Global equity markets ended the week higher. Investors have priced in a higher likelihood of a rate cut by the Federal Reserve (Fed) in September, after digesting the labor market data published this week, which overshadowed a hotter-than-expected inflation reading in August. Oracle led tech gains this week, due to its $300 billion deal with OpenAI. The UK’s economy stagnated in July and China’s exports slowed down in August. However, Deutsche Bank and Barclays do not expect a significant impact of tariffs on the U.S. economic fundamentals.  

In global geopolitics, Israel launched an attack against Hamas leadership residing in Qatar, which was criticized by multiple countries. Russia initiated significant drone attacks on Ukraine over the weekend. Poland invoked article four of the NATO treaty after Russian drones entered Polish airspace. Meanwhile a joint military exercise between Russia and Belarus commenced this week. Violent protests in Nepal precipitated a political crisis and change in government. French President Emmanuel Macron appointed Sebastien Lecornu as the new Prime Minister of France after Francois Bayrou lost the confidence vote in the French national assembly. Japanese Prime Minister Shigeru Ishiba announced his resignation last weekend.

Global Updates
  • The MSCI All Country World Index rose this week, tracking the gains in Wall Street. The Nikkei and U.S. equity market indices touched record highs this week.
  • The European Central Bank held its deposit facility rate steady at 2% for the second consecutive month. 
  • The U.K. economy stagnated in July due to a 0.9% contraction in production which offset the marginal growth in services and construction.  
  • The European Commission has imposed a $3.45 billion fine on Alphabet for anti-trust trade practices. President Trump has threatened the EU with retaliatory actions to protest the fine.
  • Dutch semiconductor company ASML has invested 1.3 billion euros into the French startup Mistral AI. 
  • Vestas Wind’s stock price declined after the U.S. Interior Secretary Doug Burgum’s public statement on not relying on offshore wind for energy consumption. 
  • Ryanair Michael O’Leary has proposed the cancellation of million seats by the next summer in flights to Spain, due to higher passenger taxes. Ryanair has already cancelled 2 million seats to Spain for the coming winter. 
  • The Spanish bank Sabadell’s board has recommended a rejection of BBVA’s $17.97 billion hostile takeover bid due to significant undervaluation, to its shareholders. 
  • Alibaba and Baidu’s stock price rose after the public announcement of the company’s’ deployment of in-house chips to train their AI models. Chinese startup X Square Robot also secured approximately $100 million in funding.
  • China’s export growth slowed to a six-month low of 4.4% annually. The slowdown is attributed to a 33% decline in its exports to the U.S. Rising exports to Asia, Africa and South America could not offset the shortfall in demand from the U.S. 
  • The Japanese tech company SK Hynix’s stock price rose after the company announced the development of its high-bandwidth memory HBM4. 
  • Oil prices declined this week pressured by softening U.S. demand and expected increase in oil supply. OPEC+ plans to increase production and the IEA has projected an increase in global oil supply outpacing earlier expectations. The U.S. has been recommending the E.U.  to impose higher tariffs on India and China to counter their purchase of Russian crude.
U.S. Equity
  • The S&P 500, Nasdaq, and Dow Jones indices rose this week, with the three indices reaching record levels. Equities rose for the third consecutive week reflecting the investor optimism for a rate cut by the Federal Reserve in September. Weakness in the U.S. labor market reinforced the rate cut expectations, overwhelming indications of higher inflation in August. U.S. courts have permitted Fed Governor Lisa Cook to continue while her court trial continues. A U.S. The Senate panel also voted to advance Stephen Miran’s nomination to the Fed’s board of governors. 
  • The U.S. Labor Department has reported a higher-than-estimated weekly unemployment claims of 263,000 for the week ended September 6th, the highest since October 2021. 27,000 claims were filed in the week. Investors have priced in a higher likelihood of a rate cut in September. 
  • The annual consumer price inflation came in hotter-than-expected at 2.9% in August, the highest since January. The Consumer Price index rose by 0.4% month-on-month in August. The core inflation came in at 3.1%.
  • UnitedHealth’s stock price rose after the company estimated the enrollment of 78% of its members in Medicare insurance plans rated 4-star or above. 
  • JPMorgan Chase’s stock gained after double-digit growth was estimated in its third quarter revenues. 
  • Oracle stock rose this week after the company raised its guidance for the cloud infrastructure business due to growing AI demand. The company expects its cloud infrastructure sales to rise by 77% to $18 billion over the fiscal year. Oracle is reported to have signed a $300 billion deal with OpenAI.
  • Shares of Warner Bros. Discovery rose on the news of a possible majority cash takeover bid by Paramount Skydance.
  • Deutsche Bank raised its target for the S&P 500 to 7,000 by the year-end, from its earlier estimate of 6,550. The company expects the economic impact of tariffs to be lower than expected. Barclays has also raised its year-end target to 6,450 from its earlier estimate of 6,050.
  • The shares of Amsterdam-based and Nvidia-backed AI infrastructure company Nebius Group rose following the company’s $19.4 billion deal with Microsoft. 
  • Nokia has announced a tie up with Super Micro Computers to develop AI-optimized networking solutions for cloud computing service providers.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index edged lower this week.
  • The U.S. 10-year Treasury yield declined slightly to 4.038% and the yield on the 2-year note rose slightly to 3.529% over the week.
  • The U.S. Dollar Index depreciated slightly to 97.67 this week.

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