Markets Show Limited Reaction to New U.S. Tariffs
Friday’s closes were:
- S&P 500: 6,259.75, down 20.71 pts (–0.33%) from Thursday’s record peak
- Dow Jones: 44,371.51, off 279.13 pts (–0.63%)
- Nasdaq Composite: 20,585.53, slipping 45.14 pts (–0.22%)
Year-to-date performance:
- S&P 500: +6.4%
- Dow Jones: +4.3%
- Nasdaq: +6.6%
United States
Nasdaq Leads as Broader Markets Dip Slightly
U.S. equity markets ended the week marginally lower, with the Nasdaq Composite showing relative strength amid headline-grabbing tariff developments. While new tariff announcements drew attention, market reaction remained subdued compared to earlier rounds. Large- and small-cap equities performed similarly, with growth stocks modestly outperforming value.
Airline stocks gained traction following Delta Air Lines’ upbeat full-year 2025 earnings forecast, signaling improving consumer demand. This outlook helped buoy airline shares broadly. In tech, NVIDIA reached a $4 trillion market capitalization milestone, further strengthening its role among the “Magnificent Seven” mega-cap stocks.
Tariffs Expanded to Multiple Countries and Commodities
President Trump introduced a 25% tariff on imports from key trade partners including Japan and South Korea, along with varying tariffs on nations like Canada, South Africa, Thailand, and Malaysia. Brazil’s tariff will be raised to 50%, reportedly in response to legal actions involving former President Jair Bolsonaro.
In a significant move, a 50% tariff on copper was also announced, causing a sharp rise in U.S. copper futures, though global prices remained mostly stable.
Fed Minutes Reveal Policy Division
Minutes from the Federal Reserve’s June meeting revealed internal disagreement on rate policy. While most FOMC members favor rate cuts in 2025, a few are open to reductions as early as July, while others anticipate no cuts at all. Markets remained relatively unmoved by the release.
Bonds Mixed; Treasury Auction Shows Strong Demand
Treasuries initially rallied on the FOMC minutes but reversed by week’s end. A well-received 10-year note auction helped alleviate investor concerns about long-term U.S. debt. Investment-grade corporate bonds underperformed Treasuries, despite slightly higher-than-expected issuance. High yield bonds mostly followed equity movements, while bank loan activity was led by refinancing deals.
Europe
Stocks Rise on Trade Hopes, Then Slip on Tariff Concerns
The STOXX Europe 600 gained 1.15% as optimism over U.S.-EU trade deals lifted sentiment early in the week. However, gains were trimmed after President Trump warned of increased tariffs on EU goods. France’s CAC 40 (+1.73%), Germany’s DAX (+1.97%), and the UK’s FTSE 100 (+1.34%) all posted weekly advances.
UK Economy Shrinks Again; Housing Shows Signs of Stabilization
UK GDP contracted 0.1% in May, following a 0.3% decline in April, driven by weakness in production and construction. Housing data from Halifax showed flat prices in May and increased transaction activity. Finance Minister Rachel Reeves is reportedly considering a permanent mortgage guarantee program.
Eurozone Retail Sales Dip; Mixed Industrial Output
Eurozone retail sales fell 0.7% in May, underscoring tepid consumer demand. In Germany, industrial production rebounded 1.2%, though exports declined for the second consecutive month. Italy’s output declined 0.7%, nearly offsetting April’s gain.
Japan
Markets Slip Amid Tariff Tensions and Political Uncertainty
Japanese equities declined, with the Nikkei 225 down 0.61% and the TOPIX off 0.17%. U.S.-Japan tariff frictions and weak economic signals dampened sentiment. The yen depreciated to JPY 146.8 per USD, while 10-year government bond yields rose to 1.49%.
The U.S. announced an increase in tariffs on Japanese goods to 25%, effective August 1, 2025, leaving room for negotiation. Meanwhile, political risk grew ahead of Japan’s Upper House election, where Prime Minister Ishiba’s coalition may lose seats.
Wage Data Disappoints, but Spending Rebounds
Japan’s nominal wages rose just 1.0% in May, well below expectations, while real wages dropped 2.9%. However, household spending jumped 4.7%, exceeding forecasts and offering a bright spot.
China
Stocks Rise as Deflation Sparks Stimulus Hopes
Mainland Chinese markets gained, with the CSI 300 up 0.82% and the Shanghai Composite rising 1.09%, buoyed by hopes of more economic stimulus following deflationary data. Hong Kong’s Hang Seng Index added 0.93%.
China’s producer price index fell 3.6% in June, marking the biggest drop in nearly two years. Meanwhile, the consumer price index rose 0.1%, ending a four-month streak of declines. Analysts attribute the increase to recent stimulus efforts rather than a rebound in confidence.
President Xi Jinping’s leadership has pledged further action to tackle deflation and phase out low-value production, signaling a renewed push for economic revitalization.
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