Markets in July
US equities markets appeared to have largely ignored tariff related uncertainties throughout July, instead focussing on Q2 earning results, which have largely continued to report above analyst expectations, particularly AI stocks, which have benefited from a falling dollar. So far this month the S&P 500 is +2.55%, the Dow Jones +1.22% is MTD, and the Nasdaq 100 +2.94% MTD. European equity markets have had a good month with the STOXX 600 being +1.64% MTD.
In the bond market, we’ve generally seen a steepening as markets price in lower rates over the next year, leading to higher long-term inflation expectations. The dollar recovered ground in the later part of the month as trade deals were announced. It is +3.29% MTD but still down about -8% YTD.
Following today’s Fed announcement that it opted to keep rates at 4.25-4.5%, citing a “solid” labour market and “somewhat elevated” inflation, there appears to be further division within the Fed over the timing of the next rate cut as two of the Fed’s governors voted for a rate cut; the first time since 1993 that two governors dissented on a rate decision. Chair Jerome Powell has come under increasing political pressure from the US President to cut rates, and, earlier in the month there were rumours that President Trump was considering firing him. This threat shook markets as an independent Fed is viewed as critical for ensuring the smooth functioning of the monetary policy system.
The ECB kept rates on hold in July as annual inflation stood at the target rate of 2% in June although ECB President Christine Lagarde stated that the downside risks were: a further escalation in global trade tensions, geopolitical tensions and a deterioration in financial market sentiment. However, even though one more rate cut this year has been expected by market participants, with the EU-US trade deal agreed earlier this week, the ECB may need to cut rates sooner than suggested. This is due to the disinflationary threat, as tariffs will weigh on economic activity and overall demand, and the strengthening of the euro.
The UK is in a somewhat different position as noted by the IMF. Although the UK has cut rates twice this year to 4.25%, the IMF has called for interest rates to be lowered twice more this year from the current 4.25%. Therefore, markets are expecting at least one more reduction, to around 4%, in August, as the BoE seeks to balance the risk between cutting rates to help grow the economy and concerns that inflation will remain well above target this year.
The economic picture
Despite the dollar experiencing significant fluctuations throughout the month, the dollar index for July is +3.29% MTD. The dollar’s volatility has been due to uncertainty over US tariffs, investor concerns around debt and deficit sustainability. Headline inflation rose by 0.3% m/o/m in June, and 2.7% annualised, up from May’s 2.4%, while core CPI, excluding food and energy, was at 0.2% and 2.9% annualised, respectively. The US labour market continued to show strength with nonfarm payrolls increasing a seasonally adjusted 147,000 in June. Unemployment was 4.1% in June, slightly down from May’s 4.2%. Real average hourly earnings fell 0.1% from May to June and 1.3% y/o/y. The labour force participation rate was unchanged in June at 62.3% and the employment-population ratio held at 59.7%. Expectations are that the July nonfarm payroll, due for release on 1 August, will show some weakening, with estimates of around 110,000. However, initial jobless claims have fallen for six straight weeks, suggesting that labour market conditions may not have deteriorated as much as feared despite the June JOLTS report coming in at only 7.44 million vs an expected 7.5 million and the hiring rate slowing to 3.3%, the lowest since November.
On the growth front US GDP for Q2 came in at 3%, above market estimates of 2.3% and reversing a 0.5% decline in the prior period. The July Flash PMIs showed US business activity continuing to grow. The Flash Composite PMI in July came in at 54.6, up from June’s 52.9 reading and a 7-month high. The Flash services PMI came in at 55.2, up from June’s 52.9 and also a 7-month high. The Flash Manufacturing PMI fell into contractionary territory, falling to 49.5 from June’s 52.9 and a 7-month low. As noted by S&P Global, “business confidence about the year ahead has also deteriorated in both manufacturing and services to one of the lowest levels seen over the past two-and-a-half years. Companies cite ongoing concerns over the impact of
government policies, notably in terms of both tariffs and cuts to federal spending.” It also cited increasing inflation pressure with companies attributing this to tariffs and increased labour costs. The Conference Board's consumer confidence index increased in July on easing concerns about the economy’s outlook and the labour market. It rose 2 points to 97.2 from 95.2 in June. The Present Situation Index—based on consumers’ assessment of current business and labour market conditions — fell 1.5 points to 131.5. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose 4.5 points to 74.4. Expectations remained below the threshold of 80 that typically signals a recession ahead for the sixth consecutive month. The University of Michigan consumer sentiment survey for July showed that ten-year inflation expectations fell to 4.4%, down from 5.0% in June, and the five-year outlook dropped to 3.6%, down from 4.0%.
In the UK, inflation edged down in June, coming in at 3.4% from May’s 3.5%. However, core CPI rose by 3.7% in the 12 months to June 2025, up from 3.5% in May. In terms of business activity in July, the S&P Global Flash Composite PMI for the UK came in at 51.0 in July, down from a nine-month high of 52.0 in June. The Flash Services PMI declined to 51.2 points in July from 52.8 in June, while the Flash Manufacturing PMI, while still in contractionary territory, was at a 6-month high, up to 48.2 from June’s 47.7. According to Chris Williamson, Chief Business Economist at S&P Global, the sluggish output growth reported in July reflected headwinds of deteriorating order books, subdued business confidence and rising costs, all of which were widely linked to the ongoing impact of the policy changes announced in last autumn's Budget and the broader destabilising effect of geopolitical uncertainty. July's flash PMI employment index represents a tenth successive month of job cutting. He said the continued impact of Budget measures on employment is particularly worrying. He noted that higher staffing costs have exacerbated firms' existing concerns over payroll numbers, resulting in another month of sharply reduced headcounts in July.
Consumer confidence is falling with the GfK Consumer Confidence Index falling by one point to -19 in July. As noted by Neil Bellamy, Consumer Insights Director at GfK, “The key measures on personal finances, the economy and purchase intentions are flat in July, and many will conclude that consumers are in a cautious wait-and-see mood. But the data suggests that some people may be sensing stormy conditions ahead. With speculation growing over possible tax rises in the Autumn Budget, and price pressure contributing not just to higher inflation already but also to the likelihood of worse inflation to come, the news is worrying. Our Savings Index is significant this month because it does indeed suggest people are anxious. It has jumped seven points to +34 to reach the highest level since November 2007.”
The labour market is still weakening with the number of payrolled employees falling by 135,000 (0.4%) between May 2024 and May 2025, and by 25,000 (0.1%) between April and May 2025. According to the Office for National Statistics, pay growth excluding bonuses came in at 5.0% in the three months through May from 5.3%, with wage inflation in the private-sector cooling to 4.9% from 5.2% — the first reading below 5% since April to June 2022. Unemployment rose to 4.7% from May’s 4.6%.
The eurozone economy appears to be improving. Eurozone inflation was 2% in June, slightly up from May’s 1.9%. Core inflation, which excludes energy, food, tobacco and alcohol prices, was unchanged at 2.3% in June. Services inflation rose to 3.3% in June, after cooling significantly in May to 3.2%, down from April’s 4% reading. The ECB wage tracker indicated negotiated wage growth with smoothed one-off payments of 4.6% in 2024 and 3.2% in 2025. With unsmoothed one-off payments, the tracker pointed to 2.9% in 2025. It projects 1.7% wage growth in the first quarter of 2026. The ECB sees pay growth averaging 3.2% in 2025. It has previously stated that wage growth around 3% would be consistent with its 2% inflation target.
On the growth front, eurozone GDP came in at 0.1% in Q2. July eurozone HCOB Flash Composite PMI came in at 51.0, up from June’s 50.6 and a 11-month high. The HCOB Flash Services PMI was 51.2, up from June’s 50.5 and also a 6-month high. The HCOB Flash Manufacturing PMI came in at 49.8, up from June’s 49.5 and a 36-month high. As noted by Chris Williamson of S&P Global, “Bar a deterioration in France, business confidence has continued to revive, especially in Germany, which hints at a broader improvement in the underlying economic environment. Furthermore, with the PMI showing inflation pressures continuing to run at a subdued level consistent with the central bank's target, the survey hints at scope persisting for a further lowering of interest rates after the summer should the growth trajectory be considered too soft.”
Global market indices
US:
S&P 500 +2.55% MTD and +8.18% YTD
Nasdaq 100 +2.94% MTD and +11.10% YTD
Dow Jones Industrial Average +1.22% MTD and +4.91% YTD
NYSE Composite +0.99% MTD and +8.03% YTD
The Equally Weighted version of the S&P 500 is +1.85% so far in July, 0.70 percentage points lower than the benchmark.
The S&P 500 Information Technology sector is the top performer so far in July at +5.48% MTD, while Consumer Staples has underperformed at -1.93% MTD.
On Wednesday, major indexes held their gains for most of the session, and through the Fed’s 2 p.m. announcement that it would keep rates unchanged as expected. But stocks began to drift lower shortly after Fed Chair Powell started taking questions from reporters after the FOMC meeting.
The Dow Jones Industrial Average gave up -0.38%, the S&P 500 slipped -0.12%, while the Nasdaq Composite eked out a +0.15% gain. Declines were broad-based, with 8 out of the 11 S&P 500 sectors ending the day in the red. It was the third straight day of declines for the Dow, and the second straight drop for the S&P 500.
In corporate news, Ford Motor in its Q2 earnings call said profit will fall as much as 36% this year. Ford said tariff-related costs will cut about $2 billion from its annual earnings, up from the $1.5 billion it predicted three months ago.
Arm Holdings, which provides the most widely used technology in computing chips, gave a lower-than-expected profit forecast for Q3 after ramping up spending on new products.
Palo Alto Networks agreed to buy CyberArk Software in a cash-and-stock deal valuing the Israeli cybersecurity company at about $25 billion.
Humana raised its profit guidance for the year, bucking a trend in the US health insurance industry after most other companies cut their forecasts in recent months.
Harley-Davidson said tariffs crimped profits in Q2 as high borrowing costs sapped demand and forced the motorcycle manufacturer to cut production.
Hershey lowered its full-year profit guidance in part on tariff costs, but is hopeful that the Trump administration will offer relief for products, like cocoa, that can’t be grown in the US.
Europe:
Stoxx 600 +1.64% MTD and +8.40% YTD
DAX +1.47% MTD and +21.86% YTD
CAC 40 +2.56% MTD and +6.52% YTD
FTSE 100 +4.28% MTD and +11.79% YTD
IBEX 35 +2.78% MTD and +24.02% YTD
FTSE MIB +3.62% MTD and +20.62% YTD
Source: FactSet
In Europe, the Equally Weighted version of the Stoxx 600 is +1.53% MTD, 0.11 percentage points lower than the benchmark.
The Stoxx 600 Travel & Leisure is the leading sector, +7.20% MTD, while Retail has exhibited the weakest performance at -3.29% MTD.
On Wednesday, within the STOXX Europe 600 sectors, the Food & Beverage sector outperformed, buoyed by robust earnings and strong volume growth in China and Emerging Markets. JDE Peet's shares rose after surpassing EPS expectations and raising its guidance, while Danone shares saw an increase following solid Q2 revenue and a reiterated outlook.
The Construction & Materials was also higher, driven by strong earnings momentum. Bodycote rallied on a profit beat and a £30 million share buyback programme. Nexans shares rose after strong Q2 earnings and upgraded guidance, supported by grid demand and the impact of US tariffs.
The Travel & Leisure was supported by robust summer demand and easing fuel costs. Wizz Air Holdings shares rose following a rating upgrade to ‘buy’ at Deutsche Numis, and Aena delivered steady results.
Financials were mixed on Wednesday. UBS Group exceeded Q2 estimates due to strength in its investment banking division. Conversely, HSBC Holdings’ profit fell 26%, attributed to losses from its real estate exposures in China and Hong Kong. Similarly, Banco Santander's Q2 profit was slightly below consensus, with solid core income being offset by higher provisions.
Chemicals underperformed, reflecting weak results and reduced guidance. IMCD shares declined after missing earnings expectations, though Basf registered gains as its outlook remained stable despite an 82% drop in Q2 profit.
Retail faced downward pressure amidst tariff and inventory concerns. Adidas slipped despite an EBIT beat, while Amplifon fell after a revenue downgrade and profit miss.
Autos & Parts remained pressured by tariffs and weakness in the Chinese market. Aston Martin Lagonda issued a warning, and both Mercedes-Benz Group and Porsche cut their guidance following profit declines, as both companies highlighted challenges stemming from US tariffs.
Global:
MSCI World Index +1.95% MTD and +11.23% YTD
Hang Seng +4.59% MTD and +25.51% YTD
Mega cap stocks had a mostly positive performance in July. Nvidia +13.47%, Alphabet +11.52%, Amazon +4.92%, Microsoft +3.18%, Apple +1.89%, and Tesla +0.43%, while Meta Platforms -5.81%.
Microsoft Q2 earnings. Microsoft announced robust financial results for Q2, surpassing Wall Street's revenue and profit expectations.
A key driver in this strong performance was the Azure cloud business, which saw sales increase by 39% year-over-year, exceeding expectations. This strong performance from the cloud computing unit underpinned Microsoft's results for Q2. The company further indicated that its Q3 outlook is more optimistic than analysts had anticipated.
Operating income rose 22% to $34.3 billion, exceeding consensus projections. Net income reached $27.2 billion, or $3.65 per diluted share, both figures outperforming analyst estimates.
CEO Satya Nadella highlighted the company's expanding infrastructure, noting that Microsoft now operates over 400 data centres across 70 regions worldwide. This expansion is supported by substantial investments; total CapEx for the quarter rose by 27% y/o/y to $24.2 billion, surpassing the estimated $23 billion.
For the first time, Microsoft disclosed that its annual Azure revenue has exceeded $75 billion, a figure slightly above analyst estimates.
All three of Microsoft's business segments reported revenues higher than the company's previous projections. The Productivity and Business Processes segment, which includes Microsoft 365 products, recorded $33.11 billion in revenue, against analysts’ mean estimate of $32.12 billion. The Intelligent Cloud segment achieved $29.88 billion in revenue, compared to estimates of $28.92 billion. Azure revenue growth y/o/y (in constant currency) was 39%, higher than analysts’ expectation of 34.3%. Lastly, More Personal Computing generated $13.45 billion in revenue, exceeding estimates of $12.68 billion.
Furthermore, Microsoft’s gross margin of 68.6% against a consensus of 68.0%, and the operating margin stood at 44.9%, surpassing FactSet's projection of 43.6%.
Meta Platforms Q2 earnings. Meta Platforms announced a 22% increase in revenue for Q2, demonstrating the continued strength of its core advertising business even as the company commits substantial investments to AI. This quarter marked the first time this year that Meta maintained its top capital-spending projections, a decision likely to alleviate investor concerns regarding CEO Mark Zuckerberg’s AI spending spree.
The company's revenue reached $47.5 billion, exceeding analyst expectations. Net income for the Q2 was $18.3 billion, also surpassing market predictions. Looking ahead, Meta anticipates y/o/y revenue growth of between 17% and 24% for Q3.
During Q2, Meta's key operating metrics showed robust performance. Revenue from its Family of Apps reached $47.15 billion, surpassing the consensus estimate of $44.45 billion, with advertising contributing $46.56 billion against a consensus of $43.97 billion. Operating income stood at $20.44 billion, exceeding FactSet’s consensus of $17.06 billion, resulting in an operating margin of 43.0% compared to FactSet’s 38.0%. The company also reported an 11% increase in ad impressions delivered and a 9% rise in the average price per ad.
In its Q&A session, Meta addressed several strategic themes. The company highlighted that its AI advancements are outpacing even aggressive assumptions, maintaining an optimistic trajectory for AI-driven product improvements. Expected expense growth in 2026 will be primarily driven by infrastructure, particularly depreciation and operational costs, with employee compensation also playing a significant role. The scaling of generative AI capacity is the primary driver behind the increase in 2026 CapEx, alongside continued investment in core AI.
Meta affirmed its unchanged open-source AI strategy but also noted safety concerns associated with superintelligence development. The company is exploring potential external financing partnerships for large-scale data centre projects in 2026, with a focus on utilising internal infrastructure capacity to support core AI and recommendation engine work.
Energy stocks have experienced a positive performance so far in July, with the Energy sector +3.53% MTD. Energy Fuels +60.23%, Baker Hughes Company +18.75%, Halliburton +9.91%, ConocoPhillips +7.72%, Chevron +7.24%, Apa Corp +6.51%, Occidental Petroleum +5.71%, Shell +4.91%, Phillips 66 +4.27%, ExxonMobil +3.80%, and Marathon Petroleum +2.81%.
Materials and Mining stocks have had a mixed performance so far in July. The Materials sector is +0.49% MTD. Sibanye Stillwater +26.75%, Nucor Corporation +10.35%, Albemarle +9.93%, Newmont Mining +6.95%, and Yara International +3.15%, while Celanese Corporation -2.15%, Mosaic -2.69%, and Freeport-McMoRan -9.71%.
Commodities
Gold is -0.71% MTD in July as trade uncertainty concerns among investors were assuaged by a series of 'deal' announcements involving major US trading partners. Gold is +24.95% YTD.
On Wednesday, gold prices experienced a decline of over one percentage point as the Fed opted to maintain current interest rates, offering minimal indication regarding the timing of potential cuts. This decision, coupled with strong US economic data, diminished the appeal of the non-yielding asset.
Spot gold was traded down -1.41% at $3,278.89 per ounce.
Oil prices are up more than eight percentage points in July. WTI is +8.24% MTD and -2.02% YTD and Brent +8.64% MTD and -1.57% YTD.
Oil prices were higher on Wednesday. Brent crude futures settled 96 cents, or +1.32% to $73.47 a barrel, while WTI crude increased by $1.03 or +1.49%, to $70.24. Earlier in the day, both contracts had fallen by nearly one percent.
On Tuesday, the US President announced an accelerated timeline for imposing measures against Russia, including potential 100% secondary tariffs on trading partners, if no significant progress is made in ending the war in Ukraine within 10 to 12 days. He had previously given Russia a 50-day deadline.
In addition, the US President implemented a 25% tariff on goods imported from India, effective 1st August, along with an unspecified penalty for their continued purchase of Russian weaponry and oil. The US also issued a warning to China, the largest consumer of Russian oil, indicating the possibility of substantial tariffs if it persists in these purchases.
Analysts suggest that while China is unlikely to adhere to US sanctions, India has signaled its potential compliance. Such a move by India could impact Russian oil exports, potentially affecting 2.3 million barrels per day.
EIA report. According to the latest EIA weekly report, US crude oil inventories saw an increase last week, primarily driven by a decline in exports, while gasoline and distillate stockpiles both decreased.
For the week ending 25th July, crude inventories rose by 7.7 million barrels, reaching a total of 426.7 million barrels. Furthermore, crude stocks at Cushing, Oklahoma, a key delivery hub for US crude futures, increased by 690,000 barrels.
The EIA reported that crude exports dropped by 1.2 million barrels per day (bpd) last week, settling at 2.7 million bpd. This export decline coincided with a narrowing spread between Brent and WTI crude prices during the relevant trading periods. Conversely, net US crude imports rose 1.3 million bpd.
Refinery crude runs decreased by 25,000 bpd, with utilisation rates falling by 0.1 percentage point to 95.4% of capacity. Despite this slight dip, refining activity along the Gulf Coast reached its highest level since July 2024.
Gasoline stocks fell by 2.7 million barrels during the week, totaling 228.4 million barrels. Product supplied of gasoline, an indicator of demand, rose last week to 9.2 million bpd, up from just under 9 million bpd the previous week.
Distillate demand also jumped, gaining 262,000 bpd to reach 3.61 million bpd, with jet fuel demand hitting its highest level since December 2017. However, distillate stockpiles themselves rose by 3.6 million barrels, reaching 113.5 million barrels.
Currencies
The dollar has had a positive performance in July due to lessened concerns on trade policy. The dollar index is +3.29% MTD and -8.03% YTD. The GBP is -3.53% MTD and +5.88% YTD against the USD. The EUR is -3.15% MTD against the USD and +10.39% YTD.
The US dollar strengthened against its major counterparts on Wednesday after the FOMC maintained the Fed funds rate target, aligning with market expectations.
The FOMC voted 9-2 to keep its benchmark overnight interest rate steady within the 4.25% - 4.50% range for the fifth consecutive meeting. Notably, Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller dissented, advocating for a 25 bps reduction in rates.
Earlier in the session, data revealed that US economic growth in Q2 rebounded more significantly than anticipated, expanding by 3% compared to economists' estimates of 2.4%.
The euro extended its losses against the dollar following the FOMC's decision and Fed Chair Powell's remarks. It ended the session -1.23% lower at $1.1407, marking its fifth consecutive session of declines and trading at its lowest level since 11th June. The euro is also poised to record its first monthly drop in 2025, largely due to a sharp reaction to the US - EU trade deal announced earlier in the week. The euro has declined by -3.15% MTD.
The dollar index added to its gains following the FOMC decision, rising +0.97% to 99.87. This marks its highest level since 29th May, and the index is on track to post its first month of gains this year, having risen +3.29% so far in July.
Recent trade agreements, including those with Japan last week and the EU over last weekend, signal a renewed US commitment to global engagement, which has served to alleviate investor concerns.
The spotlight will also be on comments from BoJ Governor Kazuo Ueda today. Investors anticipate that the trade deal between Japan and the US may pave the way for the BoJ to raise rates Thursday. The dollar strengthened by +0.93% against the yen, reaching ¥149.45 and hitting its highest level since 2nd April, with a gain of +1.17% in July to date.
Sterling concluded Wednesday's session lower after the outcome of the FOMC policy meeting. The greenback edged lower as investors shifted their focus to the FOMC meeting and upcoming economic data. The pound was down -0.79% at $1.3244, having touched $1.3308 on Tuesday, its lowest level since 19th May. The British pound has declined -3.53% against the US dollar so far in July.
The euro was down -0.12% at 86.38 pence per pound on Wednesday, its lowest level since 11th July. The euro is up +4.27% year-to-date, versus the pound, and +0.38% in July.
Money markets are now pricing in nearly two 25 bps BoE rate cuts by year-end, with a cumulative 80 bps by December 2026.
Cryptocurrencies
Bitcoin +9.43% MTD and +25.65% YTD to $117,272.00.
Ethereum +51.10% MTD and +12.81% YTD to $3,761.10.
Bitcoin was -0.06% Wednesday and Ethereum was +5.17%. Cryptocurrencies have risen this month as institutional investors and corporates have piled into cryptocurrency ETFs, with inflows into Ethereum ETFs breaking records in July due to legislation around stablecoins – most of which are issued on Ethereum – being signed into the first-ever US crypto law, the GENIUS Act. Crypto markets have also been bolstered by the Securities and Exchange Commission's passage on Tuesday of two key changes in existing policy: one that streamlines how crypto funds trade, and another that broadens how investors can bet on them. It authorised the use of in-kind creation and redemption mechanisms for crypto Exchange Traded Products (ETPs), thereby allowing a shift from the cash-only model that had been required until now.
On Wednesday, the Trump Administration’s Working Group on Digital Assets issued its 168 page report outlining recommendations for a regulatory framework for digital assets. The report advocated for Congress to pass the Digital Asset Market Clarity Act to eliminate gaps in regulatory oversight by providing the Commodity Futures Trading Commission (CFTC) authority to “oversee spot markets for non-security digital assets” and measures that embrace decentralised finance technologies. The report also calls for the SEC and CFTC to use their existing powers to “immediately enable the trading of digital assets at the federal level” by providing more clarity on issues such as registration, custody, trading and recordkeeping.
Note: As of 5:30 pm EDT 30 July 2025
Fixed Income
US 10-year yield +15.1 bps MTD and -19.7 bps YTD to 4.379%.
German 10-year yield +10.2 bps MTD and +34.0 bps YTD to 2.709%.
UK 10-year yield +12.0 bps MTD and +4.0 bps YTD to 4.608%.
US Treasury yields advanced Wednesday after Fed Chair Jerome Powell indicated it was premature to determine if the central bank would reduce its interest rate target in September.
The FOMC maintained its benchmark overnight interest rate within the 4.25% - 4.50% range for the fifth consecutive policy meeting. This decision was supported by sustained low unemployment and robust labour market conditions. However, the FOMC acknowledged that economic growth had ‘moderated in the first half of the year,’ strengthening the rationale for potential rate reductions should this trend persist. Notably, the Wednesday decision included two dissenting votes from governors, the highest number in over three decades.
By late afternoon trading, the yield on the US 10-year Treasury note had increased by +5.7 bps to 4.379%. The two-year yield, which often reflects interest rate expectations, rose +7.6 bps to 3.951%. The US 30-year yield also saw an increase, climbing +4.5 bps to 4.905%.
These yield increases earlier in the session were bolstered by economic data releases. The Commerce Department's Bureau of Economic Analysis reported in its advance estimate that Q2 GDP expanded at an annualised rate of 3.0%. Concurrently, the ADP National Employment Report indicated a larger-than-anticipated increase in US private payrolls for July, with 104,000 jobs added, following a revised decline of 23,000 in June. Economists had projected a 75,000 increase in private employment.
The yield on the US 10-year Treasury note is +15.1 MTD. The US 30-year yield is +12.7 bps MTD. At the short end, the two-year Treasury yield is +22.8 bps MTD.
Markets will now be looking to today’s release of the June Personal Consumption Expenditure Price Index and the Nonfarm payroll report on Friday.
Following Wednesday's Fed decision, current sentiment in the Fed funds futures market according to CME's FedWatch Tool, suggests that the Fed is most likely to resume its programme of interest rate cuts at the 29th October FOMC meeting, with a 65.1% probability of doing so. Markets are pricing in 36.5 bps of cuts by year-end, compared to 44.6 bps the week prior, and 66.4 bps a month ago.
Across the Atlantic, eurozone government bond yields trended without clear direction on Wednesday. The yield on Germany's 10-year government bond settled marginally lower, -0.1 bps to 2.709%. The yield on the 30-year German bond was unchanged bps at 3.204%. The German 2-year yield, which correlates to ECB monetary policy expectations, ended the session +2.5 bps higher to 1.967%.
Italy's 10-year yield was up +4.1 bps on Wednesday, reaching 3.531%.
The eurozone demonstrated greater economic resilience than anticipated in Q2, registering a 0.1% expansion against forecasts of no growth. This suggests that businesses within the single currency bloc are effectively adapting to the prevailing uncertainties surrounding trade.
This unexpected growth, coupled with inflation remaining near the ECB’s 2.0% target, has led traders to scale back their expectations for further ECB interest rate cuts this year.
The German 10-year yield is +10.2 bps in July. The spread between US 10-year Treasuries and German Bunds has widened by 4.9 bps from 162.1 bps at the end of June to 167.0 bps now.
Throughout July, the 2-year Schatz +10.1 bps to 1.967%, and on the long end of the maturity spectrum, the German 30-year yield is +11.5 bps MTD.
The Italian 10 year bond yield, a eurozone periphery benchmark, is +4.8 bps MTD to 3.531%. This narrowed the spread over its Bunds equivalent to 82.2 bps, lower than the 87.6 bps recorded at the end of June.
France’s 10-year OAT yield is +7.8 bps in July to 3.363%. The spread on French government bonds versus German Bunds contracted to 65.4 bps, a decrease of 2.6 bps from 67.8 bps at the end of June.
In the UK, the 10 year gilt yield was down by -2.2 bps to 4.608% on Wednesday. It is bps +12.0 MTD.
Note: Data as of 5:00 pm EDT 30 July 2025
What to think about in August 2025
Are Trump’s trade deals all that they seem? In advance of the 1 August tariff deal deadline imposed by the US administration, a number of trade deals have been made, with the baseline appearing to be 15% and requiring investment into the US. For example, the deal with Japan involves a 15% tariff and investment of $550 bn. The deal with the EU is a 15% tariff and commitments to buy $750 billion of American liquefied natural gas, oil and nuclear fuels and invest $600 billion more in the US economy. The deal with South Korea is also a 15% tariff and $350 bn for investments owned and controlled by the US. In hindsight, the UK’s deal of a 10% tariff appears to be generous. There are also deals of 20% tariffs with Vietnam and 19% with the Philippines and Indonesia.
President Trump is also imposing new tariffs on countries that have not made agreements by the 1 August deadline with across the board 15-20% tariffs. And it appears he is suggesting that the range of additional penalties he has threatened to impose on India, a 25% tariff, could include measures against the BRICS bloc of nations. He has already threatened Brazil with 50% tariffs, but this higher rate appears to be partly in retaliation for a supposed political “witch-hunt” against his far-right ally Jair Bolsonaro. BRICS consists of 11 nations, including Brazil, China, Egypt, Ethiopia, India, Indonesia, Iran, Russia, Saudi Arabia, South Africa and the United Arab Emirates. President Trump has referred to the bloc as a group of countries that are anti the United States and anti the US dollar.
The answer to the question of why he is pushing on tariffs is now clearer. It is not because the US has been “taken advantage” of by trading partners and this will eliminate trade deficits, nor to reshore manufacturing jobs, or to isolate China and reduce its global influence, but rather simply a pretext for the US administration to raise money that will allow for tax cuts. If this is true, then there may not be a real rush by the US administration to negotiate new deals after the 1 August deadline. This is because tariff revenues have climbed to a record $150 billion so far this year.
As noted by Foxbusiness.com, the US collected nearly $28 billion in customs duties based on data through 25 July. This is the highest monthly total this year, according to the Treasury Department’s Customs and Certain Excise Taxes data. This has already surpassed June’s monthly record of $27 billion. Treasury Secretary Scott Bessent has previously said the administration predicts tariffs may generate more than $300 billion in revenue for the federal government.
Previously President Trump has said that he wanted to impose tariffs as a response to actions taken by other countries that limit US exports. However, he has also said that tariffs are a way to raise revenue for the federal government and suggested tariffs could replace income taxes. Given the signing into law on 4 July of the ‘one big, beautiful bill’ which will increase borrowing by $4.1 trillion through 2034 according to new estimates from the Congressional Budget Office (CBO) and potentially add over $5.5 trillion to the debt through 2034, revenue from other sources needs to be found. This revenue raising may explain why President Trump has suggested that all countries that do not have an agreement in place by 1 August will face 15-20% tariffs. And, depending on how quickly the US slows due to tariffs raising costs for businesses and consumers, there is an incentive for him to ‘renegotiate’ these tariff rates with countries that think they already have ‘deals’ with the US as was the case with both Canada and Mexico through the USMCA. Although he was unable to force the EU to change its regulations regarding digital services rules, agricultural rules and pharmaceutical pricing, he may still be able to do this to smaller trading partners, particularly if they come/may come into conflict with existing US regulatory requirements in certain sectors. As noted by Simon Nixon, the irony is that these regulatory changes are the one thing that US companies would have most wanted out of any trade deal. Instead, they have been hit with a massive hike in tariffs on imports, which they are currently having to absorb through lower profits, without any increase in market access.
At the end of the day, as noted by Foreign Policy magazine, it should be remembered that there does not, as of yet, appear to be formal binding agreements on these tariffs. In fact, the EU described the deal as a ‘political agreement’. Caution should therefore still be the case as both politics and deficits levels change, leaving room for additional disputes.
Key events in August 2025
The potential policy and geopolitical risks for investors that could affect corporate earnings, stock market performance, currency valuations, sovereign and corporate bond markets and cryptocurrencies include:
7 August Bank of England Monetary Policy Meeting. BoE Governor Andrew Bailey has said that the Bank is ready to lower interest rates further if the UK job market begins to show clear signs of slowing down. However, despite UK inflation being up in June to 3.6% from 3.4% in May, the unemployment rate increased to 4.7% annually between March and May. The Bank is therefore widely expected to cut rates by 25 bps at this meeting.
17 August General election, Bolivia. Voters will elect the President, Vice President, and members of the legislative chambers. The elections are expected to reflect the significant internal divisions within the ruling Movement for Socialism (MAS) party, as current President Luis Arce and former president Evo Morales, who has been barred from running, compete for influence.
31 August - 1 September Shanghai Cooperation Organization (SCO) Summit, Tianjin, China. This will be the 25th Heads of State Council meeting. China, as the rotating president of SCO, is putting together more than 100 events in political, security, economic, and people-to-people fields under the theme of "Upholding the Shanghai Spirit: SCO on the Move." Discussions are expected to focus on efforts to combat terrorism and extremism and promoting trade and investment among member states.
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