Soft jobs, cooling oil, stronger equities: markets open Q3 with cautious optimism.
This week @ 15:20 pm Friday 3rd July in London.
Markets:
- FTSE 100 rose 1.50% this week to 10,665.64, led by strong gains in defence names including BAE Systems and Babcock International alongside AstraZeneca, as investors rotated into healthcare, financials and defence following the UK government’s £15 billion Defence Investment Plan.
- S&P 500 rose 1.76% this week to 7,483.24, supported by traditional sectors and consumer names, though the index finished Thursday broadly flat as semiconductor weakness weighed heavily on technology into the close.
- Nasdaq Composite rose 2.12% this week to 25,832.67, though the index came under pressure late in the week as the Philadelphia Semiconductor Index fell 5.4%, with chip names including Micron, Applied Materials and AMD declining sharply on profit-taking and AI valuation concerns.
- Euro Stoxx 50 rose 2.50% this week to 5,475.84, supported by easing energy price pressures and improving sentiment around the Middle East de-escalation, with Germany’s DAX up 3.69% over the period.
Bonds:
- UK 10-year gilt yields rose 6.7 basis points this week to 4.80%, as investors digested central bank remarks from the ECB’s Sintra Forum, with Bank of England Governor Andrew Bailey maintaining a dovish tone on growth but ruling out near-term rate cuts given persistent inflation risks.
- US 10-year Treasury yields rose 11.5 basis points this week to 4.49%, as Fed Chair Kevin Warsh reaffirmed the Fed’s commitment to price stability while signalling the FOMC would have a “good family fight” at its July meeting over the rate path.
Commodities:
- Brent crude fell 0.87% this week to $71.97/bbl, as improving prospects for indirect US-Iran talks, with Qatar expected to schedule the next round shortly, continued to ease the energy risk premium as Strait of Hormuz traffic remained largely uninterrupted.
- Gold rose 1.98% this week to $4,177.50/ozt, as the softer US jobs print reduced the probability of a near-term Fed rate hike, supporting demand for the precious metal.
- Copper was broadly flat this week at $6.21/lb, with the US ISM Manufacturing PMI easing slightly to 53.3 in June from 54.0 in May, signalling slower but still expanding industrial activity.
FX:
- GBP/USD rose 1.11% this week to 1.3348, with sterling supported by easing UK political risk after Andy Burnham pledged to maintain current fiscal rules ahead of assuming the Labour leadership.
- EUR/GBP: sterling strengthened 0.71% against the euro to 1.1674, as eurozone CPI fell to 2.8% in June from 3.2% in May, below market expectations, reinforcing the divergence between UK and eurozone inflation trajectories.
Macro
- US Non-Farm Payrolls (June), released Thursday ahead of the Independence Day holiday, showed the US economy added just 57,000 jobs, well below the consensus estimate of around 110,000, with prior months also revised lower. The unemployment rate ticked down to 4.2%. The miss reduced the probability of a Fed rate hike at the July meeting and was the dominant driver of markets on Thursday.
- Eurozone CPI (June) rose 2.8% year-on-year, below the 3.0% consensus and down from 3.2% in May, aided by retreating energy prices. Core and services inflation also surprised to the downside, though ECB policymakers at Sintra showed no consensus on the direction of the next rate move.
- UK Defence Investment Plan: outgoing Prime Minister Keir Starmer announced an extra £15 billion in defence spending over four years, lifting annual spending to £79.1 billion by 2029 and 2.7% of GDP, with investment directed at nuclear capability, cybersecurity, drones and AI.
- US markets were closed Friday for Independence Day.
Company news:
- AstraZeneca received European Commission approval this week for Enhertu (trastuzumab deruxtecan) as the EU’s first tumour-agnostic HER2-directed antibody drug conjugate, covering previously treated HER2-positive metastatic solid tumours regardless of origin. The EMA also recommended approval of Datroway for first-line treatment of metastatic triple-negative breast cancer. Enhertu now holds six EU indications, with H1 results due 27 July 2026.
- Babcock International and BAE Systems were significant beneficiaries of the UK Defence Investment Plan, with both names rallying strongly on the announcement of £15 billion in additional spending. The plan provides direct tailwinds for Babcock’s naval and nuclear engineering services and BAE’s defence manufacturing order book.
What we will be keeping an eye on next week…
w/c 3rd July 2026
- 6 July: US ISM Services PMI (June). Following this week’s softer ISM Manufacturing reading of 53.3, the services print will be closely watched as a gauge of whether the broader US economy is losing momentum, with any weakness likely to reinforce the case against a near-term Fed rate hike.
- 8 July: FOMC Minutes (June meeting). Markets will scrutinise the minutes for the degree of internal disagreement on the rate path, following Fed Chair Warsh’s comments that the committee would have a “good family fight” at the July meeting over the direction of policy.
- 9 July: US Initial Jobless Claims. Coming in the wake of this week’s sharply disappointing Non-Farm Payrolls print of 57,000, initial claims will provide the first weekly read on whether labour market weakness is broadening, or whether June’s miss was an anomaly.
- 9 July: US Existing Home Sales (May). A useful cross-check on the health of the US consumer and the impact of the higher-for-longer rate environment on the housing market, with elevated mortgage rates continuing to weigh on transaction volumes.
Enjoy the weekend.
Markets move constantly and the numbers in this update will change. This is a snapshot only, pulled together from a range of sources, and is meant as a quick guide rather than a precise record. It’s not investment advice and shouldn’t be used to make trading or investment decisions. If you need more accurate or specific data over a defined period, please get in touch with a member of the team who will be happy to help.
Important Information
This article is for information only and does not constitute advice or recommendation and you should not make any investment decisions based on it. The views and opinions of this article are those of Casterbridge at the time of writing and may change without notice. Any opinions should not be viewed as indicating any guarantee of return from investments managed by Casterbridge nor as advice of any nature. It is important to remember that past performance and the value of an investment, and any income from it, may go down as well as up and the investor may not get back the original amount invested.