Global Markets Brace for Sharpest Weekly Slide Since July as Dollar Weaken rallies

Global Markets Brace for Sharpest Weekly Slide Since July as Dollar Weakens

By Dhara Ranasinghe and Wayne Cole

Market Trends and Economic Variables Shaping World Equity Performance

LONDON, Aug 21 (Reuters) – Market participants anticipated a steepest decline in global equities over the week since mid‑July, driven by persistent strain in bond markets and geopolitical friction in the Gulf that pushed oil prices to one‑month highs, keeping inflation concerns at the fore.

Equity Movements and Treasury Yields

European stocks and U.S. equity futures advanced, yet risk appetite remained tempered by a softer dollar. U.S. 30‑year Treasury yields resumed climbing after Treasury’s surprise intervention on Wednesday, offering only a fleeting respite from selling spurred by inflation worries and fiscal pressures.

The lift followed Treasury Secretary Scott Bessent announcing potential further repurchase programmes and suggesting that fiscal consolidation was on the agenda.

Fiscal Policy and Debt Dynamics

Analysts doubted that sufficient deficit‑cutting could be achieved, given the current budget gap exceeds six per cent of GDP and interest charges already hit $1.2 trillion this year, while the debt ceiling has just surpassed $40 trillion.

Meanwhile, the dollar hovered near Thursday’s three‑month low, falling 1 % against major currencies during the week.

Market Sentiment and Expert Viewpoints

“The initial Treasury buy‑back was surprising, but the real question is whether it will have lasting impact,” said Christian Hantel, head of global corporate bonds at Vontobel.

“We’re watching to see if the market will test higher levels beyond the $4 billion announced so far. It could be an interesting couple of days.”

The 30‑year yield traded around 5.25 %, while the 10‑year hovered at 4.70 %. The consensus now places 5.30 % as the pain threshold for Treasury, echoing the 160‑yen benchmark for Japanese policymakers.

Rising yields increase global debt costs—a challenge for tech giants heavily leveraged for AI capex and for companies climbing discount rates that pressure valuations.

Regional Equity Performance

The Nikkei fell 0.3 %, taking weekly losses to nearly 4 % and setting the stage for the steepest week‑long dip since mid‑July. South Korean and Taiwanese markets edged higher but posted negative weekly returns.

European indices steadied, yet the STOXX 600 tying the sharpest weekly fall since early July dropped roughly 1 %. MSCI’s world equity index also poised for its steepest weekly decline since mid‑July.

On Wall Street, a robust earnings 함께 season offered support, with S&P 500 futures up 0.3 % and Nasdaq futures rising 0.6 %.

Technology Sector and Earnings Landscape

The AI rally faces a verwijderd test next week as Nvidia releases its outlook on infrastructure demand and data‑centre revenue.

Walmart’s Thursday slide of 9 % showed the impact of unmet high expectations after a weak sales report.

Ge_SW Tests of geopolitics and commodity trends

War‑Dependent Market Dynamics

Bessent expanded on President Donald Trump’s pledge of economic warfare against Iran, saying the U.S. would impose “the toughest sanctions in history.”

Iran warned that any new U.S. threat would provoke a “devastating” response.

Limited hopes for a remedy that could.project the Strait of Hormuz fully reopened pushed Brent to a one‑month peak close to $95, before profit‑taking set in. Brent futures finished slightly lower, at $93.5 per barrel, up over 5 % for the week. U.S. crude eased 0.3 % to $86.56.

Currency Markets and Safe‑Haven Assets

The dollar suffered broad weekly losses amid fears that a growing U.S. debt and policy uncertainty will erode the currency’s purchasing power, steering investors toward scarce assets like gold.

Gold rose 1.6 % to about $4,592 an ounce, its highest level in almost three months.

The dollar index fell 1 % to 98.elleen, after hitting a three‑month low overnight. The euro led the higher side, up just over 1 % at $1.17 after a 14‑week peak. Facing the Swiss franc, the dollar dropped 1.8 % this week, its steepest weekly loss since January.

Citi increased its euro/dollar outlook, citing mounting headwinds for the dollar.

Strong euro‑zone data supported the euro. Business activity grows at its fastest pace of the year thanks to stronger new orders, especially in manufacturing, and sustained export growth. Surveys also reported easing price pressures.

Alternative Assets and Cryptocurrencies

Concern over a rising U.S. debt pile prompted some investors to shift toward alternatives, including bitcoin, which historically benefits from diversification away from U.S. assets.

Bitcoin rallied to a more than two‑month high on Friday, up almost 6 % to $76,446, on track for a 20 % weekly rise – its largest gain in 2½ years.

Scholarly Views on Dollar Weakness

“The dollar faces renewed pressure, driven in part by a resurgent ‘debasement’ narrative,” said Jonas Goltermann, chief markets economist at Capital Economics.

“While we see the concerns overblown, the economic backdrop could eventually support a stronger dollar. But the near‑term could see surprise policy moves carry more weight.”

Japanese Yen Context and Inflation Fixes

The dollar performed modestly better against the yen, sitting near 159.

Japan’s core inflation accelerated in July, as firms passed on higher import costs. New orders in manufacturing surged, adding credence to a September rate hike from the Bank mofato.

Markets have already priced in a 1 quarter‑point rise to 1.25 %, but many would prefer an accelerated tightening path from policymakers.”

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