Market Wrap US-Europe 30 July: Microsoft Leads a 2.8 Percent Nasdaq Rebound

By The Edge Research Team

US stocks rebounded sharply on Thursday, led by Microsoft and a powerful recovery in semiconductor shares, recovering the ground lost after a divided Federal Reserve hold a day earlier as a slide in the dollar and a drop in volatility revived risk appetite. The Nasdaq Composite jumped 2.78 percent, the S&P 500 rose 1.66 percent and the Dow Jones Industrial Average added 1.19 percent, per CNBC, while Europe closed mostly higher. The rally came alongside a weaker dollar and a retreat in oil.

Wall Street’s advance was concentrated in big technology. Microsoft surged 15.51 percent after its quarterly results and the Philadelphia Semiconductor Index jumped 8.19 percent, per CNBC, pulling the cap-weighted indexes higher. The Nasdaq Composite closed up 2.78 percent at 25,122.18, the S&P 500 rose 1.66 percent to 7,437.63 and the Dow Jones Industrial Average gained 1.19 percent to 52,208.06, while the volatility index tumbled 17.38 percent to 17.07. The megacap leadership meant the rally was narrower than the headline gains suggested, our reading, though it more than recovered Wednesday’s post-Fed selloff in the S&P 500 and the Nasdaq.

Europe closed mostly higher. The Euro Stoxx 50 rose 1.53 percent to 6,344.40 and France’s CAC 40 added 0.92 percent to 8,485.64, while Germany’s DAX gained 0.60 percent to 25,612.03, per CNBC. Britain’s FTSE 100 was the regional laggard, easing 0.10 percent to 10,897.27, with a firmer pound a modest headwind for its overseas earners. The gains followed the Bank of England’s decision on Thursday to hold its rate at 3.75 percent in a six to three vote, with three members preferring an increase.

In commodities, oil retreated while gold extended its climb. Brent crude traded at 89.12 dollars a barrel, down 1.79 percent, and West Texas Intermediate at 83.68 dollars, off 0.92 percent, per CNBC, as part of the security premium around the Middle East conflict came out of prices in what looked like a technical pullback after this week’s surge. Gold rose 1.80 percent to 4,170.70 dollars an ounce on the CNBC most-active contract, supported by the weaker dollar and steady safe-haven demand.

In currencies and crypto, the dollar fell broadly. The euro rose 0.57 percent to 1.1530 and sterling 0.75 percent to 1.3469, while the yen strengthened 2.50 percent to 159.30 per dollar, per CNBC. The Kuwaiti dinar held near 0.3077 to the dollar and the Egyptian pound eased to about 51.02, while Bitcoin gained 1.48 percent to about 64,724 dollars. The US 10-year Treasury yield still rose about 4.3 basis points to 4.665 percent, so the equity rebound came despite firmer long-term borrowing costs.

Further east, Thursday’s closes from our MENA-Asia wrap remain the reference: Gulf markets were mixed on the oil bid, Saudi Arabia’s Tadawul rising 0.43 percent to 10,589.72 and Abu Dhabi’s FADGI 0.40 percent while Dubai, Oman, Bahrain and Qatar eased, Qatar’s QE Index the laggard at down 0.86 percent. Across Asia, Japan’s Nikkei 225 rose 0.71 percent while China’s Shenzhen Component fell 2.73 percent and South Korea’s Kospi fell 1.23 percent, per CNBC and the regional exchanges.

Why it matters: Thursday’s rebound and the weaker dollar offer a constructive sentiment signal for the Gulf, though its concentration in Microsoft and semiconductor shares tempers how broad that signal really is, our reading. A softer dollar lifts the value of the region’s reserves diversified into gold and supports non-oil export competitiveness, but because the Gulf currencies are pegged to the dollar it also raises the local-currency cost of imports priced in euros, sterling and yen. Gulf policy rates track the Federal Reserve through the peg rather than Treasury yields directly, so the rise in long-term yields matters most through higher sovereign and corporate financing costs, while oil near 89 dollars a barrel keeps the revenue backdrop supportive for regional exporters despite Thursday’s pullback.

Outlook: The immediate markers are whether earnings from other megacap names broaden the rebound beyond technology, the path of the dollar and Treasury yields into the Federal Reserve’s next meeting, and the direction of oil, our reading. A firmer dollar or renewed escalation in the Middle East could pressure risk assets and rebuild the oil premium, while continued dollar weakness would extend the tailwind for gold even as it raises the cost of some non-dollar imports for the Gulf.

Table – US and Europe equities, 30 July close, ranked by change:

Table – MENA and Asia, 30 July closes, for reference, ranked by change:

Table – Commodities, rates, currencies and crypto, intraday 30 July:

Sources: CNBC; Reuters.

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