US stocks closed lower in a generally quiet week
Market Summary
Last week, the US closed lower following a holiday-shortened week. The EU and Asian markets also closed lower as anticipation for rate hikes grows.
In US, stocks closed lower in a generally quiet week, with growth stocks holding up slightly better than value shares. Additionally, the release of the Federal Reserve's minutes revealed a hawkish outlook, leading to expectations of interest rate hikes in the near future.
In Europe, markets experienced declines as central banks' potential tightening of monetary policy caused concerns. Mortgage rates contributed to a sharp fall in UK house prices.
Japanese equities retreated from their recent highs, with investors locking in profits, particularly in the technology sector.
Chinese equities declined as economic data raised concerns about the country's post-pandemic recovery. Manufacturing and services activity softened, indicating slower expansion. Premier Li Qiang pledged to implement targeted policies to strengthen the recovery, but no specific measures were outlined.
Major News
Global stocks and bonds were sold off on Thursday as US borrowing costs reached a 16-year high, following stronger-than-expected jobs figures that heightened expectations of further rate hikes by the Federal Reserve. European and Asian markets also experienced significant declines.
The Reserve Bank of Australia (RBA) kept the interest rates unchanged at 4.10% in its July policy meeting, citing the need for more time to assess the impact of previous rate hikes.
China has announced new export restrictions on gallium and germanium, crucial metals used in the production of semiconductors and electronic components. This move escalates the technology trade standoff between China and the US, potentially impacting the supply chain for electronic devices.
What Caught Our Attention
The labour market in the United States is showing signs of strength and tightness. For every unemployed person, there are 1.6 job openings available, a number higher than pre-pandemic era. Additionally, wage growth has been robust, with hourly earnings rising at an annualized pace of 4.4% in June, well above the Federal Reserve's target of 2%. Some alternative measures suggest even higher wage growth, with projections of around 6% for this year.
The strong labour market conditions have led to expectations of an interest rate hike by the Federal Reserve in late July. Markets currently assign a 92% probability to a quarter-point rate increase. The labour market's resilience supports the case for tighter monetary policy, as there is no indication of an abrupt deterioration in labour-market conditions.
Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia
