Key highlights:

MSCI US index rose 0.4 per cent despite weak tech earnings

US ISM services data fell, lowering Treasury yields and narrowing the yield curve

Fed maintained a cautious stance on rate cuts, while Treasury focused on 10-year yields

US Dollar weakened, gold hit a record high, and Brent crude fell on rising inventories

A new Crypto Task Force aims to regulate stablecoins, with possible legislation in six months

February 6, 2025: We’ve recently witnessed a stabilisation of risk sentiment following a tumultuous week marked by volatile price action. Despite the tech sector’s underwhelming earnings, the MSCI US index managed to eke out a modest gain of 0.4 per cent, buoyed by a broader rally across other sectors. This resilience in the face of disappointing tech earnings speaks volumes about the current market dynamics, where diversification across sectors seems to be paying dividends.

The week’s economic data provided a mixed bag of signals. The US ISM services data, which fell unexpectedly to 52.8 against a consensus forecast of 54.1, sent ripples through the financial markets. This decline in service sector activity led to a significant drop in US Treasury (UST) yields, with the 2-year yield softening by three basis points to 4.19 per cent and the 10-year yield dropping eight basis points to 4.42 per cent.