Deutsche Bank strategists note that the S&P 500 delivered its strongest weekly gain since early May, supported by a softer US payrolls print and a dovish repricing of Fed expectations. They highlight that the STOXX Europe 600 reached a new record with a strong weekly gain, as markets reassessed the likelihood of further European Central Bank tightening.

US equities rally on softer Fed pricing

"Recapping last week now and markets saw a decent risk-on move, with the S&P 500 posting its best weekly performance since early May, with a +1.76% advance."

"So collectively, that meant market pricing for a July hike fell from a 30% chance to 22% over the course of the week."

"Interestingly as well, the dovish repricing failed to prevent a move up in longer-dated yields, with the 10yr Treasury yield up +11.5bps last week to 4.48%, whilst the 10yr German yield rose +8.4bps to 2.93%."

"Over in Europe there was a similar trend, with the STOXX 600 up +2.66% (+0.68% Friday) to a new record. That came as markets grew more doubtful about another ECB rate hike this year, with the latest flash CPI print also surprising on the downside."

"But even though equities did quite well on the whole, there were still clear pockets of weakness, most notably in the chip sector. Indeed, the Philly semiconductor index fell -4.37%, losing ground for a second week running."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)