Bullish and Bearish Signals Clash in a Tug-of-War Across Global Markets

Financial market performance came in in mixed and uncertain for July, with markets across the globe exhibiting both bullish and bearish sentiment. Meanwhile, a number of factors continued to pull markets in different directions, including economic indicators, central bank monetary policies, geopolitical tensions, and the upcoming U.S. presidential election.

In the Middle East, geopolitical risks continued to affect oil prices, commodities, indices and currency markets, adding another layer of complexity to the global market landscape. Collectively, these influences shaped and drove prices for global markets throughout July, leading to mixed and uncertain equity, bond and currency signals.

Bond Markets, Metals, and the Fed

Non-ferrous base metals like copper continued their bearish decline, breaching June 2024 lows to reach fresh new depths. Meanwhile, gold and silver prices both began to come off their weekly highs, signaling a potential bearish headwind in the global precious metals market.

On the other hand, global bond markets remained relatively stable, with some regional variations. In Europe, a mid-year outlook by BlackRock indicated a neutral stance on several government bonds due to rising fiscal challenges and budget deficits. However, they remained attractive due to their high potential and favorable valuations compared to high-yield U.S. bonds.

Speaking of which, the U.S. bond market showed minor adjustments to the Federal Reserve’s policy stance. The 10-year treasury yield hovered around 4%, reflecting investor and trader speculation of future rate hikes tempered by mixed economic signals. Meanwhile, the two-year yield curve continues to hover around 4.85% and 5.05%, showing the market may be anticipating more potential hikes. Additionally, the 30-year yield curve edged slightly higher, reaching around 4.2% as longer-term inflationary expectations remain anchored.

Dow Jones Climbs as Tech Stocks Stumble

Prices for U.S.-based markets, such as the Dow Jones Industrial Average, saw modest increases due to robust corporate earnings and the relative easing of inflationary pressures and fears. That said, the S&P500, along with the tech-heavy NASDAQ Composite Index, faltered this past month. These relative declines mainly stemmed from commercial real estate uncertainties and pressures surrounding Federal Reserve monetary policies.

For its part, the Fed’s decision to hold and maintain interest rates steadily while hinting at possible future hikes created a cautious outlook among investors. This uncertainty also contributed to rising trade tensions with China, which remains a primary driver of current market volatility.

Currency Markets as Economic Indicators

Among global marketplaces, currency markets reflected and indicated broader economic and geopolitical trends. While the U.S. dollar remains robust due to strong economic data, the euro and British pound faced bearish headwinds and pressure due to weaker-than-expected economic data and political uncertainty.

The yen continues to demonstrate mixed signals in the global foreign exchange market as the Bank of Japan speculates on hiking interest rates in its upcoming meeting. On the other hand, Japan’s core consumer price index, or CPI, did manage to rise slightly for the month.

Commodities markets were also influenced by global economic conditions and geopolitical tensions. For example, oil prices experienced significant volatility due to supply concerns and fluctuating demand forecasts. Meanwhile, precious metals faltered and began declining from their weekly highs, with gold now trading below $2,400/oz and silver below $30/oz.

Mixed Feelings Continue Regarding the Rest of 2024

Overall, July 2024 saw mixed performances across global financial markets. While some regions showed resilience, others faced significant challenges due to economic data, central bank policies and geopolitical tensions. Throughout the month, investors navigated these complexities cautiously, balancing between potential growth opportunities and risks associated with ongoing uncertainties.

As the year progresses, market participants will likely continue closely monitoring economic indicators and policy decisions so that they can adjust their strategies accordingly.