This past week brought a wave of optimism in global markets, powered by breakthroughs in international trade. Equity indices soared, trade tensions eased, and earnings delivered—but beneath the surface, mixed signals are emerging. From manufacturing slumps to political instability and uneven inflation, the picture is far from one-dimensional.
Let’s unpack what really happened—and why it matters for the week ahead.
Global Markets Rally on Trade Optimism
Markets surged globally, driven by a series of new trade deals ahead of the August 1 tariff deadline. The S&P 500 rose 1.46%, the NASDAQ climbed 1.02%, and the Dow Jones gained 1.26%—each reflecting relief over eased tariff risks and solid earnings reports.
The U.S. inked agreements with Japan, Indonesia, and the Philippines, while talks with the EU made real progress. The positive sentiment was immediate, reminding us just how influential trade certainty is in a market hungry for stability.
US Equities: Tech Earnings Shine, But Risks Persist
Notable earnings reports shaped sentiment. Alphabet soared 4.4%, fueled by strong commentary around AI development. Tesla fell 4.1%, missing earnings expectations.
Meanwhile, economic signals were increasingly split. The July Flash Services PMI rose to 55.2, indicating strong momentum in services. But manufacturing PMI dipped below 50, landing at 49.5, signaling contraction.
Housing also added concern. Existing home sales dropped 2.7% in June, as affordability constraints and elevated mortgage rates weighed on buyers.
In the bond market, long-term yields eased, and investment-grade credit saw strong demand. Notably, the bank loan market marked its fourth busiest issuance day ever—a sign that capital remains active but selective.
Europe: Relief, But Fragility Remains
The Stoxx 600 gained 0.54%, while the FTSE 100 led with a 1.43% rise. However, Germany’s DAX slipped modestly, and France's CAC 40 posted moderate gains.
The ECB held rates steady at 2%, pausing after eight consecutive cuts. President Lagarde’s tone turned more cautious—signaling that no further cuts are likely soon. The euro firmed slightly as a result.
Economic indicators were mixed. The Eurozone PMI edged up to 51.0, signaling weak expansion. Germany showed slight improvement in sentiment. France softened. In the UK, retail sales rose 0.9% but missed expectations, and PMIs showed services cooling and labor slack increasing.
Japan: Major Rally Fueled by Trade Breakthrough
Japan’s markets soared, with the Nikkei 225 and TOPIX both rising 4.1%. The key catalyst: a trade deal with the U.S. that capped tariffs at 15% on most exports, a major improvement over the previously feared 25%.
But headwinds remain. Political instability rose after Prime Minister Ishiba’s coalition suffered losses in the upper house elections. Tokyo CPI came in at 2.9%, below expectations. Services held steady while manufacturing slumped, partly due to earlier trade fears.
China: Sentiment Up on Diplomatic Hopes
Markets rallied on trade truce hopes. CSI 300 gained 1.69%, Shanghai Composite rose 1.67%, and Hang Seng added 2.27%.
Investors are optimistic that U.S.–China trade talks in Stockholm could extend the tariff truce set to expire in August. The memory of the April 145% tariff scare is still fresh, and the hope for diplomatic breakthroughs lifted confidence.
Still, domestic support measures are lacking. Investors now await upcoming PMI data and potential stimulus announcements to reinforce the rebound.
The Week Ahead: Key Data to Watch (July 30–August 1, 2025)
United States
Wednesday, July 30: Q2 GDP Advance Estimate
Wednesday, July 30: Fed Rate Decision and press conference
Thursday, July 31: Core PCE Price Index and personal income
Friday, August 1: Non-Farm Payrolls and ISM Manufacturing PMI
Europe
Wednesday, July 30: Q2 GDP Flash Estimates for Germany, France, Italy, and the Eurozone
Thursday, July 31: Preliminary July Inflation
Friday, August 1: Eurozone CPI (flash)
Asia
Thursday, July 31: Japan BOJ Rate Decision and Consumer Confidence
Thursday–Friday: China NBS and Caixin Manufacturing PMIs
Top 5 Market Risks to Watch This Week
US manufacturing and housing weakness. Strong services are masking softness in foundational sectors. If weakness persists, it may drag down broader momentum.
Eurozone’s fragile recovery. Despite calm from the ECB, the data remains mixed. Any negative surprises could rattle investor confidence.
Japan’s political and inflation pressures. While the trade breakthrough was positive, uncertainty around leadership and rising inflation could complicate long-term policy.
Uncertainty from U.S.–China trade talks. Markets are optimistic, but without concrete progress, sentiment could quickly reverse.
Economic reality vs investor optimism. This week’s data will test whether markets are pricing in real strength—or ignoring critical fragilities.
Final Thought
Markets are celebrating—for now. Trade progress, strong tech earnings, and dovish signals have lifted equities globally. But a dense calendar of GDP, inflation, and labor data is about to test whether the rally is rooted in reality or inflated by hope.
The big question for the week ahead: will hard data support investor optimism—or force a reevaluation of expectations?
We’ll be back next week with the answers. Until then, stay informed—and stay curious.
FAQs
Are markets rallying despite weak economic fundamentals?
Yes. Trade optimism and strong earnings are overpowering weak signals from housing and manufacturing—for now.
Will the Fed hike rates this week?
No. A pause is expected, but all eyes will be on Powell’s tone and forward guidance.
Why did Japan’s markets spike?
The new U.S.–Japan trade deal capped tariffs at 15%, calming markets and fueling a relief rally.
What could derail the Eurozone’s stability?
Weaker-than-expected growth or sticky inflation could push the ECB back into action sooner than expected.
What’s at stake in U.S.–China talks?
A breakdown would revive tariff fears, spook markets, and shake global trade flows.
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