Weekly Market Update – 28 July 2025

A positive week for global equities, driven by the announcement of multiple trade deals ahead of the upcoming reciprocal tariff deadline. US equities reached new record highs and Japanese equities soared, whilst UK stocks rally, brushing off softening economic data. Chinese equities jump on hopes of a tariff truce extension, whilst US-EU trade talks remain in focus.

US: Favourable trade deal news drives stocks to record highs

US equities reached fresh record highs for the second consecutive week, driven by announcements that the U.S. had reached agreements with Japan, Indonesia, and the Philippines. Reports that the U.S. and European Union (EU) are progressing toward a deal ahead of the August 1 deadline also appeared to boost sentiment during the week. The week also brought a slew of corporate earnings reports, including two of the Magnificent Seven stocks, which had mixed responses. Google’s parent company Alphabet rallied +4.38%, meanwhile, Tesla’s report fell short of expectations, seeing the stock pullback -4.12% for the week. In a light week of economic data releases, the US flash Purchasing Managers’ Index (PMI) data for July highlighted that the US economy grew at a sharply increased rate at the start of the third quarter, driven by growth in the services sector. Meanwhile, manufacturing business conditions deteriorated for the first time this year.

Japan: Stocks soar on trade deal with the US

Japan’s stock markets registered strong gains over the week, with the Nikkei 225 Index rallying +4.11%. Segments of the market, notably auto original equipment manufacturers, soared on the announcement that Japan and the U.S. had reached a trade deal. The agreement sets a 15% tariff for most Japanese goods exported to the U.S., including autos. The U.S. had threatened to impose a 25% tariff rate, so the outcome was viewed as favourable. It was also announced that the Japanese government would support investments totalling around USD 550 billion to bolster a number of industries in the U.S., as well as open Japan’s markets to key American goods. Following the governing Liberal Democratic Party-Komeito coalition’s loss of its majority in Japan’s July 20 Upper House election, speculation grew that Prime Minister Shigeru Ishiba would resign, although he denied reports that he would step down once the Japan-U.S. trade negotiations were complete.

China: Stocks rally on hopes for a continued stabilisation in US-China relations

Mainland Chinese stock markets rose on hopes for an extension of a tariff truce with the U.S. ahead of another round of trade talks between both countries. The onshore benchmark CSI 300 Index advanced 1.69% in local currency terms. U.S. Treasury Secretary Scott Bessent plans to meet with Chinese officials in Stockholm, Sweden, this week for a third round of talks aimed extending the current trade deal, which expires in August. The Stockholm meeting follows discussions in Geneva in May that produced a 90-day pause in tariffs and a second round in London in June that led to each country lifting export controls.

Europe: Stocks mixed as investors keep an eye on trade talks

Tentative optimism around a possible EU-U.S. trade deal supported sentiment, although the EU said it could retaliate with counter-tariffs in the absence of an agreement. The European Central Bank (ECB) held rates steady, and the comments accompanying its decision were perceived as slightly hawkish. Eurozone inflation is currently at the ECB’s 2% medium-term target, and the economy is performing in line with or better than expectations, in the central bank’s assessment. However, the global environment remains highly uncertain as a result of trade disputes. Among Europe’s major markets, Italy’s FTSE MIB gained 1.03%, France’s CAC 40 Index posted a modest gain, and Germany’s DAX fell 0.30%.

UK: UK-India trade deal boosts stocks despite economic data continuing to soften

UK retail sales increased 0.9% month on month (m/m) in June, short of consensus expectations for a 1.2% m/m rise, but recovering from a 2.8% m/m fall in May. Retail sales were lower than expected across the board, despite the warm weather in June, which had been expected to boost consumption. Manufacturing data improved, whilst services data fell slightly for the month. A significant move down in the employment balance provided evidence of a weakening labour market. Stocks finished higher for the week, boosted by the long-awaited trade deal with India, which Prime Minister Keir Starmer hailed as the “biggest and most economically significant” agreement Britain has made since Brexit.