United States: Tech Stocks Stay Buoyant Amid Trade Noise
U.S. equity markets exhibited a modest pullback last week, though the tech-driven Nasdaq Composite managed to post relatively stable performance. Amid rising geopolitical trade friction, equity investors showed remarkable composure, particularly in growth-oriented and large-cap names. The renewed focus on tariffs—especially a sweeping 25% rate on imports from South Korea, Japan, and several other nations—garnered headlines but sparked only minor price movements, underscoring how the market has adjusted to trade-related volatility.
Airline earnings have become a notable barometer of consumer strength. Delta Air Lines issued a bullish full-year 2025 earnings forecast, restoring guidance it had withdrawn earlier in the year due to tariff uncertainties. This positive outlook boosted sentiment across the airline sector, reinforcing hopes of sustained travel demand despite macro headwinds. In parallel, NVIDIA’s ascent beyond a $4 trillion market capitalisation added further momentum to the “Magnificent Seven” mega-cap tech cohort, emphasising the market’s reliance on heavyweight innovators.
Trade policy also touched commodity markets, with copper contracts seeing significant price surges after the announcement of a forthcoming 50% tariff. While U.S. futures spiked, global benchmarks displayed only modest reactions, indicating a localised pricing disruption driven by protectionist rhetoric.
From a policy standpoint, investor attention turned to the Federal Reserve’s mid-June meeting minutes. The document revealed a notable division among FOMC members: some favoured initiating rate cuts as early as July, while others projected no adjustments through year-end. Although most participants agreed on an easing bias, the divergence in timing has fueled uncertainty.
Bond markets reflected this ambivalence. After a brief rally on dovish signals from the Fed minutes, Treasuries gave up gains by Friday. A well-received 10-year Treasury auction eased some concerns about long-term fiscal credibility. Meanwhile, the investment-grade credit space saw negative returns amid modestly elevated issuance volumes. High yield debt and bank loans mirrored equity movements, with muted activity and subdued investor appetite.
U.S. Market Index Summary
| Index | Friday’s Close | Week’s Change | % Change YTD |
| DJIA | 44,371.51 | -457.02 | 4.30% |
| S&P 500 | 6,259.75 | -19.60 | 6.43% |
| Nasdaq Composite | 20,585.53 | -15.58 | 6.60% |
| S&P MidCap 400 | 3,172.40 | -18.91 | 1.65% |
| Russell 2000 | 2,234.83 | 76.51 | 0.21% |
Source: Reuters, Yahoo! Finance, Bloomberg. Data as of 4 p.m. ET.
Europe: Mixed Data and Tariff Anxiety
European equities closed the week in positive territory, led by optimism over potential transatlantic trade negotiations. The STOXX Europe 600 Index rose 1.15% in local currency terms, though sentiment shifted downward after the U.S. signalled plans to reimpose higher tariffs on EU imports. France’s CAC 40 gained 1.73%, Germany’s DAX climbed 1.97%, and the UK’s FTSE 100 rose 1.34%, reaching a new record.
Economic data across the continent highlighted fragility in the recovery. UK GDP contracted for a second consecutive month, shrinking by 0.1% in May following a 0.3% dip in April. The downturn was concentrated in the industrial and construction sectors. Though market participants had anticipated a mild rebound, the weak showing prompted analysts to revise short-term growth expectations.
Nonetheless, signs of stabilisation appeared in the housing sector. Halifax reported flat home prices in May, following a modest April decline. Year-on-year growth stood at 2.5%. Encouragingly, transaction activity increased, likely driven by expectations that the government would unveil a permanent mortgage guarantee program to assist first-time buyers.
The broader eurozone revealed similarly tepid consumption dynamics. Retail sales volumes fell by 0.7% month-on-month in May, with annual growth slowing to 1.8%—a signal that consumer sentiment remains cautious amid lingering inflation concerns. In Germany, industrial production rebounded 1.2% from April, but exports fell for a second month, underscoring external weakness. Italy’s manufacturing sector struggled, as output dropped 0.7%, nearly reversing the prior month’s 0.9% gain. Across Europe, the push-pull dynamic between domestic stabilization and external drag continues to limit upside momentum.
Japan: Political and Economic Headwinds Build
Japanese stocks drifted lower amid growing anxiety over trade relations and weak domestic fundamentals. The Nikkei 225 fell by 0.61%, while the broader TOPIX index dipped 0.17%. Investors reacted cautiously to news that the U.S. would raise tariffs on Japanese exports to 25%, effective August 1. The delay in implementation leaves a brief negotiation window, but the symbolic escalation weighed on confidence.
Domestically, macroeconomic indicators sent mixed messages. The most concerning was wage data: real wages fell 2.9% year-on-year in May, a steeper drop than expected and the largest contraction in over a year. Nominal wages rose just 1.0%, well below the 2.4% consensus, weakening the argument for consumer-led growth and fueling speculation that the Bank of Japan will hold off on any additional rate hikes until at least 2026.
In contrast, household spending showed strength, rising 4.7% annually, outpacing the 1.2% forecast and reversing April’s 0.1% decline. Analysts attributed the surge to pent-up demand in travel and hospitality. However, one strong data point was not enough to offset concerns about income stagnation and political risk.
As the July 20 Upper House elections approach, political uncertainty is rising. Prime Minister Ishiba’s ruling coalition is projected to lose seats, potentially complicating future fiscal strategies and structural reforms. Combined with unfavourable wage trends and global trade volatility, these dynamics present significant near-term headwinds for Japan’s market outlook.
China: Deflation Threat Sparks Stimulus Speculation
Mainland Chinese equities ended the week higher, buoyed by mounting expectations of government support in the face of ongoing deflation. The CSI 300 gained 0.82%, while the Shanghai Composite rose 1.09%. Hong Kong’s Hang Seng Index advanced 0.93%, reflecting modest regional optimism.
The June inflation report revealed persistent pricing pressures. Producer prices declined 3.6% year-on-year, the sharpest drop in nearly two years and the 33rd consecutive month of factory-gate deflation. Consumer prices offered a marginal surprise to the upside, rising 0.1% after four months of contraction—but analysts cautioned that this uptick likely stemmed from temporary subsidies rather than organic demand recovery.
These data reinforced speculation that Beijing will expand stimulus efforts. In early July, President Xi Jinping convened a high-level economic meeting where policymakers vowed to address “disorderly competition” and phase out unproductive industrial capacity. Markets interpreted the message as a sign that broader fiscal and credit support may soon be deployed.
Investor focus remains on how effectively authorities can balance stabilising growth with curbing structural inefficiencies. With exports and consumer confidence both under pressure, targeted stimulus aimed at households and strategic industries may be necessary to achieve even modest 2025 growth targets.
Other Markets
Turkey: Balancing Inflation Control and Growth
Turkey’s economic outlook remains dominated by the battle against inflation, which stands at 36%. The central bank has reiterated its aim to reduce inflation to the 20–25% range by end-2025, and to 12–15% by the end of 2026. While monetary policy has remained tight, that stance has constrained real growth, which has reached only 2.5% year-to-date versus 4% forecasts.
The government has managed to slightly improve its fiscal performance compared to 2024, although it is still expected to fall short of the 3.1% budget deficit target. Currency appreciation of the lira has also started to weigh on lower-margin export industries such as textiles and furniture. Still, the overall macro environment remains stable. Sovereign analysts at T. Rowe Price maintain that the current combination of tight monetary and flexible fiscal policies should eventually lead to reduced inflation, controlled credit growth, and a gradual buildup of foreign exchange reserves. While growth will likely remain below potential in the short run, these adjustments are seen as necessary steps toward long-term economic health.
Bulgaria: On Track for Euro Adoption
Bulgaria is set to join the eurozone on January 1, 2026, after receiving final approval from EU finance ministers. The European Commission and European Central Bank had previously confirmed that the country met all criteria for adoption of the single currency. This milestone concludes nearly three decades of integration that began with the introduction of a currency board in 1997.
Analysts believe eurozone accession will improve macro stability, reduce transaction costs, and enhance investor confidence in Bulgaria’s financial system. The country reported a budget deficit of 3% in 2024 and maintained healthy fiscal reserves of EUR 5.4 billion. Its debt-to-GDP ratio—at approximately 19–20%—remains among the lowest in the EU.
Euro membership is expected to further align Bulgaria’s financial infrastructure with EU norms, promote trade, and mitigate currency risk. While some transitional challenges may emerge, the overarching outlook for Bulgaria’s economy remains positive as it becomes the 21st member of the euro area.
