Market Update

US Markets
It was a shortened trading week in the US as markets were closed on Thursday for the 4th of July holiday. Despite the break, US stocks posted solid gains, with the S&P 500 ending the week up nearly 2% and the NASDAQ rising 3.5%. Investors had plenty to digest, as economic data painted a picture of a slowing—though not necessarily weakening—economy, carrying important implications for Federal Reserve policy and market expectations in the months ahead.
In the services sector, mixed signals emerged. The ISM Services Index fell sharply from 53.8 in May to 48.8 in June, its lowest level since the early pandemic lockdowns of 2020 and a move into contraction territory. The decline was driven by steep drops in new orders, business activity, and employment. However, a contrasting survey by S&P Global suggested continued expansion, with its services index ticking up from 55.1 to 55.3.
Labor market data released on Friday aligned largely with expectations. The June jobs report showed a slowdown in employment growth, with 206,000 jobs added, down by 12,000 from the previous month but slightly exceeding forecasts. Wage growth also softened, with average hourly earnings rising by 3.9% year-over-year in June, compared to 4.1% in May, marking the slowest pace in two years. This moderation in wage growth is a welcome sign for Federal Reserve policymakers, as it could help reduce inflationary pressures. The unemployment rate edged up slightly to 4.1%, from 4% in May, reflecting a slight increase in the number of Americans out of work.
UK Markets
In the UK, Sir Keir Starmer’s Labour Party secured a landslide victory in the general election, ending 14 years of Conservative rule. Rachel Reeves made history as the country’s first female Chancellor of the Exchequer. Her leadership will be critical in shaping the UK’s economic policies and addressing financial challenges.
Market reactions to the election result were subdued, with investors taking a wait-and-see approach. Focus now turns to the initial policy steps and direction of the new government, which will be closely scrutinized in the coming weeks. For detailed insights into market responses to the 2024 election, see our July 5th market update.
French Elections
France’s political landscape was thrown into flux after the leftist alliance won the second round of parliamentary elections on Sunday, securing the largest share of seats and blocking the far-right from gaining power. President Emmanuel Macron’s centrist group came in second, while Marine Le Pen’s far-right National Rally placed third.
The fragmented outcome leaves no party with a governing majority, placing Macron in a difficult position as he navigates potential coalition negotiations. Despite this political uncertainty, market reactions have so far remained muted. Investors are likely to keep a close watch as the situation evolves.
Asia-Pacific Markets
Japan continued to support regional markets, with robust economic data lifting sentiment. TOPIX closed up 3.1%, bolstered by strong retail sales growth and improved industrial output in May. Inflation in Tokyo rose 2.1% year-over-year in June, up from 1.9% in May, driven by higher energy prices. This data has heightened speculation about a potential interest rate hike by the Bank of Japan in July.