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The week in Global Markets
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A July payroll contraction, large downward revisions and slower wage growth reduced expectations for a September rate hike, pushing yields and the dollar lower. Markets then lifted stocks on hopes that policy could become less restrictive, though upcoming inflation data became the next decisive test.
US-Japan intervention initially deterred yen shorts, but the currency surrendered much of its gain as the underlying rate gap remained unresolved. The episode revived intervention risk and exposed coordination problems among major authorities.
Diplomatic hopes around Iran and the Strait of Hormuz repeatedly lowered oil's geopolitical premium and supported equities, rates and currencies. Stalled arrangements and uncertain shipping kept the risk of renewed energy disruption, inflation and tighter monetary policy alive.
Gold advanced as weaker US data, lower expected rates, a softer dollar, geopolitical risk and central-bank buying reinforced demand. Its gains remain exposed to firmer inflation, stronger payrolls or renewed energy disruption that would lift yields and the dollar.
Higher issuance, interest costs and the US deficit kept long-term Treasury yields elevated even as markets debated smaller auctions and financial engineering. The proposed fixes offered temporary relief but did not close the funding gap or remove pressure on bonds and other assets.
Global equities reached records as softer rate expectations, strong earnings and geopolitical relief supported the advance. Heavy options activity, compressed momentum and very low volatility left markets vulnerable to a reversal if flows or fundamentals deteriorate.
South Korean equities swung from a sharp AI-led rebound to a 5% plunge as global technology weakness exposed heavy dependence on a few chipmakers. Regulatory curbs on leveraged ETFs then redirected speculation toward small caps, reducing some leverage while creating new crowding and reversal risks.
Investors shifted from concentrated hyperscaler leadership toward semiconductors, value and non-US markets while demanding stronger earnings support for the AI rally. More expensive debt financing and concern about AI credit markets increased pressure on companies to prove that infrastructure spending can generate revenue.
Day’s Recap