Fitch downgrades the US government rating, causing a decline in the US market

Market Summary

Last week, stock markets in the United States, Europe and Japan closed lower. Chinese stocks closed higher.

The US equity market experienced a decline due to increasing Treasury yields and a credit rating downgrade of the US government by Fitch Ratings. Amazon outperformed expectations, while Apple's mixed report resulted in stock losses.

In Europe, stocks closed lower amid higher US bond yields and disappointing earnings reports. The Bank of England raised its key interest rate to 5.25%, and UK house prices saw a significant decline.

Japanese stocks fell despite strong corporate earnings, influenced by the Bank of Japan's monetary policy adjustment leading to higher bond yields.

Chinese stocks rose as Beijing introduced measures to boost consumption, but concerns about economic data persisted. The People's Bank of China pledged support for the real estate market.

Brazil's central bank initiated an easing cycle, cutting its benchmark interest rate, and Peru reported positive inflation data.

Major News

Last week, the Bank of England raised its benchmark interest rate by 0.25 percentage points to 5.25% due to a slowdown in consumer-price rises. House prices in Britain fell by 3.8% in July, but the average price remained higher than earlier this year.

The yield on Japanese ten-year government bonds surged to nine-year highs after the Bank of Japan adjusted its "yield-curve control" policy amid rising inflation.

Euro area economy grew 0.3% in Q2, following two quarters of contraction or stagnation. The growth was mainly due to intellectual property adjustments by multinational companies based in Ireland for tax purposes. Germany’s GDP growth remained stagnant, while Italy’s declined by 0.3%. Inflation in the euro area slowed to 5.3% in July, but the service price index reached a record high of 5.6%.

What Caught Our Attention

The S&P 500 had a strong performance in July, resulting in a cumulative gain of 20% for the first seven months of the year. This marks the best January to July streak in 26 years. The rally was largely driven by prominent technology companies such as Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, known as the “Magnificent Seven.”

However, other sectors, notably travel-related shares and cruise lines, also experienced significant growth. The tech-heavy Nasdaq index outperformed, with a 37% increase since the beginning of 2023.

Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia