Global markets were shaped last week by uncertainty over the Middle East conflict, key central bank rate decisions and violent swings in tech stocks. This week, all eyes are on the US nonfarm payrolls data due on Friday.
Middle East tensions rattle markets
The week began with Iran’s statements on talks with Oman about the Strait of Hormuz, raising hopes that regional tensions could ease. But Iran’s attack on Jordanian forces and US President Donald Trump’s threat to hit Iran “very hard”, followed by a fresh wave of strikes on Iranian military targets, showed the sides remain far from a deal and reignited geopolitical uncertainty.
Fed decision and a jump in long-term yields
The US Federal Reserve held its policy rate steady at 3.50–3.75 percent, in line with expectations. The decision passed by a 9-3 vote, with Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan dissenting in favour of a 25-basis-point hike.
Fed Chair Kevin Warsh stressed after the decision that the central bank would not compromise on its inflation target and remained committed to price stability. Yet the dissenters’ lack of a concrete roadmap stoked concern that the Fed might not be aggressive enough in fighting inflation.
That perception drove long-term yields sharply higher. The 30-year US Treasury yield hit 5.28 percent, its highest in 19 years, while the 10-year note ended the week up 6 basis points at 4.72 percent. The dollar index fell 1.7 percent to 99.7.
US economy grows below expectations
The US economy grew 1.5 percent in the second quarter, missing forecasts. The Fed’s preferred inflation gauge, the personal consumption expenditures price index, slipped 0.1 percent month-on-month in June but rose 3.7 percent year-on-year. Slowing consumer spending and soft growth bolstered hopes that the Fed can keep rates on hold for longer.
Over the week, spot gold slipped 0.2 percent to $4,046 an ounce and October Brent crude futures dropped 4.1 percent to $87.9 a barrel.
Earnings optimism lifts New York stocks
Wall Street had a positive week as earnings generally beat expectations and tech shares rallied. Optimism that companies’ hefty AI spending will pay off pushed indices higher. The Dow Jones added 1.04 percent, the S&P 500 rose 1.05 percent and the Nasdaq climbed 1.59 percent.
European bourses buoyed by results, BoE holds
European equities also had a positive week, helped by strong corporate earnings. The Bank of England kept its policy rate at 3.75 percent, with three members voting for a 25-basis-point increase. Governor Andrew Bailey said inflation was falling faster than expected but warned that the Middle East war was keeping energy prices elevated.
Eurozone second-quarter GDP grew 0.4 percent quarter-on-quarter and 1 percent year-on-year, beating forecasts. July consumer prices rose 0.2 percent from the month before and 2.9 percent annually, also above expectations. The UK’s FTSE 100 gained 1.23 percent, Germany’s DAX 40 advanced 2.11 percent and France’s CAC 40 added 1.64 percent.
Asian tech swings and BoJ
Asian markets had a mixed showing amid sharp swings in technology shares. SK Hynix fell 2.33 percent on the week as record revenue and operating profit still fell short of expectations, stoking concern that AI demand may be cooling. In contrast, Samsung’s strong results lifted its stock 5.2 percent.
The Bank of Japan kept its policy rate at 1 percent; one member voted for a hike. The yen strengthened, falling 3.7 percent to 157.6 per dollar – its steepest weekly drop since February 2024. The Nikkei 225 slipped 0.39 percent, while China’s Shanghai Composite rose 0.47 percent and Hong Kong’s Hang Seng surged 3.69 percent.
Domestic focus on inflation data
On the home front, the BIST 100 index in Istanbul ended the week 3.48 percent lower at 13,458.10 points. The lira weakened 0.4 percent to 47.5280 per dollar. Next week brings the CPI report on Monday and the foreign trade balance on Tuesday.
Economists in the AA Finans survey expect the CPI to rise 1.82 percent month-on-month in July, which would bring the annual rate down from 32.11 percent in June to 31.80 percent. Their average year-end inflation forecast stands at 29.55 percent.
Key data ahead
In the US, Monday brings the manufacturing PMI, Tuesday the JOLTS job openings and factory orders, Wednesday the services PMI and ISM services index, Thursday weekly jobless claims and Friday the nonfarm payrolls and unemployment rate.
Europe will see manufacturing PMIs on Monday, services PMIs and producer prices on Wednesday, German factory orders on Thursday and industrial production on Friday. In Asia, China’s manufacturing and services PMIs are on the calendar.
