Al-Watani: Markets Reprice Risks
Global markets focused last week on inflation, central bank signals, and geopolitical tensions in the Middle East, with US monetary policy expectations remaining a key market driver.
According to the weekly money markets report issued by National Bank of Kuwait, the Federal Reserve meeting minutes showed that some officials saw justification for raising interest rates in June, although they all ultimately supported keeping the federal funds rate unchanged.
Meanwhile, the Institute for Supply Management’s Services Purchasing Managers’ Index fell to 54.0 points, while initial jobless claims dropped to 215,000, indicating continued expansion and resilience in the labor market.
US Treasury yields rose, with two-year and 10-year bond yields closing the week at 4.208% and 4.561%, respectively. The US Dollar Index closed the week at 100.952 (+0.09%). In Canada, employment rose by 18,200 jobs in June, while the unemployment rate fell to 6.5%. The US dollar closed the week against the Canadian dollar at 1.4154 (-0.32%).
In Europe, inflation slowed in Germany and France to 2.4% and 2.0% year-on-year, respectively, although policymakers at the European Central Bank maintained a cautious stance amid persistent inflation risks.
The Swiss National Bank (SNB) reiterated its readiness to intervene in foreign exchange markets after keeping interest rates at 0% in June, while Switzerland’s inflation rate stood at 0.5% year-on-year. The euro and US dollar closed the week against the Swiss franc at 1.1416 (-0.18%) and 0.8086 (+0.66%), respectively. The Bank of England proposed reforms aimed at capital rules to support lending, while warning that financial leverage linked to artificial intelligence and geopolitical risks remain top concerns for financial stability.
The British pound closed the week against the US dollar at 1.3404 (+0.40%). In the Asia-Pacific region, China’s consumer price index slowed to 1.0% year-on-year, while the producer price index rose 4.1% year-on-year but fell 0.3% month-on-month, indicating fading reflationary momentum and leaving room for further monetary easing.
In Japan, producer prices rose 7.1% year-on-year, bolstering expectations for further tightening by the Bank of Japan, while policymakers encouraged increased domestic investment by pension funds.
Commodity prices remained sensitive to Middle East tensions. Brent crude and spot gold contracts closed the week at $76.01 (+5.39%) and $4,119.93 (-1.36%), respectively. The spread between two-year and 10-year US Treasury yields and their five-year and 30-year counterparts closed the week at 34.920 basis points (+0.516 bps) and 75.332 basis points (-0.02 bps), respectively.
This group, comprising former central bank officials, academics, and private sector executives, is expected to submit its recommendations by the end of the year.
In a separate development, the minutes of the Federal Open Market Committee meeting held on June 16–17, released last week, showed that a small number of policymakers saw justification for raising interest rates at the June meeting, although they all ultimately supported keeping the federal funds rate unchanged.
