This week's global market update highlights the volatility in U.S. markets, mixed signals from Europe, Japan's market stabilization efforts, and China's economic data. Additionally, key developments in Brazil and India are covered.
United States
The major indexes closed modestly lower for the week after recovering from the biggest sell-off in nearly two years. The S&P 500 Index neared correction territory (down over 10%) on Monday morning, when it fell as much as 9.71% from its intraday high in mid-January; around the same time, the Nasdaq Composite was down 15.81% from its peak, after entering a correction the previous Friday. The CBOE Volatility Index (VIX) briefly spiked Monday to 65.73, its highest level since late March 2020, before falling back to end the week at 20.69.
- Technical factors and programmed trading strategies contributed to market swings.
- Japanese short-term interest rate increases led to a partial unwind of the carry trade.
- Short covering and stock buybacks provided support.
- The summer vacation season may have exacerbated volatility.
Market Indexes Changes
| Index | Friday's Close | Week's Change | % Change YTD |
|---|---|---|---|
| DJIA | 39,497.54 | -239.72 | 4.80% |
| S&P 500 | 5,344.16 | -2.40 | 12.04% |
| Nasdaq Composite | 16,745.30 | -30.86 | 11.55% |
| S&P MidCap 400 | 2,935.55 | -12.46 | 5.54% |
| Russell 2000 | 2,080.92 | -28.39 | 2.66% |
Europe
In local currency terms, the pan-European STOXX Europe 600 Index clawed back sharp losses from earlier in the week to end 0.27% higher. Major stock indexes were mixed.
- Germany’s DAX gained 0.35%, and France’s CAC 40 Index added 0.25%.
- The UK’s FTSE 100 Index was little changed.
- Italy’s FTSE MIB fell 0.74%.
- Eurozone government bond yields broadly rose.
Retail Sales Suggest Eurozone Consumers Struggling
Retail sales volumes in the eurozone unexpectedly declined 0.3% sequentially in June after increasing 0.1% in May. This weakness reflected a drop in the sales of food, drinks, and tobacco.
Some Relief for German Industry; Trade Surplus Shrinks
- German industrial output in June rose 1.4% sequentially, while industrial orders increased by 3.9%.
- The foreign trade surplus declined to EUR 20.4 billion in June from a revised EUR 25.3 billion in May.
UK Housing Market Mood Strengthens
- Housing market sentiment turned cautiously positive in July.
- Royal Institution of Chartered Surveyors reported the strongest level of expected sales since January 2020.
- Halifax reported house prices rose 0.8% sequentially in July.
Japan
Japan’s stock markets started the week with the most severe one-day sell-off in decades, driven by a rebounding yen on the back of the Bank of Japan’s (BoJ’s) hawkish turn at its July meeting.
- Nikkei 225 Index and the broader TOPIX Index were down 2.5% and 2.1%, respectively.
Central Bank Comments Help Stabilize Markets
- BoJ Deputy Governor Shinichi Uchida's comments reduced the likelihood of a near-term hike.
- The yen weakened following Uchida’s comments.
- Yield on the 10-year Japanese government bond fell to 0.86% from 0.98%.
Economic Data
- June wage growth surprised to the upside, with headline wages rising by 4.5% year on year.
- Scheduled earnings also moved higher.
China
Chinese stocks retreated as a stronger-than-expected increase in consumer prices failed to offset concerns about deflationary pressures.
- Shanghai Composite Index fell 1.48% while the blue chip CSI 300 gave up 1.56%.
- Hong Kong's Hang Seng Index gained 0.85%.
Economic Indicators
- China’s consumer price index rose 0.5% in July from a year earlier.
- Core inflation rose 0.4%, narrowing from 0.6% in June.
- Producer price index fell 0.8% from a year ago.
- Caixin/S&P Global survey of services activity edged up to 52.1 in July.
Exports Point to Softer Global Demand
- Imports exceeded forecasts in July, rising 7.2% from a year earlier.
- Exports rose a lower-than-expected 7% in July.
- Overall trade surplus was USD 84.65 billion, down from USD 99.05 billion in June.
