France’s CAC 40 sees weekly drop of 3.3% on political uncertainty
While Nvidia delivered a second quarter earnings beat, this was not enough to wow markets, with its data centre segment revenue missing expectations as well as uncertainty around China sales. Meanwhile Dell raised its annual outlook, but this was overshadowed by softer expectations on the current quarter. Before Friday’s losses both the S&P 500 and Dow Jones Industrial Average had closed at record highs. For the week the indexes fell 0.1% and 0.2% respectively, and the tech-heavy Nasdaq Composite dropped 0.2%. Despite the muted weekly performance, with trading somewhat light going into the Labor Day holiday weekend, the major equity indices notched gains for August.
Small caps logged moderate gains for the week, helped by the rotation out of tech stocks as well as growing prospects for a Federal Reserve rate cut. Friday also saw the release of the personal consumption expenditures price index, which rose 2.6% in July, unchanged from the prior month. Despite inflation remaining above the Fed’s target markets are expecting a rate cut from the central bank at its September meeting. The yield on the 10-year Treasury note ended at 4.22%, and was down for the month of August. In other Fed related news, President Trump announced he would fire governor Lisa Cook over allegations of mortgage fraud, with Cook subsequently filing a lawsuit.
Questions over Fed independence weighed on European markets as well as French political uncertainty. For the week the pan-European STOXX 600 index dropped around 1.9%, but still saw a modest monthly increase. A notable laggard was France’s CAC 40 which slumped 3.3% for the week. At the start of the week Prime Minister Francois Bayrou announced a confidence vote for 8 September on his sweeping budget cuts, with opposition parties quickly stating they would not back it. This raised the probability of government collapse, further adding to France’s political woes. Preliminary inflation data out of major eurozone economies showed little signs of acceleration, with markets currently anticipating that the European Central Bank will leave rates unchanged at its September meeting.
Japan’s equity markets ended mixed with the Nikkei 225 managing to eke out a 0.2% gain while the broader Topix dropped 0.8%, hurt by some profit taking going into the end of the month. Both the yen and the yield on the 10-year Japanese government bond ended little changed. The Tokyo core consumer price index rose 2.5% from a year earlier in August, slowing from July’s 2.9% pace. The unemployment rate also unexpectedly dropped, strengthening the expectation that the Bank of Japan would move closer to hiking interest rates. The Shanghai Composite was up 0.8% for the week, continuing its recent momentum, while the Hang Seng dropped 1%. South Korea’s Kospi added 0.6%, with the central bank remaining on hold. Meanwhile Indian indices lost ground, with the additional 25% US tariff on Indian imports coming into effect.
Weekly macro highlights
US PCE inflation remains steady
In July, the US personal consumption expenditures (PCE) index rose 0.2% month-on-month (MoM), adding to a 12-month increase of 2.6% year-on-year (YoY) according to the Bureau of Economic Analysis. This was in line with market expectations. Consumer expenditure, which accounts for more than two-thirds of US economic activity, was up 0.5% on the month, supported by lower layoffs and strong wage growth. Excluding food and energy, the core PCE price index, which is the Federal Reserve’s preferred measure of US inflation, increased 0.3% MoM and 2.9% YoY, compared with 2.8% YoY in June. Personal income and disposable personal income both increased 0.4% MoM. The July rise in personal income primarily reflected higher compensation, with wages and salaries recording gains. This data reinforced expectations of a rate cut at the next Federal Open Market Committee meeting in September. Markets currently assign a probability of almost 90% to a 25bps rate cut.
Tokyo inflation slows in August
In August, Tokyo’s consumer price index (CPI), excluding fresh foods, rose 2.5% year-on-year (YoY), slowing from the 2.9% increase in July according to the Ministry of Internal Affairs and Communications. Headline CPI, which includes all items, increased by 2.6% YoY, slightly down from July’s 2.9% YoY yet remains above the Bank of Japan’s (BoJ) 2.0% target. All items excluding fresh food and energy, an index closely watched by the BoJ, rose 3.0% YoY, marginally down from last month’s 3.1% YoY. Food prices increased 0.8% month-on-month (MoM) with fresh food contributing strongly, rising 3.2% MoM. Food excluding fresh food rose 0.3% MoM, unchanged from the previous month. Meanwhile, fuel prices decreased, with electricity down 6.6% from July and gas down 5.5% MoM. This was largely due to government fuel subsidies that pushed down utility bills. Rent was unchanged compared with July and remained at 1.2% YoY.
Swiss GDP shows weak growth in Q2
According to the State Secretariat for Economic Affairs (SECO), the Swiss economy showed weak growth in Q2 of 2025. Switzerland’s gross domestic product (GDP) adjusted for sporting events increased by 0.1% quarter-on-quarter (QoQ), following a 0.7% rise in the first quarter. The chemical and pharmaceutical industry saw a sharp contraction in value added as exports fell, reversing the front-loading effects that had boosted exports in the first quarter. Manufacturing declined by 2.4% QoQ, while exports dropped 2.7% and imports fell 3.7%. Domestic final demand provided a small positive contribution, increasing by 0.1%. Beyond food purchases, spending rose in health care and in hotel and restaurant services, leading to a 1.5% increase in accommodation and food services sector. Government consumption grew 0.9%. SECO’s updated economic scenario indicated that economic growth could be lower than previously forecast in June, particularly in 2026 (2025: 1.2%, 2026: 0.8%).
