Geopolitical and macroeconomic conditions continue to pressure market sentiment

The US stock indices ended Friday’s session in the red. By the end of the day, the Dow Jones Index (US30) fell by 0.77% (weekly: -1.01%). The S&P 500 Index (US500) declined by 1.01% (weekly: -1.19%). The tech‑heavy Nasdaq (US100) closed Friday in the red at 1.49% (weekly: -2.98%). The main driver of the sell‑off was the semiconductor sector, where investors began to doubt the sustainability of capital expenditures on AI infrastructure, additionally fearing competition from new Chinese developments such as Moonshot’s Kimi model. Shares of key industry players, including Nvidia, Broadcom, AMD, and Intel, posted solid declines, marking a correction after a significant rally earlier this year.

Preliminary University of Michigan data for July 2026 indicated a noticeable improvement in consumer sentiment, which rose to 54.4 points, significantly exceeding market expectations. Nevertheless, current sentiment levels remain 12% below last year’s readings, as overall inflationary pressure continues to burden household budgets.

Geopolitical and macroeconomic conditions continue to pressure market sentiment. Renewed tensions in the Middle East have triggered rising fuel prices, once again raising concerns about inflation risks. The situation is further complicated by political rhetoric: President Trump’s accusations against China regarding the 2020 election have undermined the stability of trade relations.

The Mexican peso (MXN) weakened to 17.52 per dollar, correcting after recent strengthening to 17.40 amid a global rise in risk aversion. Investors prefer the US dollar as a safe‑haven asset due to the escalation of the Middle East conflict. The situation for the national currency is further complicated by weak May industrial‑production figures, which showed a broad‑based decline, indicating signs of slowing economic activity in the country.

European indices closed Friday higher. By the end of the day, Germany’s DAX (DE40) fell by 0.34% (weekly: -0.53%), France’s CAC 40 (FR40) closed down 0.47% (weekly: +0.39%), Spain’s IBEX 35 (ES35) declined by 0.45% (weekly: -0.46%), and the UK’s FTSE 100 (UK100) closed up 0.27% (weekly: +0.97%). European stock indices ended Friday’s session with notable declines, reflecting global investor pessimism about the outlook for the artificial‑intelligence sector. As a result, shares of giants such as ASML and Siemens posted significant losses. Geopolitical tensions and rising natural‑gas prices created additional pressure on the banking sector, intensifying concerns about inflation risks and declining credit activity.

Crude‑oil prices (WTI) reached a monthly high, surpassing $84 per barrel amid rapid escalation of the Middle East conflict. Over the week, oil prices surged more than 14% after Iran’s retaliatory strikes on targets in Bahrain, Jordan, Kuwait, Oman, Qatar, and Syria in response to a series of US attacks. The situation is complicated by reports of damage to a power plant and desalination facility in Kuwait, as well as Tehran’s threats to deploy Houthi forces to block the Red Sea if strikes on Iranian energy infrastructure occur.

On Friday, Japan’s Nikkei 225 (JP225) fell sharply by 4.03% (weekly: -6.24%), China’s FTSE China A50 closed down 3.33% (weekly: -2.83%), Hong Kong’s Hang Seng (HK50) declined 1.78% (weekly: +1.67%), and Australia’s ASX 200 (AU200) closed down 0.50% (weekly: 0.0%).

Hong Kong’s labor market showed resilience in Q2 2026: the unemployment rate remained at a ten‑month low of 3.7%. Overall employment improved: an influx of labor resources increased total employment to 3.6 million people, while the number of unemployed decreased by 1,400.

The offshore yuan (CNY) on Monday held near 6.77 per dollar, staying close to weekly lows amid geopolitical instability and Beijing’s monetary decisions. Market sentiment remains highly sensitive to Middle East escalation: after new US airstrikes on Iran over the weekend, Tehran officially announced its withdrawal from the ceasefire with Washington, increasing global uncertainty. Domestically, the People’s Bank of China maintained stability, keeping the one‑year and five‑year Loan Prime Rates (LPR) at 3.0% and 3.5%, respectively. The regulator has kept them at record lows for 14 consecutive months despite mixed macroeconomic indicators in Q2.

The New Zealand (NZD) dollar shows confidence, reaching a six‑week high at $0.585. The main driver of growth is market expectations ahead of the upcoming CPI report. Projections indicate that annual inflation in Q2 may reach or exceed 4%, a two‑year high, largely due to rising fuel costs. Such an inflation spike virtually guarantees continued tightening by the Reserve Bank.