Highlights

1. A clear divergence defined the week’s trading, with U.S. and European markets ending on a weak note while key Asian and Israeli markets rallied.
2. Wall Street saw a broad-based pullback on Friday, with the S&P 500 falling -0.32% and the Dow Jones declining -0.48%.
3. Major European indices, including Germany’s DAX ( -0.73%), fell in sympathy with the U.S., signaling widespread risk-off sentiment in the West.
4. In stark contrast, Japan’s Nikkei 225 surged +1.03% and Hong Kong’s Hang Seng rallied +1.43%, while Tel Aviv’s TA-35 ( +0.92%) and TA-125 ( +1.09%) also showed significant strength.

A stark geographical split characterized global equity markets this past week, as a wave of selling pressure hit Western bourses while investors in key Asian hubs and Tel Aviv found reasons for optimism. While U.S. indices faltered after testing record highs, markets in Japan, Hong Kong, and Israel demonstrated remarkable resilience, charting their own upward course. This growing divergence raises a critical question for the week ahead: are we witnessing a fundamental shift in market leadership, or will the bearish sentiment from the West eventually pull all markets lower?

Profit-Taking Hits Wall Street and Europe

The week ended on a sour note for U.S. markets, which served as the primary driver for the negative sentiment in the West. After a period of strong gains, investors appeared to lock in profits, leading to a broad-based decline on Friday. The blue-chip Dow Jones Industrial Average led the losses with a -0.48% drop, while the broader S&P 500 fell -0.32%. The tech-heavy Nasdaq showed relative strength but still ended in the red. This weakness quickly spread across the Atlantic, with major European indices following suit. Germany’s export-heavy DAX index was hit particularly hard, falling -0.73%, while the EURO STOXX 50 declined -0.53%, indicating that concerns over a potential global slowdown are weighing on investor confidence.

A Wave of Optimism Across Asia

While the West faltered, a distinctly different story was unfolding in Asia. Japan’s Nikkei 225 continued its powerful run, surging +1.03% on Friday, fueled by a weak yen and continued optimism about the Bank of Japan’s supportive policies. In Hong Kong, the Hang Seng Index staged a powerful relief rally, jumping +1.43% as bargain hunters emerged after a period of weakness. These moves suggest that local catalysts—from monetary policy in Japan to hopes for stimulus in China—are currently powerful enough to override the jitters felt in U.S. and European markets.

Tel Aviv Shows Its Mettle

The Tel Aviv Stock Exchange demonstrated its own brand of remarkable resilience. A sharp mid-week dip that saw the benchmark TA-35 index briefly fall below the critical 3000-point level was met with a fierce wave of buying. The index not only reclaimed the lost ground but also powered ahead, ending Thursday’s session with a strong +0.92% gain. The broader TA-125 index performed even better, rising +1.09%. The strength was widespread, with the TA-90 and Banks indices also posting significant gains, signaling deep-rooted domestic confidence that was strong enough to completely diverge from the negative mood on Wall Street.

An Uncertain Path Forward

As a new trading week begins, this clear divergence will be the central theme. The key question is whether the strength in Asia and Tel Aviv is sustainable if U.S. markets continue to correct. Investors will be watching to see if the powerful domestic narratives in these regions are enough to keep them insulated, or if the old adage, “When Wall Street sneezes, the world catches a cold,” will ultimately reassert itself.