Commentary
In the US, the S&P 500 saw a slight dip after six weeks of gains, affected by rising Treasury yields and cautious expectations for Federal Reserve rate cuts. Large-cap and growth stocks, particularly tech-heavy Nasdaq components, held up better than small caps. Tesla emerged as the best-performing stock, driving its price up 22% on Thursday — the best single-day gain in over 11 years. Treasury yields climbed and stayed at around 4.20% for the week. The expectations for Fed rate cuts over the next year have gradually reduced to a total of 125bps. Investment-grade corporate bonds softened early in the week, and high-yield bond activity slowed due to higher Treasury yields and economic concerns.
In Europe, the STOXX Europe 600 fell by 1.18% as investors expect that the US Federal Reserve might slow down its pace of monetary easing. Major European indexes also declined, with Italy, France, Germany, and the UK all posting losses. Business activity in the eurozone continued to contract, with the composite PMI slightly edged up to 49.7 but remained below 50, indicating ongoing economic contraction, especially in France and Germany. ECB officials showed openness to lowering rates but expressed differing views on the timing. ECB President supported a cautious approach, while some officials called for more aggressive cuts to counteract weakening growth. In the UK, business activity slowed, with the composite PMI dropping to an 11-month low, and consumer confidence reaching its lowest point this year.
