Markets rebound as US yields and policy outlook remain in focus

US shares managed a modest Friday rebound, trimming the week’s losses as fresher economic data eased some near-term concerns. The S&P 500 edged up 0.40%, the Nasdaq 100 gained 0.30% and the Dow added 518 points, helped by a report showing US business activity expanding at its quickest pace since 2022. Even so, investors remained cautious after a sharp rise in long-dated Treasury yields, driven by inflation concerns, heavy debt issuance and fiscal worries. Long-term US yields climbed after Fed Chair Kevin Warsh suggested a rate hike may not be his preference for curbing inflation, heightening the focus on the upcoming Jackson Hole speeches.

Hyperscalers advanced, with Alphabet increasing by 1.10%, Microsoft gaining 0.40% and Meta rising 0.80%. Chipmakers traded mixed: Nvidia fell 1%, Micron lost 0.80% and Intel retreated 2.20%. Walmart slid more than 10% over the week after an uncommon earnings miss dented its outlook and sparked concerns about US consumer resilience amid higher fuel prices and tighter budgets.

European markets ended the week strongly, due to gains in the big banks and in the luxury stocks, even though the main indexes still experienced losses for the week. The Euro STOXX 50 increased by 0.60% to 6 458 and the STOXX Europe 600 rose by 0.50% to 653. The recovery was helped by banking shares, with Santander advancing by 2.70%, with BNP Paribas, Deutsche Bank, BBVA, and Nordea each gaining more than 1%. The sector had experienced greater volatility earlier in the week because comments from the US Treasury about possible intervention in bond markets had increased the uncertainty surrounding benchmark borrowing costs. Luxury shares also provided support, with LVMH, Adidas, Hermès and Ferrari rising between 1.50% and 2.30%.

However, despite Friday’s positive session, the Euro STOXX 50 ended the week 1.30% lower, while the STOXX Europe 600 declined 0.60%. In the UK, the FTSE 100 rose 0.60% on Friday, extending its winning streak to six sessions and ending the week with a gain.

Asian markets closed mixed on Friday, capping a largely weaker week as persistent pressure from rising global bond yields and oil prices at one-month highs, driven by tensions in the Persian Gulf, weighed on sentiment. Japan’s Nikkei 225 fell 0.30% to close at 66 016.36, pressured by higher US and domestic bond yields, as well as concerns over rising import costs linked to elevated crude oil prices. Hong Kong’s Hang Seng Index gained 1.21% to finish at around 26 009.46, supported by strength in basic materials shares and positive corporate earnings. Meanwhile, mainland China’s Shanghai Composite edged 0.04% higher to close at 3 905.20, as investors assessed fresh policy signals from Beijing.

South African markets closed sharply higher on Friday, supported by a surge in gold prices, a weaker US dollar and improved sentiment towards emerging markets following the US Treasury’s announcement of a bond buyback. The FTSE/JSE All Share Index gained 1.81% to close at 117 747.80, while the FTSE/JSE Top 40 Index advanced 2.07% to 110 387.07. Resource and mining shares were among the strongest performers, providing significant support to the market throughout the trading session. The rand strengthened 0.68% against the US dollar to trade at R16.01.

Crude oil remained broadly unchanged trading at around $94 a barrel on Friday as investors weighed conflicting signals surrounding the conflict between Iran and the US. Hopes that Iran may be seeking an end to the war offered some relief, although the prospect of tougher US sanctions kept geopolitical risks elevated. Despite Friday’s muted trading, oil gained more than 5% for the second consecutive week. Gold, meanwhile, climbed above $4 600 an ounce, its highest level since mid-May, extending its weekly gain to around 5%.