Global markets moved into a defensive mode ahead of the weekend as two major concerns dominated investor sentiment. The escalation of the Middle East conflict continued to fuel uncertainty, while a sharp selloff in technology shares spread across equity markets worldwide. The US dollar traded mixed but generally stronger and appeared set to end the week on a firm footing. Japan’s finance minister warned that authorities could take “decisive action” if needed, though the yen showed little reaction and remained one of the weakest major currencies. In the UK, investors focused on the upcoming change in government leadership and the possibility of a market-friendly Chancellor, which helped support demand for Gilts.
Asia Pacific Markets
Asian markets experienced heavy losses as the technology-sector downturn intensified. Japan’s Nikkei 225 fell 4%, while the main equity benchmarks in Taiwan and South Korea dropped more than 6.25%. China’s CSI 300 declined 3.6%. Currency markets were also active. The dollar traded near one-week highs against the yen, reaching JPY162.55 yesterday and remaining above JPY162 today despite official warnings from Tokyo. The Australian dollar weakened to a three-day low near $0.6965 after recently touching its highest level since late June. Meanwhile, the offshore yuan came under pressure as the dollar advanced above CNH6.78, while the People’s Bank of China lifted its daily reference rate after setting a new three-year low the previous day.
European Markets
European financial markets reflected the broader risk-off environment. The euro lost ground after failing to sustain gains made earlier in the week, trading above $1.1430 but struggling to move significantly beyond $1.1450. Sterling also retreated after a strong rally, falling from nearly $1.3560 to around $1.3435 as investors awaited confirmation of the next UK Chancellor. Government bonds outperformed, with UK Gilt yields leading declines across the region. Economic data showed the eurozone current account surplus improved to €25.1 billion in May from a revised €17.5 billion in April. Equity sentiment weakened as the Stoxx 600 snapped a three-day advance and moved lower on the week.
American Markets
US markets remained under pressure as investors prepared for a busy economic calendar and continued fallout from the technology selloff. Nasdaq futures pointed to another sharp decline, falling around 1.75%, while S&P 500 futures lost nearly 1%. Treasury yields eased, with the benchmark 10-year yield slipping to about 4.52%, roughly 10 basis points below last week’s level. In commodities, gold recovered slightly after dropping below $3,970 earlier in the week but continued to hover near the $4,000 mark, while silver extended losses to fresh yearly lows. Oil prices remained elevated, with August WTI trading near $80.70 ahead of what market participants viewed as an unpredictable weekend shaped by geopolitical risks.