Equities markets have found reason for renewed optimism in the same week that the US is celebrating 250 years of independence. Most Magnificent Seven big tech stocks have recovered from a difficult June, with an easing in energy costs and softer-than-expected employment data shifting the market’s attention away from geopolitics and back towards monetary policy.
Paradoxically, the weak labour market report released on Thursday may turn out to be good news for equities. US job growth slowed in June, with employers adding 57,000 new jobs. This is half of what economists had forecasted. Wage growth rose by 0.3%. The Bureau of Labor Statistics revised its figures from the past two months down by a total of 74,000, reinforcing signs that hiring is slowing after a stronger run earlier in the year.
The softer jobs data and relatively weak wage growth suggests that the labour market is cooling rather than overheating. Paired with falling energy prices, this may reduce the possibility of the Federal Reserve increasing the interest rate in July. Traders are scaling back expectations of tightening policy, betting that the Fed will instead be patient, especially given the political pressure it faces to keep interest rates low.
At the same time, the cooler jobs reading is not so negative as to raise questions about the underlying health of the US economy. The average number of jobs added in the last three months was about 111 000, suggesting a relatively strong job market despite economic uncertainty and higher inflation. The numbers remain much higher than the slow growth seen in the second half of 2025.
Recent inflation reads have remained elevated. The Personal Consumption Expenditures Index, the Fed’s preferred inflation measure, touched 4.1%, its highest reading in three years. Yet market activity this week indicates that investors believe inflation has peaked and will gradually moderate over coming months. A correction in the gold price also suggests that markets are tempering inflation fears.
Oil prices, which have dropped over the past few weeks to near the levels of last year this time, helped improve the market’s mood. Lower oil costs feed directly into transport, manufacturing and consumer prices, meaning that households should see some relief from inflation. President Donald Trump will welcome the presents of falling oil prices and rising equities as he prepares for his Independence Day address in Washington DC, the July 4 fireworks and critically the November mid-term elections.
Higher gas prices at US pumps have a marked impact on election cycles, for example Nixon in 1973-74 during that Middle East oil crisis. Carter’s approval rating dropped from 40% to 28% in 1980 as gas prices spiked following the 1979 Iran crisis. High energy costs were part of the “misery index” narrative that boosted Reagan’s rating, leading to his victory over Carter in 1980.
The Dow Jones Industrial Average finished the week 2% higher, reaching fresh record levels during Thursday’s session. Although the S&P 500 treaded water yesterday and the Nasdaq retraced following renewed concerns about richly valued Artificial Intelligence (AI) stocks, both indexes also ended the week in positive territory.
The Dow’s relative outperformance for the month of June indicates that investors are broadening their exposure beyond technology and rotating into sectors more closely tied to the wider US economy. This is another signal of underlying confidence in American economic resilience. This week’s rebound is, however, not enough to erase the losses suffered by the Nasdaq during June, which was largely driven by the pressure on Big Tech.
Investors appear to have largely placed the Middle East conflict in the rear-view mirror, and the Fed is once again setting the direction for the markets. As long as geopolitical tensions remain contained, we can expect second-quarter earnings results to set the pace in the short term. Any renewed escalation of the conflict in Iran could, however, quickly push oil prices up again and change the market narrative.
“Americans have a history of rewarding or punishing presidents based on how things are going at the pump.”
– Jon Krosnick, Director of the Political Psychology Research Group at Stanford University
“With participation weakening and hiring cooling, the Fed’s decision to hold last month looks less like a policy mistake and more like prudent patience. Markets are already repricing a lower likelihood of Fed tightening as the inflation debate continues.”
– Eric Merlis, MD and Co-Head of Global Markets at Citizens
Global News
- US job growth slowed sharply in June, with nonfarm payrolls increasing by just 57,000, well below economists’ expectations after the previous two months were revised down by a combined 74,000 jobs, official data released on Thursday showed. Although the unemployment rate edged down to 4.2%, the decline was largely driven by a fall in labour force participation to its lowest level in more than five years.
- Wall Street welcomed the weaker-than-expected US jobs report, easing concerns that the Fed may need to raise interest rates after investors viewed the data as evidence that the labour market is cooling without showing signs of a broader deterioration. Traders sharply reduced expectations of further monetary tightening, helping the Dow Jones Industrial Average close at a record high. The Nasdaq, however, fell as investors took profits in semiconductor stocks following this year’s strong rally. Attention has now shifted to upcoming inflation data and second-quarter earnings to determine whether the broader market rally can be sustained.
- Fed Chairman Kevin Warsh reaffirmed on Wednesday that the Fed remains committed to returning inflation to its 2% target, saying anyone expecting a higher inflation objective would be “disappointed” despite easing price pressures in recent weeks. In his first appearance alongside peers from other global central banks, Warsh defended the Fed’s independence from political pressure and reiterated his intention to avoid providing forward guidance, saying that policy decisions will depend on evolving economic conditions rather than preset signals.
- Morgan Stanley cut its oil forecasts for the second time in about two weeks as flows through the Strait of Hormuz are recovering faster than expected, while strong US supply and weak Chinese demand raise the risk of a global glut. The bank expects Dated Brent to average $75 per barrel in both the third and fourth quarters and has also lowered forecasts for all four quarters of next year. Analysts said on Tuesday that the market had “come full circle – back to surplus,” as tanker traffic through the strait returned to pre-conflict levels, signalling that easing supply constraints are likely to keep downward pressure on oil prices.
- The US and Iran concluded a round of indirect technical talks in Doha on Wednesday with little progress towards a comprehensive peace agreement, as negotiators focused on implementing last month’s interim peace agreement. A key unresolved issue remains Iran’s demand for international recognition of its control over the Strait of Hormuz and its proposal to levy shipping fees. The White House said the talks were progressing well, while Qatar described the discussions as making “positive progress”. Negotiations are expected to resume after the funeral of Iran’s late Supreme Leader on 9 July.
- The US Supreme Court ruled on Monday that Trump can remove the heads of most independent federal agencies, overturning a 1935 precedent and significantly expanding presidential authority, while leaving the Fed’s independence intact for now. In a separate 5-4 decision, the court allowed Fed Governor Lisa Cook to remain in office while she challenges Trump’s attempt to dismiss her. The rulings reinforce the Fed’s unique status but leave unresolved the broader question of whether a president can ultimately remove a Fed governor, an issue with important implications for monetary policy independence and investor confidence.
- AI is revitalising a century-old private bond market that once financed railroads, canals and mining projects, with issuance reaching a record $81 billion through May, according to Private Placement Monitor data released on Wednesday. The growing demand for AI data centres and computing infrastructure is driving technology companies to raise capital from private investors rather than traditional debt markets. Recent deals, including a $35 billion financing package supporting Broadcom and Anthropic, highlight the increasingly important role of private capital in funding the AI boom.
- Stocks recorded their strongest quarter in six years following the Q1 losses as a result of the Middle East conflict, with the S&P 500 adding more than $8 trillion in market value as the AI-driven rally in semiconductor shares and resilient economic data reinforced confidence in corporate earnings. The Philadelphia Semiconductor Index (SOX) posted its best quarter on record, underscoring investors’ continued enthusiasm for AI-related companies. Despite the powerful rally, some market indicators suggest valuations and investor sentiment are becoming increasingly stretched, raising the likelihood of a period of consolidation.
- Semiconductor equipment makers surged on Tuesday, with ASML reaching a record high and Applied Materials and KLA each gaining more than 5% after Samsung and SK Hynix unveiled plans to invest about $516 billion in four new chip plants in South Korea. Investors expect equipment suppliers to be among the biggest beneficiaries as the memory giants expand production capacity.
- Anthropic can resume the global rollout of its Fable 5 and Mythos 5 AI models after the US Commerce Department lifted export restrictions imposed earlier this month over cybersecurity concerns. The company said on Wednesday it is redeploying Fable 5 with enhanced safeguards and is working with Amazon, Microsoft and Google to develop industry-wide AI safety standards. The decision removes a major regulatory hurdle ahead of Anthropic’s planned IPO and signals closer collaboration between leading AI developers and the US government on future model oversight.
- OpenAI has begun preliminary discussions about giving the US government a 5% equity stake in the ChatGPT developer as part of a broader proposal for Washington to hold similar stakes in leading US AI companies, it emerged on Thursday. CEO Sam Altman first proposed the idea in 2025, arguing it would allow the public to share in the economic benefits of the AI boom while helping address growing political scrutiny of the sector. The proposal aligns with the Trump administration’s interest in giving Americans a financial stake in AI, although it remains in its early stages and it is unclear whether other AI companies would support the plan.
- Tesla said on Thursday that it delivered a record 480,126 vehicles in the second quarter, well above Wall Street expectations as stronger demand in Europe offset continued weakness in North America. The rebound provides additional funding for Tesla’s AI ambitions, with capital expenditure expected to exceed $25 billion this year as the company accelerates investment in Optimus humanoid robots, Cybercab technology and AI infrastructure. The results reinforce the view that Tesla’s long-term valuation will increasingly depend on the successful execution of its AI and autonomous driving strategy rather than on vehicle sales alone.
- SpaceX’s $2.2 trillion valuation will face its first major test next week, when the post-IPO quiet period ends, and Wall Street analysts begin publishing independent research on the company. Investors will be looking for evidence to justify one of the world’s largest market capitalisations, with early valuations expected to focus on the long-term potential of Starlink, reusable launch services and AI infrastructure rather than near-term earnings.
- JPMorgan plans to expand its digital bank, Chase, into Spain, France, Italy and the Netherlands after building £30 billion ($40 billion) in assets in the UK, as it seeks to challenge European fintech rivals and deepen its retail banking presence. Despite investing more than £1 billion ($1.34 billion) in the business, Chase still trails Revolut and Monzo in customer numbers, prompting a greater focus on customer engagement and rewards to drive profitability.
- Trump’s financial disclosures released on Tuesday show that cryptocurrency has overtaken real estate as the largest source of his reported income, with his family’s crypto ventures generating more than $1.4 billion in 2025. His companies received almost $800 million from World Liberty Financial and an additional $635 million from Trump-themed meme coins, highlighting the rapid growth of the family’s digital-asset businesses.
- As at Thursday’s close the S&P 500 was1.76% up for the week.
Local News
- President Cyril Ramaphosa reshuffled his Cabinet on Tuesday, making changes across six ministries after consultations with the DA as the Government of National Unity adjusts its leadership ahead of November’s local elections. The changes included appointing former communications minister Dina Pule as social development minister, reviving the career of a politician previously dismissed from Cabinet and later sanctioned by Parliament, prompting criticism from the DA over her suitability for the role.
- The South African Reserve Bank (SARB) said on Tuesday that the Middle East war disrupted financial markets, lifted energy prices and weakened the rand but had little impact on South Africa’s real economy in the first quarter. Strong growth in agriculture, supported by favourable La Niña rains, and higher production of gold and platinum-group metals offset a third consecutive quarterly contraction in manufacturing. The Bank warned that ongoing geopolitical uncertainty remains a key source of volatility for the rand and financial markets.
- SARB Governor Lesetja Kganyago signalled that another interest rate increase could be needed this month as inflation expectations remain above the central bank’s 3% target. Defending May’s surprise rate hike, he said on Wednesday that restoring inflation expectations after recent readings above 4% remains the Bank’s priority, while declining to indicate the likely outcome of the Monetary Policy Committee’s meeting later this month.
- Formal sector employment fell by 80,000 in the first quarter, with community services and trade accounting for most of the decline, while manufacturing, mining and business services recorded modest gains, Statistics South Africa said on Tuesday. Gross earnings fell 4% from the previous quarter, largely due to lower bonuses and overtime, underscoring continued pressure on consumer spending and the broader economy. Formal employment was also 121,000 lower than a year earlier.
- South Africa’s manufacturing sector slipped back into contraction in June after the Absa Purchasing Managers’ Index fell 3.5 points to 47.3, as weaker demand and slowing hiring weighed on activity. New sales orders declined for a second consecutive month, and the employment index reversed May’s gains, signalling continued pressure on the sector despite easing input costs from lower oil prices and a stronger rand lifting business confidence.
- Johannesburg began the new financial year with an unfunded budget gap of about R2.1 billion and an overall deficit of R7 billion after revenue projections exceeded audited performance, according to a National Treasury assessment released on Wednesday. The city had just five days of cash available in March, well below Treasury’s 30-day benchmark, while the government has threatened to withhold R8 billion in funding over an illegal wage agreement. Moody’s Ratings has also placed the city’s credit rating under review for a possible downgrade, highlighting mounting concerns over its financial sustainability.
- The Independent Communications Authority of South Africa said on Monday that satellite operators, including Starlink, will have to follow the country’s existing licensing process, with no new network licences to be issued outside a formal application round or through the acquisition of existing licences. The clarification provides greater regulatory certainty for prospective investors but suggests Starlink’s entry into South Africa is likely to remain delayed while licensing and ownership requirements are resolved.
- Thungela Resources maintained its full-year production guidance on Tuesday after higher coal prices and improved rail performance lifted first-half export sales. Coal prices have been supported by the conflict in the Middle East and renewed demand from India, although a stronger rand offset some of the gains. The company said it still expects to generate sufficient cash to distribute at least 30% of adjusted operating free cash flow as dividends.
- Naspers reported record annual results on Monday, with revenue rising to $10.8 billion and core headline earnings increasing 14% to $3.6 billion as all of its AI-powered lifestyle ecosystems became profitable for the first time. The group said it is embedding AI across its businesses as it transforms into an AI-driven technology operator, while Takealot Group achieved full-year profitability, marking a significant milestone for its South African e-commerce business.
- Absa shares fell 6.6%, their biggest drop in two years, after the bank flagged that a stronger rand and weaker African operations would weigh on first‑half earnings, even as it expects strong growth in South Africa. The group said on Tuesday that headline earnings growth will be mid‑ to high-single digits, with the stronger rand reducing revenue and costs amid a slower global growth environment. Absa expects net customer loans and deposits to grow by mid‑single digits and plans to maintain a dividend payout ratio of around 55%.
- South Africa’s online grocery battle is shifting from delivery speed to AI-powered shopping experiences, with Pick n Pay launching Google Gemini-powered Penny, a voice- text- and photo-enabled shopping assistant, on Thursday as it seeks to narrow the gap with Shoprite. The launch forms part of CEO Sean Summers’ turnaround strategy to rebuild the retailer’s digital capabilities after years of market share losses. It comes as Checkers Sixty60 continues to dominate the market, with Shoprite’s digital sales rising 48% in 2025 to account for 9% of supermarket sales.
- As at the time of writing, the rand was 1.2% stronger against the dollar, and the ALSI was 1% up for the week.
Sources: Dynasty, Business Day, Bloomberg, Business Report, Daily Investor, Reuters, TechCentral, etc.
