Second quarter earnings kick off

The S&P 500 and Nasdaq Composite gained 0.6% and 1.5% respectively, both seeing record highs during the week. Meanwhile the Dow Jones Industrial Average lost 0.1%, with markets ending the week on a more cautious note as they weighed up the lingering tariff uncertainty. Amongst those reporting earnings, many big banks saw an increase in investment banking revenues, helped by a rebound in dealmaking. Netflix shares declined even after the streaming giant raised its full-year revenue guidance.

There was some pressure on markets during the week after President Trump renewed his attack on Jerome Powell, threatening to fire him as Federal Reserve chair. In response, stocks, the US dollar and long-dated Treasuries sold off while gold jumped. This however proved short-lived with Trump backtracking to say he would not fire him, although he renewed his criticism over his lack of rate cuts. For the week the 10-year Treasury yield ended slightly higher at 4.43%. Yields had also moved higher in response to the latest inflation report in which the consumer price index rose 0.3% month-on-month in June, an early indicator of tariff impact starting to creep in.

European equity markets ended little changed for the week, as investors parsed through earnings reports and were cautious over progress in EU-US trade talks. The pan-European STOXX 600 closed marginally below the flatline, with industrials the best performing sub-sector while automobiles lagged. Amongst regional indices, the Italian FTSE MIB and the UK FTSE 100 both added around 0.6%. The latter managed to benefit from a weaker pound and managed to briefly break above 9,000 for the first time.

In Japan, the Nikkei 225 added 0.6% despite uncertainty ahead of the election in the Upper House on 20 July. Heading into the election the coalition government looked set to lose its majority, and indeed this turned out to be the case. In China the Shanghai Composite advanced 0.7%, while the Hang Seng outperformed, gaining 2.8%. Economic data was in focus, with China’s economy expanding 5.2% in the second quarter from a year ago, better-than-expected by slowing from the previous quarter’s pace. While this figure may reduce pressure on the government to enact new stimulus measures, housing data remained weak so there may still be a case for giving the economy a boost.

The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.