In a reversal of fortunes, global equity markets slipped after technology stocks had a difficult week, wiping out more than $900 billion in market cap as investors moved money out of the technology sector to those that have languished in 2024. Across the ocean, in Europe, the European Central bank has reaffirmed its stance on sticking to its plan of announcing rate cuts as per the trajectory of inflation in the region and not making any hasty changes. In the US, as the expectation of rate cuts by the Federal Reserve grew and the labor market continued to weaken, the price of Gold touched an all-time high. As many of the financial giants of the world posted strong earnings during the second quarter of 2024, the growing expectation is to bet on a Trump presidency from 2025 onwards.

Global Updates
  • The MSCI All Country World Index fell this week, as technology stocks tumbled worldwide; shedding about $900 billion in market value and European stocks reacted to a fall in commodity prices. 
  • Republican presidential candidate Donald Trump announced JD Vance as his vice presidential candidate. In another development, a Democratic party committee will meet to discuss a virtual voting process to decide whether President Joe Biden will continue as the Democratic candidate.
  • The European Central Bank announced that its next strategy assessment would not involve some key issues, including a discussion on the bank’s numerical inflation target or the publication of interest rate forecasts. ECB President Christine Lagarde announced that it would be more of an internal review.
  • Optimism of rate cuts by the Federal Reserve pushed up gold prices, as it hit an all-time high during the week and slowed down the strengthening dollar. Dovish statements by Federal Reserve officials and a continuously weakening labor market support the speculation of an early rate cut. 
  • According to the International Monetary Fund, the Canadian economy seems to have achieved a soft landing. Canada’s economy has been posting growth this year and the rate of inflation has consistently stayed in the bank’s target range of 1% to 3%, albeit hovering at the upper end.
  • A global technology outage occurred on Friday as the latest update by Crowdstrike affected Microsoft operating systems around the globe. The outage affected stock markets, airports, critical services and many other industries across the globe.
U.S. Equity
  • The S&P 500 and Nasdaq indices fell this week with a drop in technology stocks, led by the drop in ‘Magnificent Seven’ shares. The Dow Jones index, however, rose with the Industrials sector data boosting investor confidence levels.
  • President Biden proposed a national rent-control plan to cap rents in the weak American housing market with high mortgages and high rents. The populist policy is expected to adversely hit the property/housing market.
  • The PHLX Semiconductor Index fell 7% due to the emerging report that the Biden government is contemplating imposing harsh restrictions on non-American companies manufacturing chips in China, like ASML, Tokyo Electron, etc. Donald Trump exacerbated the situation by suggesting a levy on Taiwan for its defense by the United States.
  • Blackstone stock continued to rise regardless of the lower second quarter earnings. The company has dedicated $19.1 billion in new investments buoyed by the possibility of early rate cuts. Blackstone has also increased investments in private equities to $34 billion, the highest in two years.
  • New York’s office space company SL Green’s stocks rose this week with positive second quarter outcomes. The increase in FFO to $1.6 per share over the quarter in a tight properties market impressed investors.
  • The average interest rate on the popular US 30-year fixed-rate mortgage fell to its lowest level since mid-March. The 30-year fixed-rate mortgage averaged 6.77% during the week ending July 18, the lowest level since mid-March, down from 6.89% in the prior week.
  • The weekly flows of equities during the week ended 12th of July 2024, was the fifth largest of all time and fixed income inflow was the eighth largest of all time.
  • Capital One will commit $265 billion over five years to lending, philanthropy and investment if its takeover of Discover Financial Services goes through, as it aims to appease critics and win over regulators.
  • Morgan Stanley’s second-quarter profit beat expectations, driven by a surge in investment banking and trading revenues that overcame muted results in wealth management. Institutional securities revenue grew 23% in the quarter to $7 billion, buoyed by investment banking revenue, which soared 51% to $1.62 billion.
  • Goldman Sachs’ profits more than doubled in the second quarter and beat analysts’ estimates on strong debt underwriting and fixed-income trading, but slipped from a bumper first quarter when earnings were the highest since 2021. Earnings rose to $3.04 billion, or $8.62 per share, for the three months ended June 30th, about 3% higher than analysts’ average expectation of $8.34 per share.
U.S. Fixed Income
  • The Bloomberg US Aggregate Bond Index marginally rose this week. 
  • The US 10-year Treasury yield rose to 4.209% and the yield on the 2-year note reset to 4.485% over the week. The bond yields fell early this week owing to expectations of early rate cuts and recovered with the ECB keeping rates unchanged. 
  • The U. Dollar Index rose to 104.29 this week. 
  • Early in the week, the Dollar trended down with optimism fanned by comments from officials of the Fed. The dollar recovered later this week with the release of manufacturing data showing a surge in new orders in the US Mid-Atlantic region.
  • Foreign holdings of US Treasuries rose to a record high in May, exceeding the previous record in March. Holdings of US Treasuries rose to $8.129 trillion in May from a revised $8.04 trillion in April.
Sources

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