Fed Holds Steady as China PMI Falls into Contraction

The past week in financial markets saw significant movements, particularly at the Federal Reserve and in China. The Fed kept interest rates steady despite three policymakers calling for a hike, leaving investors uncertain about inflation expectations. This move sparked a surge in long-term Treasury yields to their highest level since 2007.

Meanwhile, the Bank of England maintained its policy rate while signaling a hawkish tilt, with three dissenting votes from its policymakers. The Bank of Japan also kept rates unchanged but hinted at possible tightening through inflation-overshoot warnings and an upgraded GDP forecast.

Australia's inflation eased to 3.8% year-over-year in June, reducing pressure on the Reserve Bank to hike interest rates further. In China, official manufacturing PMI unexpectedly fell into contraction for the first time in four months, while non-manufacturing PMI also declined.

Markets saw divergent performances across various indices, with US mega-cap companies experiencing differing fortunes due to varying earnings and revenue growth. Apple's stock plummeted 7.2% despite record quarterly revenue, as it guided for lower fourth-quarter revenue growth below market consensus. In contrast, Microsoft and Amazon rose significantly after posting accelerating cloud revenue growth.

Hang Seng Index in Hong Kong posted its best week since September with a 3.7% gain, driven by renewed optimism on domestic demand support from Beijing. The Nikkei 225 was dragged down by semiconductor rout, with Kioxia plummeting 17%, but rebounded towards the end of the week.