Weekly market report: July 2, 2024

USA

Prior to the release of second-quarter earnings reports, there appeared to be a slight lull in market activity during the week when most U.S. stock indexes registered increases.

The best-performing equities were those of small-cap firms and IT, with growth stocks surpassing their value counterparts. Part of this week's action might have been the result of investors watching those indexes changing their positioning, as index provider FTSE Russell was scheduled to rebalance its series of Russell indices after the close on Friday.

The core personal consumption expenditures (PCE) price index for May was released by the Bureau of Economic Analysis on Friday morning. The data indicated a 0.1% increase in prices, excluding food and energy, from April. Since the Fed prefers to use Core PCE to estimate inflation, markets welcomed the slowdown from April's upwardly revised 0.3% pace as a sign that a rate drop in September was now more plausible.

Yields on longer-term Treasuries increased over the course of the week. Heightened expectations for a September Fed rate cut led to a slight decrease in short-term Treasury yields, resulting in a steeper yield curve.

Europe

STOXX Europe 600 Index ended 0.72% lower amid heightened political uncertainty in France as the snap election called by President Emmanuel Macron approaches. Major stock indexes were mixed. Germany’s DAX rose 0.40%, Italy’s FTSE MIB fell 0.46%, and France’s CAC 40 Index lost 1.96%. The UK’s FTSE 100 Index eased 0.89%.

Eurozone government bond yields rose ahead of inflation prints in the eurozone and the U.S. Comments from European Central Bank officials leaning toward a more cautious approach to cutting interest rates this year added upward pressure on yields.

Japan

Japan’s stock markets rose over the week, with the Nikkei 225 Index gaining 2.6% and the broader TOPIX Index up 3.1%, as historic weakness in the yen continued to support the country’s export-heavy industries. The Japanese currency hovered around its lowest levels in 38 years, falling to around JPY 160.6 against the USD from JPY 159.7 at the end of the previous week.

The yield on the 10-year Japanese government bond rose to 1.06%, from 0.97% at the end of the prior week, on growing anticipation of further monetary policy tightening by the Bank of Japan (BoJ).

China

A light economic calendar combined with worries about the slowing economy caused Chinese stocks to fall. Hong Kong's benchmark Hang Seng Index fell 1.5%, while the Shanghai Composite Index and the blue-chip CSI 300 Index saw minor weekly drops.

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