Kicking off earnings from the Magnificent 7 group were Alphabet and Tesla, with both detailing higher spending plans, raising worries around whether they are overspending. Sentiment around tech has been fragile recently, and in a further test this week we will see earnings reports from Amazon, Meta and Microsoft. With this, the tech-heavy Nasdaq Composite led losses, dropping 2.1% for the week, the S&P 500 fell 0.6% and the Dow Jones Industrial Average was down 0.4%.
Oil prices were in focus due to the geopolitical developments. On Thursday Brent crude surged above $100 a barrel for the first time since May. This came after a new round of US strikes on Iran, as well as Houthis attacking tankers in the Red Sea, raising concerns around oil supply. While prices stabilised the following session, dropping back below $100, for the week Brent gained 10%. This stoked inflation concerns which in turn raised the possibility of an interest rate hike. The Federal Reserve meets this week, in which markets see a one-in-three chance of a hike. Meanwhile Treasury yields pushed higher, with the 10-year yield ending at 4.68%, having risen to its highest level since January 2025 on Thursday.
European markets also logged a steep loss on Thursday amid the oil surge, but overall for the week the STOXX 600 index ended up 0.6%. The index found support in strong corporate earnings updates as well as upbeat purchasing managers’ index readings. This came despite the US imposing fresh tariffs on a number of trading partners including the European Union. The European Central Bank left its interest rates on hold, although comments from President Christine Lagarde suggested the central bank remained open to a possible hike in September. Similar to the US, European bonds jumped over the week. The German 10-year yield touched its highest level since 2011, France’s 10-year yield crossed 4% for the first time since 2009 and the UK equivalent closed above 5% for all five sessions, its longest streak since 2008.
Japanese markets were closed on Monday, but managed to surge over 3% on their return as investors tried to buy back in following the previous week’s sell-off in which it had fallen into correction territory. As the week progressed the early gains were pared back amid the tech stock volatility as well as rising oil prices. Overall, the index saw a 0.7% gain for the week. The 10-year Japanese government bond ended at 2.8%, with consumer price index data reinforcing expectations for the Bank of Japan to hike rates at some point this year. The yen weakened to its lowest level against the US dollar since November 1986, with officials reiterating the government was ready to act if necessary. Similar factors influenced Chinese equity markets for the week but the major indices managed to log gains. Technology stocks managed to get a boost from announcements of some state-backed purchases.