Contents
Market review
Global markets moved higher overall, though performance remained uneven across regions. US equities led gains, driven by technology stocks and resilient earnings, while Asia and emerging markets lagged amid increased volatility in regional tech names. In fixed income, global sovereign bonds delivered positive returns. UK gilts outperformed as lower oil prices and a less hawkish-than-feared Bank of England supported sentiment, while US Treasuries were more subdued as investors continued to assess the risk of further Fed tightening. Commodity performance diverged, with oil prices falling on easing supply concerns around the Strait of Hormuz, while gold rallied strongly as investors sought safe-haven assets amid geopolitical and policy uncertainty.
Q2 earnings have continued to underpin equity markets, with results exceeding expectations across major regions. US earnings growth is tracking around +25% year-on-year, while Europe has also delivered robust double-digit growth, supported in large part by the Energy sector. Technology remains a key driver globally, with ongoing earnings upgrades across the US and Asia. As expectations rise, investors are increasingly focused on the sustainability of growth.
US data point to continued expansion, but with a softer labour market and persistent inflation pressure. ADP private payrolls rose just 44k in July, while wage growth remained firm. The ISM services index stayed in expansion at 54.1, but prices paid rose to 70.3, highlighting sticky cost pressures. This leaves the Fed facing a more challenging mix of slowing hiring but still-elevated wage and services inflation.
Geopolitical risk also returned later on in the week, with initial hopes of a partial reopening of the Strait of Hormuz offset by later headlines suggesting access could remain conditional. Despite a decline in oil prices over the week, renewed concerns over the Strait of Hormuz triggered a late rebound in crude, underscoring that energy supply risks remain a potential source of market volatility.
In China, the US-China trade truce remains intact, but strategic competition continues to deepen across AI supply chains and advanced technologies. Domestically, softer services activity points to a more subdued consumption backdrop, but external demand remains resilient, with July exports rising 23.9% year-on-year, supported by strong global demand for AI-related technology products.
Outlook
The broader backdrop remains constructive, but near-term dynamics are increasingly driven by central bank policy, incoming data, and the resilience of corporate fundamentals. Markets remain reactive to geopolitical flare-ups and the potential for inflation tail risks, and more hawkish policy rhetoric — particularly from the Fed — may tighten financial conditions and drive intermittent volatility. Encouragingly, structural growth drivers remain intact, with earnings expectations broadly resilient and corporate balance sheets holding up.
Movers table
Equities |
1 Week |
YTD |
1 Year |
|---|---|---|---|
S&P 500 |
2.95% |
13.38% |
23.06% |
FTSE 100 |
0.24% |
11.76% |
23.29% |
Euro Stoxx 50 |
2.31% |
14.32% |
24.65% |
MSCI Asia Pacific ex Japan |
-0.40% |
20.55% |
32.42% |
MSCI China |
0.52% |
-6.84% |
-2.23% |
Source: Bloomberg as at 07:58am on 07/08/2026.
This content has been prepared by M&G Life Investment Office (LIO) for information purposes only and does not contain or constitute investment advice. Information provided herein has been obtained from sources that LIO believes to be reliable and accurate at the time of issue but no representation or warranty is made as to its fairness, accuracy, or completeness. The views expressed herein are subject to change without notice. Neither LIO, nor any of its associates, nor any director, or employee accepts any liability for any loss arising directly or indirectly from any use of this document. The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back less than the original amount invested and past performance information is not a guide to future performance.
‘M&G Life Investment Office (LIO)’ includes the team formerly known as Prudential Portfolio Management Group (PPMG), Prudential Portfolio Management Group Limited, is registered in England and Wales, registered number 2448335.
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