US Markets Rattle Amid Escalating Global Uncertainty
Equity markets in the United States ended Tuesday in the red as heightened geopolitical friction, particularly surrounding potential US involvement in the ongoing Israel-Iran conflict, unsettled investors. This elevated sense of risk spurred a flight to safer assets, reflected in lower Treasury yields and a stronger dollar.
Oil prices surged, with West Texas Intermediate crude climbing over 4% to $73.50 a barrel, as fears mounted over possible supply disruptions. Equity indices suffered broad-based losses, the Nasdaq slipped 0.9%, the S&P 500 declined 0.8%, and the Dow Jones lost 0.7%. The energy sector was the only segment in positive territory, while healthcare stocks led the selloff.
Renewable Sector Feels the Heat
Among the hardest-hit were renewable energy stocks such as Enphase Energy and First Solar, both of which plummeted following analyst downgrades and adverse regulatory developments. These moves underline shifting investor sentiment in the green energy space amid changing policy landscapes.
Consumer Spending Falters, But Underlying Strength Persists
US retail sales in May dropped by 0.9%, a sharper decline than expected. The dip was largely attributed to weakened demand for vehicles and construction materials. However, a silver lining emerged from control-group retail sales, which exclude more volatile categories; these figures rose by 0.4%, aligning with forecasts and hinting at resilient household consumption.
Labour Market and Household Balance Sheets Provide Cushion
Discretionary spending on items such as clothing and furniture remained relatively stable. Strong employment figures and robust household balance sheets continue to support core consumer activity, tempering fears of an imminent slowdown.
Fed in Focus: Rate Outlook Remains Pivotal
All eyes are on the Federal Reserve’s policy meeting concluding today. Markets broadly expect interest rates to hold steady, but updated economic projections and any changes in tone from Fed Chair Jerome Powell will be key.
A dovish pivot could open the door to one or two rate cuts in the latter half of 2025, which would provide a much-needed tailwind for both equity and fixed-income markets.
Global Market Recap: Diverging Sentiment Across Regions
Global equity performance showed significant divergence, with Asian, European, and commodity-linked markets reacting differently to escalating geopolitical risks and macroeconomic signals. Here’s a closer look at regional developments.
Asian Markets: Mixed Signals
Asian equities painted a varied picture this morning. Hong Kong’s Hang Seng index dropped over 1% amid the geopolitical fallout, while Japan’s Nikkei 225 gained 0.7% to hit a four-month high, buoyed by a weaker yen. This came despite a significant drop in Japanese exports to the US.
European Markets: Banking Stocks Under Pressure
In Europe, the STOXX 600 fell by 0.8%, with banking stocks shedding 2.3%. Energy and real estate were the only sectors to close in positive territory. Notable losers included UniCredit (-3.6%) and Generali (-1.2%), while Germany’s DAX index retreated 1.1% despite a bounce in investor confidence.
Currency & Commodities: Dollar Firms as Oil Holds Gains
The US dollar remained strong around 98.7, benefiting from safe-haven flows ahead of the Fed’s announcement. The euro weakened to 1.1504 against the greenback, caught between geopolitical risk and soft US economic signals.
Crude Oil Consolidates Gains
Following Tuesday’s sharp climb, oil prices held steady in Asian trading. Concerns over a 10 million barrel inventory draw in the US and escalating Middle East tensions kept prices supported, although sluggish demand data capped further gains.
Stocks on the Move: Key Corporate Developments
A range of corporate headlines shaped individual stock movements this week:
Noteworthy Announcements and Analyst Moves
- Airbus plans to raise its dividend ceiling to 50%, signalling financial strength.
- Salesforce will implement a 6% price hike across key products starting August 1, 2025, while enhancing AI offerings through Slack and new Agentforce add-ons.
- Meta Platforms reportedly offered signing bonuses of up to $100 million to attract AI engineers, although OpenAI confirmed none have accepted.
- Ferrari delayed its second EV launch to 2028 amid weak demand and ongoing R&D.
- Spotify received a $900 price target from Pivotal Research, citing strong user growth and monetisation.
- Nvidia had its price target raised to $200 by Barclays due to strong demand and improved margins.
- Tesla received an Underweight rating from Wells Fargo amid concerns about delivery volumes, cash flow, and margin pressure.
- Qualcomm had its target lowered to $200 by Bank of America, citing smartphone headwinds, but retained a Buy rating due to AI and IoT growth potential.
- SAP was initiated at Overweight by Piper Sandler with a €350 target, highlighting ERP growth and AI monetisation.
- Caterpillar maintained a Buy rating at Bank of America with a $385 price target, driven by energy and infrastructure demand.
- Raytheon secured a $299.7 million contract modification from the U.S. Department of Defense for the SeaSparrow Missile program.
- Vinci reported a 3.3% drop in intercity traffic in May, but saw a 5.3% increase in airport passengers.
- Top U.S. regulators plan to reduce the Enhanced Supplementary Leverage Ratio (ESLR), potentially improving liquidity in the Treasury market.
- Nuclear energy stocks like Oklo, Nano Nuclear, and NuScale Power gained after tax credits were proposed to be extended to 2036.
- Solar stocks declined as tax incentives are set to phase out by 2028.
- Goldman Sachs upgraded XPeng to Buy and Nio to Neutral, citing cost improvements and new product cycles, but warned of growth and debt concerns for Nio.
Upcoming Economic Indicators
Markets are closely monitoring:
- The Federal Reserve’s interest rate decision later today
- Initial jobless claims
- EIA crude oil inventories
Investors are particularly focused on whether the Fed provides hints about a policy pivot, especially amid sustained inflationary pressures and global geopolitical instability. Stay informed and manage your investments smarter with Moneybase.
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