Resilient economic data combined with relatively benign inflation numbers gave US markets a lift last week, the S&P 500 index climbing 0.59% in local currency.

US earnings season began in earnest last week with a number of big banks reporting. JP Morgan Chase and Citigroup both reported better-than-expected results for Q2.  On Thursday, consumer names such as PepsiCo, United Airlines, and Netflix all released reports that beat forecasts. On the economic front, retail sales rose more than expected in June, with core sales gaining 0.5%. This week’s jobless claims also fell to their lowest level since April to give the labour market some positive news.  Both the US consumer and producer price indices showed the first signs of being impacted by rising tariffs in June. The consumer price index increased 0.3% on the month, putting the year-on-year inflation rate at 2.7%. Excluding volatile food and energy prices, core inflation picked up 0.2% on the month, 2.9% year-on-year. The numbers were in-line with expectations and the avoidance of any shocks was enough to give the equity market support.

US President Trump used the inflation data to once again call on the Federal Reserve to cut rates and speculation grew throughout the week that Trump was set to replace Fed Chair Jerome Powell. The US dollar and equity markets fell on the reports while the Treasury yield curve steepened.

Trade talks between the US and its trading partners continue as the August 1st deadline, set by President Trump, looms. The US administration announced a trade deal on Tuesday under which Indonesia would purchase 50 Boeing jets, $15 billion in energy and $4.5 billion in agricultural commodities, whilst agreeing a reduced tariff rate. Earlier in the week, Trump threatened the European Union and Mexico with 30% tariffs. The EU said it is readying a list of countermeasures against US tariffs if talks breakdown. Canadian Prime Minister Mark Carney acknowledged this week that it may be impossible for Canada to completely avoid US tariffs but said that the two sides are close to an agreement.

Chinese exports rose 5.8% year on year in dollar terms in June, beating expectations as companies used a tariff truce with the US to ship goods ahead of an August deadline for a more definitive deal. Meanwhile, the Trump administration eased export restrictions on certain Chinese purchases of advanced semiconductors, perhaps an indication that the US–China trade relationship is becoming more amicable.

Week Ahead
 

Source: Workspace DataStream, 21/07/2025

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