Weekly Recap Fundamental Analysis: Stock Indices Fluctuate and The Dollar Falls On Concerns Of US Credit Rating Downgrade
Key Takeaways:
Global markets experienced volatility this week with the growing concerns over rising bond yields and fiscal instability, following Moody’s downgrade of the U.S. credit rating.
The U.S. dollar declined against major currencies as investors reacted to fiscal uncertainties in the U.S. and shifting monetary policy expectations.
Oil prices faced downward pressure due to potential OPEC+ supply increases of 411,000 barrels daily.
Global Stock Markets Updates
U.S. stock indices are overall in the red this week. The S&P 500 fell 1.15%, the Dow Jones Industrial Average is down 1.18%, and the Nasdaq is down 0.61%. Investor sentiment was largely affected by the U.S. credit rating downgrade and concerns over long-term government debt after Congress passed Trump’s tax cut bill. .
In European markets also faced pressure due to economic uncertainties. The European Commission cut its eurozone growth forecast for 2025 from 1.3% to 0.9% with the main reason being the impact of trade tensions.
Asian markets also experienced sell-off with Japan’s Nikkei 225 falling 1.10% amid expectations of a potential Bank of Japan rate hike after inflation numbers came out at a 2-year high. Other major indices showed mixed performance with Hong Kong’s Hang Seng rising by 1.92% and South Korea’s Kospi falling by 0.84%
Forex Market Updates
The U.S. dollar fell against major currencies this week. This was in large part due to fiscal concerns and changing monetary policy expectations.
The Japanese yen showed strength this week as rising Japanese government bond yields prompted investors to unwind carry trades, impacting global financial markets.
The British Pound climbed to 1.3500, its highest level against the US dollar since September 2024 thanks to higher inflation in the UK and a weaker US dollar.
Commodities Market Updates
Oil: Oil prices declined this week, with Brent crude falling to $63.53 per barrel and WTI to $60.72. The downturn was driven by expectations of increased OPEC+ output by more than 411,000 bpd. and rising U.S. crude inventories.
Gold: Gold prices experienced volatility with the shifting investor sentiment and continuous currency fluctuations. The precious metal gained 3.56% this week.
Major Economic Calendar Updates
The UK private sector contracted for the second consecutive month raising fears of economic slowdown, as factory output declined at the fastest rate since October 2023. Government borrowing surged to £20.2 billion in April, higher than expectations, which increases pressure for potential tax hikes.
The European Commission reduced its 2025 growth forecast for the eurozone to 0.9% from 1.3%. This change in forecast came as a response to economic uncertainties coming from trade tensions.