Euro STOXX 600 posts strongest weekly gain in 12 weeks
US equities saw weekly gains, with investors overlooking economic worries that emerged the prior week as well as the latest tariff kicking in. The Nasdaq Composite led gains, climbing 3.9% and ending the week with its 18th record closing high of the year. Meanwhile the Dow Jones Industrial Average was up 1.4% and the S&P 500 gained 2.4%. Within the S&P 500 sectors, technology and communication services were amongst the strongest gainers, seeing record highs. This was supported by a surge in Apple’s shares, particularly on Friday in which it was up over 4% following news that it would invest an additional $100bn in the US, on top of the $500bn already committed.
Another boost to the market came from growing hopes of a September rate cut from the Federal Reserve. Some Fed officials made comments suggesting that rate cuts were on the horizon. On Thursday President Trump nominated Stephen Miran to complete the remainder of Adriana Kugler’s term. Miran is the current chair of the Council of Economic Advisers and could provide a dovish view amongst governors. Attention this week will be on the latest consumer price index report to see how inflation is holding up against tariffs. For the week the yield on the 10-year Treasury note ticked higher, closing up at 4.29%.
European markets also looked beyond tariffs, gaining on corporate earnings as well as hopes for a potential Russia-Ukraine ceasefire. For the week, the pan-European STOXX 600 was up 2.2% in its best performance in 12 weeks. Banks were amongst top gainers, extending the banking index’s outperformance for the year, benefiting from strong earnings and investors seeking out domestically focused equities in the face of tariffs. Amongst regional indices, Germany’s DAX was up 3.2% and France’s CAC 40 added 2.6%. Gains for the UK FTSE 100 were more muted, rising only 0.3%. While the Bank of England cut interest rates by a quarter point to 4% as expected, what was not anticipated was how narrow the vote would be. Swiss equities got off to a cautious start to the week, in their first session since the announcement of Trump’s 39% tariff, but for the week the SMI added 0.3%.
Positive momentum was also seen over in Japan, helped by earnings. The Nikkei 225 rose 2.5% while the broader TOPIX added 2.6%, managing to top 3,000 for the first time. Upbeat earnings from SoftBank helped to support gains. In China, the Shanghai Composite added 2.1% for the week. The latest data revealed that exports rose more than expected, up 7.2% year-on-year in July, ahead of the expiration of its 90-day truce with the US. One notable decliner for the week was India’s Nifty 50, down 1.2%. This came as President Trump signed an executive order doubling tariffs on India to 50% in response to its purchases of Russian oil.
Weekly macro highlights
RBI keeps interest rates unchanged
The Reserve Bank of India (RBI) held its benchmark interest rate at 5.5%, in line with expectations. The decision was unanimous, with the Monetary Policy Committee shifting its stance from accommodative to neutral, signalling that further easing will depend on incoming data and changes in the macroeconomic outlook. The RBI maintained its GDP growth forecast for the fiscal year ending March 2026 at 6.5% and lowered its inflation forecast to 3.1% from 3.7%. Headline inflation in June fell to a six-year low of 2.1%, well below the 4.0% target, with the near-term outlook described as “more benign than anticipated.” The central bank cited resilient domestic growth but noted risks from geopolitical tensions, global uncertainties, and rising US tariff threats over India’s trade with Russia. Analysts expect the RBI to keep rates on hold at the next meeting in late September, with a possible rate cut later in 2025 if growth slows.
BoE cuts rates to 4%
On 07 August, the Bank of England cut rates by 25 basis points (bps) to 4%, the lowest level in two years. The vote was narrower than expected with the Monetary Policy Committee (MPC) approving the move by a 5-4 majority. While members agreed that progress has been made on disinflation, the split vote reflects differing interpretations of the data and views on inflation risks ahead. Minutes from the meeting highlighted a continued slowdown in core services inflation and wage growth. Activity levels have been weak, reflecting a softer labour market and offsetting the strong growth seen in the first quarter of 2025. The latter was partly attributed to domestic front-loading ahead of expected tax increases and tariff threats. The MPC now forecasts consumer price index inflation to peak at 4% in September, up from the 3.75% projection in May.
Mexico slows policy easing
On 07 August, Mexico’s central bank (Banxico) cut its interest rate by 25 bps to 7.75%, the lowest level in three years. The decision was made in a 4–1 vote, with Deputy Governor Jonathan Heath dissenting and preferring to hold rates at 8.0%, as he did in the previous meeting. The slowdown in the monetary policy easing was widely expected by markets after four consecutive 50 bps reductions, with policymakers signalling a slower pace of easing going forward. Banxico cited recent behaviour of the exchange rate between the peso and the US dollar, weak economic activity and global trade policy uncertainty as key factors in its decision. Headline inflation eased to 3.51% year-on-year in July, although core inflation remained above target at 4.23%. The bank revised down its third quarter inflation forecast to 3.8% and maintained its projection for inflation to converge to 3.0% by Q3 2026. GDP grew 0.7% quarter-on-quarter in the second quarter, up from 0.2% in the prior quarter.
