The global markets didn’t just stumble last week—they crashed through the front door. What began as a cautiously optimistic earnings season rapidly devolved into a whirlwind of anxiety, as a potent trifecta hit investors squarely: renewed trade tensions, a shockingly weak U.S. jobs report, and increasingly complex central bank dynamics.
In this breakdown, we examine the week's major developments across the U.S., Europe, the UK, Japan, and China—highlighting what happened, why it matters, and what to watch next.
United States: From Earnings Relief to Economic Anxiety
U.S. equities had their worst week in months:
S&P 500: -2.36%
Nasdaq: -2.17%
Dow Jones: -2.92%
Russell 2000: -4.17%
Two big catalysts drove the selloff:
Trade Turmoil Returns: President Trump signed an executive order imposing new tariffs on most U.S. trading partners, effective August 7. Although partial deals with the EU and South Korea helped somewhat, uncertainty remains extremely high.
Jobs Data Disappoints: July saw only 73,000 new jobs—well below expectations—and previous months were revised sharply downward, revealing a labor market far weaker than believed.
The Fed’s Dilemma: The central bank held rates steady, but internal dissent is rising. Two Fed governors voted for immediate rate cuts, even as June’s inflation rose to 2.8% YoY. Markets are now pricing in a likely rate cut in September.
Earnings Season: Despite the chaos, 66% of S&P 500 companies reporting so far have posted an average earnings growth of 10.3%, led by Microsoft and Meta. However, warnings from companies like Ford on tariff-related cost pressures highlight cracks beneath the surface.
Volatility Spikes: The VIX surged 37% this week—a clear signal of heightened fear around inflation, growth, and policy uncertainty.
Takeaway: The U.S. market narrative flipped hard this week—from optimistic earnings to full-blown macro worry. Policy is paralyzed. Markets are hypersensitive.
Europe: Trapped Between Stagnation and Sticky Inflation
European markets followed Wall Street lower:
STOXX Europe 600: -2.57%
Germany DAX: -3.27%
France CAC 40: -3.68%
Trade Deal Doubts: The new U.S.-EU trade framework fell flat. Tariffs were lower than feared on some goods—but details were vague, and the 50% steel/aluminum tariff remains in place.
Economic Softness:
Eurozone GDP (Q2): +0.1% (vs. +0.6% Q1)
Headline Inflation: 2.0%
Core Inflation: 2.3% (still too high for ECB comfort)
Unemployment: Record low at 6.2%
Takeaway: Europe’s growth is stalling, but inflation is still too high for the ECB to act aggressively. Add trade headwinds—and there’s little room to maneuver.
United Kingdom: Housing Surprises, But Trade Risks Linger
FTSE 100: -0.57%
The UK outperformed its continental peers, thanks to:
Weaker Pound: Boosted large-cap exporters
Surprising Housing Data: Nationwide House Price Index rose 0.6% in July, while mortgage approvals exceeded forecasts
However, no formal trade deal with the U.S. yet, and global demand remains a major vulnerability.
Takeaway: Domestic resilience shows green shoots, but external risk exposure keeps the UK market cautious.
Japan: Inflation Rises, Yen Slides
Nikkei 225: -1.58%
TOPIX: -0.11%
Key Concern: The yen fell past 150/USD—its weakest in four months—prompting official warnings. Currency instability is now a top risk.
BoJ Policy: Rates stayed at 0.5%, but inflation forecasts were raised, and the governor struck a more confident tone. Rate hike speculation for later in the year is gaining traction.
Economic Data:
Industrial Production: +1.7% MoM
Retail Sales: +2.0% YoY
Takeaway: Japan’s domestic economy looks solid, but FX risks and trade uncertainties remain in focus.
China: PMI Shock and Stimulus Pressure Mounts
Shanghai Composite: -0.94%
CSI 300: -1.75%
Hang Seng: -3.47%
Both official and private PMIs fell below 50, indicating a contracting factory sector. Extreme weather worsened the picture, and domestic demand remains sluggish.
Export Front-loading is fading, and momentum is clearly slowing. Pressure is building on Beijing to introduce stronger, more targeted stimulus.
Takeaway: The early-year recovery is losing steam. Investors want more action—and soon.
The Week Ahead: August 4–8
United States
Monday: Factory Orders (June)
Tuesday: Trade Balance (June), ISM Services PMI (July)
Thursday: Labor Costs, Productivity, Consumer Credit, Weekly Jobless Claims
Europe
Thursday: Germany Trade Balance
UK: Bank of England Rate Decision
China
Thursday: July Trade Data (exports/imports)
Top 5 Strategic Risks to Watch in August
U.S. Recession Risk – Soft data is stacking up.
Trade Escalation – From tariffs to a full-blown trade war.
China’s Slowdown – Weak PMIs could spill into global demand.
Volatility Surge – The VIX spike may be just the beginning.
Central Bank Divergence – Fed easing vs. BoJ/BoE hawkishness could destabilize FX markets.
FAQs
Q: Is the Fed likely to cut rates in September?
A: Market odds have jumped following weak jobs data. The Fed is in a tight spot with rising inflation.
Q: Should investors panic over volatility?
A: Not necessarily—but the VIX surge signals growing anxiety. Positioning defensively may be wise.
Q: Is China’s slowdown temporary?
A: That depends on how forcefully Beijing responds. Current stimulus efforts are seen as too mild.
Q: How real is the risk of a global trade war?
A: It’s rising. The new U.S. tariffs are a clear escalation, and more may follow if talks fail.
Q: What would central bank divergence mean for investors?
A: Currency swings, asset re-pricing, and capital flow shifts—especially in emerging markets.
Hashtags
#GlobalMarkets #USJobs #FedWatch #Tariffs #Inflation #ChinaSlowdown #ECB #BoE #BoJ #MarketVolatility #RecessionFears #EarningsSeason
