USA
The S&P 500 Index continued to climb to record highs, although the market’s gains remained notably narrow. As measured by Russell 1000 indexes, growth shares outperformed value stocks by 415 basis points (4.15 percentage points), while the small- and mid-cap benchmarks recorded losses.
Expectations for lower interest rates, fed by signs of weakening growth and easing inflation pressures, seemed to remain a major factor in favoring growth stocks by placing a lower implied discount on future earnings. On Monday, the Institute for Supply Management (ISM) posted its lowest reading of manufacturing activity (48.5, with levels below 50.0 indicating contraction) since February. A separate reading also showed a surprise contraction in construction activity.
Europe
STOXX Europe 600 Index ended 1.01% higher. Political jitters eased as the far right in France failed to win an outright majority in the first round of legislative elections on June 30. Meanwhile, the Labour Party won the UK general election on July 4 with a large majority. Major stock indexes also rose, with France’s CAC 40 Index climbing 2.62%, Germany’s DAX gaining 1.32%, and Italy’s FTSE MIB putting on 2.51%. The UK’s FTSE 100 Index added 0.49%.
Japan
Japan’s stock markets gained ground, with the Nikkei 225 Index climbing 3.36% and the broader TOPIX Index advancing 2.65% in local currency terms. Both indexes hit all-time highs during the week, propelled in part by weakness in the Japanese yen, which is typically a tailwind for export-focused industries. The yen strengthened a bit later in the week.
The yield on Japan’s 10-year sovereign bonds climbed to about 1.1%—its highest level since 2011—before easing somewhat with U.S. Treasury yields later in the week.
China
Chinese equities fell as underwhelming manufacturing data reinforced concerns about the slowing economy. The Shanghai Composite Index and the blue chip CSI 300 both registered modest losses for the week. In Hong Kong, the benchmark Hang Seng Index gained 0.46% during a holiday-shortened week.