidia split stocks 10-for-1 and Broadcom announced a similar split after their second quarter earnings beat market expectations. Up on Capitol Hill, Republicans lobbied to extend the Trump tax beyond 2025 and increase the tax cuts for corporations. Elsewhere, European stocks fell during the week after rising political uncertainty gripped France and China’s CPI edged up month-over-month owing to a surplus in domestic demand. In geopolitical developments, Hamas tempered its ceasefire negotiations with a hardened stance on withdrawal of Israeli forces, while the Houthi rebels continued to disrupt shipping channels in the Red Sea using boat and missile attacks.

Global Updates
  • The MSCI All Country World Index had a tumultuous week and ended lower overall. The index initially plummeted after French President Emmanuel Macron dissolved the French assembly and called for snap elections. Later in the week, the announcement of soft U.S. inflation numbers helped the index recover some ground.
  • In the U.S., new claims for unemployment benefits increased last week and producer prices unexpectedly fell in May, keeping alive hopes that an interest rate cut by the Federal Reserve may be on the horizon. As a result, the S&P 500 and Nasdaq rallied and registered record closing highs during the week.
  • Brent Crude and WTI Crude futures recovered on rising global demand after a steep fall from 2-week highs following an increase in U.S. inventories of crude oil by 3.73 million barrels.
  • China’s CPI edged up by 0.3% while producers’ prices declined, signaling a stagnant domestic consumer demand. Chinese carmakers accelerated plans to build factories in Hungary and Poland after the E.U. imposed an additional 38% tariff on electric vehicles imported from China. 
  • Saudi Arabia chose not to renew its 80-year petro-dollar deal with the U.S.A., which expired on the 9th of June.  Saudi Arabia can now sell oil and other goods using different currencies, such as the Chinese RMB, Euros, Yen, and Yuan, instead of only U.S. dollars.
  • The Argentinian senate approved a package of free market reforms and fiscal actions to attract foreign investment and resuscitate its economy.
U.S. Equity
  • The S&P 500 & Nasdaq composite rallied with technology stocks leading the way yet again and softer-than-expected consumer inflation numbers. The Dow Jones index fell during the week.
  • U.S. inflation slowed to 3.3% in May with cooling inflation for food, shelter, transportation, and apparel. The 30-year mortgage rate also dipped by 18 basis points. Employers added 272,000 new jobs in May and hourly wages rose 4.1% even as the unemployment rate rose to 4%.
  • The Fed kept rates unchanged during its June meeting and has projected only one rate cut this year, while its outlook in March included three quarter-percentage-point reductions.
  • Oracle stock has surged during the week after announcements of large cloud infrastructure deals with Google Cloud, Microsoft and OpenAI. 
  • Apple’s market cap increased by 7% to the tune of $215 billion fueled by the announcement of its new AI powered developments and ChatGPT integration.  
  • KKR, CrowdStrike, and GoDaddy equities advanced with inclusion in S&P 500 index rebalancing this quarter, to replace Robert Half, Comerica, and Illumina. AMD stocks fell as Morgan Stanley downgraded the company based on limited potential for financial earnings of AMD’s AI business. 
  • Ilit Raz, the founder of AI-powered hiring startup Joonko, was charged by the SEC with defrauding investors for $21 million using delusive capabilities. 
  • Terraform, crypto tycoon Do Kwon’s company, has agreed to $4.5 billion penalty and wind down operations to settle its fraud lawsuit with the SEC.
  • Chinese retail brokerage firm Webull was banned by the Tennessee state government on state employees’ equipment.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index recovered this week on Fed’s inaction and cooling inflation. 
  • The U.S. 10-year Treasury yield reset to 4.27% and the yield on the 2-year note reset to 4.72% over the week after major fluctuations.
  • The U.S. Dollar Index marginally fell to 105.22 during the week.
  • The Fed’s Summary of Economic Projections signaled only one rate cut this year, possibly in December. Market priced in 25 bps rate cut in September with 61% probability.
  • Actively managed fixed-income funds have attracted $105 billion investments so far this year, $31 billion higher than last year.
Sources

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