Multiple Trade Deals Inked Ahead of Looming Tariff Deadline
United States
Markets Reach New Highs on Trade Optimism
U.S. equities climbed to fresh records, fueled by positive trade developments. The S&P 500 and Nasdaq Composite hit new all-time highs for a second straight week, while the Dow rose 1.26%. Mid-cap and small-cap benchmarks also posted gains, with value stocks slightly outperforming growth.
Investor sentiment was buoyed by the announcement of trade deals between the U.S. and Japan, Indonesia, and the Philippines. Hopes for a U.S.-EU agreement ahead of the August 1 deadline—when the U.S. is set to impose 30% tariffs on European goods—also contributed to market strength.
Earnings season continued, with mixed reactions to results from the “Magnificent Seven.” Alphabet gained 4.38% after exceeding expectations and highlighting AI advancements, while Tesla dropped 4.12% after underwhelming results.
Services Sector Drives Economic Momentum
S&P Global’s flash PMI for July showed a pickup in U.S. business activity, led entirely by services. The composite PMI rose to 54.6—its highest in seven months—while manufacturing slipped into contraction territory at 49.5. Economists noted the unbalanced growth trend and risks from weakening industrial demand.
Housing Market Sluggish Amid High Rates
June existing home sales declined 2.7% to an annualized 3.93 million units, according to the National Association of Realtors. Prices continued to rise, hitting a record median of $435,300, as limited supply and elevated mortgage rates kept demand subdued.
Bond Markets and Loans Active
Treasury yields edged lower, generating modest gains for bond investors. The investment-grade corporate bond market outperformed Treasuries as spreads narrowed. Meanwhile, Monday marked the fourth-largest bank loan issuance day on record, driven primarily by repricing activity.
Europe
Equities Rise on Trade Hopes; ECB Holds Steady
The STOXX Europe 600 rose 0.54%, supported by trade optimism despite warnings of potential EU counter-tariffs. The ECB left rates unchanged at 2%, in line with expectations, while President Christine Lagarde’s hawkish tone underpinned euro strength.
Eurozone business activity accelerated modestly in July, with the composite PMI rising to 51.0. Growth was seen in both manufacturing and services. German business sentiment improved, while French confidence weakened.
UK Data Continues to Soften
UK retail sales rose 0.9% in June, falling short of expectations despite favorable weather. Composite PMI dropped to 51.0, with weakening services and labor market data reflecting growing economic softness. Government policies and higher tariffs added to pressure on the private sector.
Japan
Stocks Surge on Trade Deal With U.S.
Japanese equities posted strong weekly gains, with both the Nikkei 225 and TOPIX up 4.1%. Markets rallied after Japan and the U.S. reached a trade agreement setting a 15% tariff cap—below the previously threatened 25%. Japan also pledged $550 billion in U.S. investments and opened its markets to American exports.
BoJ Rate Hike Expectations Stay Alive
Despite domestic political uncertainty, rising yields and persistent inflation kept expectations of a Bank of Japan rate hike intact. Tokyo core CPI rose 2.9% year over year—still above the BoJ’s target. Flash PMI data showed solid services growth but a sharp contraction in manufacturing, which may ease after the new trade agreement.
China
Markets Gain as U.S. Trade Truce Talks Resume
Mainland Chinese markets rose on optimism over extending the current U.S. tariff truce. The CSI 300 and Shanghai Composite each gained over 1.6%, while Hong Kong’s Hang Seng advanced 2.27%.
Upcoming trade talks in Stockholm—following earlier meetings in Geneva and London—are raising hopes of continued easing in U.S.-China trade tensions. Positive headlines helped lift investor sentiment and reduced fears of further economic decoupling.
Other Notable Markets
Hungary: Rates Hold Amid Inflation Risks
The National Bank of Hungary left its base rate unchanged at 6.50%, citing persistent inflation risks despite signs of economic stagnation. Policymakers expect growth to rebound in 2025, supported by tax cuts, wage gains, and EU stimulus.
Türkiye: Central Bank Cuts Rates While Maintaining Hawkish Tone
Türkiye’s central bank cut its key rate by 300 bps to 43.0%, citing a stronger disinflationary trend. However, officials reiterated their commitment to tight monetary policy until price stability is achieved, signaling caution despite easing moves.
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