Market Update

US Market Performance
The S&P 500 closed the week lower as Big Tech and AI stocks extended their sell-off despite posting better-than-expected profit growth. Investors continued shifting capital into smaller companies, reflecting a rotation away from tech-heavy sectors.
Disappointing earnings reports weighed on sentiment earlier in the week. Tesla saw its shares plummet by over 12% after releasing its Q2 results on Wednesday. Despite maintaining its leadership in the electric vehicle market, concerns about the company’s growth trajectory sparked the decline.
Similarly, Alphabet’s stock fell 5%, even after exceeding analysts’ expectations. The company’s aggressive investments in artificial intelligence have raised investor concerns about near-term profitability, underscoring the market’s cautious approach to high spending amid economic uncertainty.
As other major players prepare to announce their earnings, the market will closely watch whether these setbacks reflect broader industry challenges or isolated missteps.
UK Market Highlights
In contrast, UK markets ended the week on a positive note. The FTSE 100 rose 1.59%, bolstered by strong private sector performance. Data revealed that the UK private sector has now expanded for nine consecutive months, consistently remaining above the critical 50-point threshold.
July saw new business growth reach its highest level in over a year, driven by the fastest manufacturing growth in two years and a robust inflow of new orders. The Composite PMI increased to 52.7 in July, up from 52.3 in May and slightly exceeding expectations.
Optimism among businesses in both manufacturing and services paints a bright outlook for the UK economy. This positive momentum contrasts with the euro zone, where the Composite PMI dropped to 50.1 from 50.9, missing forecasts and highlighting regional disparities.
US Economic Insights
US economic data provided a boost to sentiment later in the week. Q2 GDP grew at an annualized rate of 2.8%, surpassing expectations of 2% and significantly outpacing the 1.4% growth recorded in Q1.
The Federal Reserve’s Personal Consumption Expenditures (PCE) Price Index, released on Friday, added to the optimism. The Fed’s preferred inflation gauge rose 0.2% month-over-month in June, exceeding expectations of a 0.1% increase. Annually, core PCE inflation held steady at 2.6%, unchanged from May.
This combination of steady inflation and robust economic growth suggests resilience in the US economy, bolstering market confidence and potentially influencing the Federal Reserve’s monetary policy direction.
Global Central Bank Outlook
The coming week will feature key decisions from major central banks, beginning with the Bank of Japan (BoJ). While no immediate policy changes are expected, markets will pay close attention to any hints of future interest rate hikes.
Midweek, the spotlight shifts to the Federal Reserve. Recent mixed economic data makes the Fed’s decision particularly uncertain, and investors will scrutinize Chair Jerome Powell’s remarks for clues about the central bank’s future policy trajectory.
The week concludes with the Bank of England’s (BoE) interest rate announcement on Thursday, August 1st. Analysts are split on whether the BoE will lower rates by 0.25%, from 5.25% to 5%, or delay action until September. A rate cut could provide welcome relief to households and businesses, easing borrowing costs amid ongoing economic pressures.