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Global Markets Weekly Update

Several trade deals announced ahead of upcoming “reciprocal” tariff deadline

July 2025, In the Loop

U.S.

Favorable trade deal news propels stocks to record highs

Stocks posted gains for the week, pushing the S&P 500 Index and Nasdaq Composite to record highs for the second consecutive week. The Dow Jones Industrial Average rose 1.26%, while the S&P MidCap 400 and Russell 2000 indexes both climbed over 0.9%. Value stocks outpaced their growth counterparts throughout most of the week, although the spread was relatively modest by Friday’s close. 

Stocks were supported by headlines around several new trade deals during the week, including 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 August 1—which President Donald Trump has set as the deadline to impose 30% tariffs on European goods—also appeared to boost sentiment during the week. 

The week also brought a slew of corporate earnings reports, including two of the so-called Magnificent Seven stocks, which had mixed responses. Google parent company Alphabet (up 4.38%) reported results on Wednesday that largely beat consensus estimates, while the company’s commentary around artificial intelligence (AI) appeared to provide a tailwind for other stocks with AI exposure. Meanwhile, Tesla’s report appeared to fall short of consensus expectations, driving the electric vehicle maker’s stock lower by 4.12% for the week. 

Demand for services drives business activity growth 

In a light week of economic data releases, the highlight of the calendar was possibly S&P Global’s report of its U.S. flash Purchasing Managers’ Index (PMI) data for July. According to the report, U.S. business activity growth accelerated to start the third quarter, with the composite PMI output index jumping 1.7 points to a seven-month high of 54.6 (readings above 50 signal expansion). The expansion was entirely driven by growth in the services sector, with the services PMI rising to 55.2 from 52.9 in June. Meanwhile, the manufacturing PMI dropped from 52.9 in June to 49.5 in July, the lowest reading since December. 

According to Chris Williamson, chief business economist at S&P Global Market Intelligence, “The flash PMI data indicated that the U.S. economy grew at a sharply increased rate at the start of the third quarter…Whether this growth can be sustained is by no means assured. Growth was worryingly uneven and overly reliant on the services economy as manufacturing business conditions deteriorated for the first time this year, the latter linked to a fading boost from tariff front-running.”

Housing market remains sluggish amid elevated mortgage rates

On Wednesday, the National Association of Realtors reported that existing home sales declined 2.7% month over month to a seasonally adjusted annual rate of 3.93 million in June, while the median sales price of existing homes hit a record high of USD 435,300. The report noted that “high mortgage rates are causing home sales to remain stuck at cyclical lows,” while “multiple years of undersupply are driving the record high home price.” 

Bank loan market sees fourth-largest new issue day in history

U.S. Treasuries generated modestly positive returns heading into Friday as yields fluctuated but generally ended lower than the prior week. (Bond prices and yields move in opposite directions.) Long-term yields decreased on headlines from the Fed’s regulatory conference and emphasis on the importance of the Fed’s independence. 

The U.S. investment-grade corporate bond market outperformed Treasuries as spreads tightened in the latter half of the week. Investment-grade bond issuance was in line with expectations, and deals were generally oversubscribed. Elsewhere, T. Rowe Price traders noted that the bank loan primary calendar was very active, and Monday represented the fourth-largest notional new issue launch day in the market’s history, although most of the deals were repricing transactions.

Index Friday's Close Week's Change % Change YTD
DIJA 44,901.92 559.73 5.54%
S&P 500 6,388.64 91.85 8.62%
Nasdaq Composite 21,108.32 212.66 9.31%
S&P MidCap 400 3,218.31 46.76 3.12%
Russell 2000 2,261.07 21.06 1.39%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price’s presentation thereof.

Europe

In local currency terms, the pan-European STOXX Europe 600 Index rose 0.54%. 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, which underpinned the euro’s gains against the U.S. dollar. 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%. The UK’s FTSE 100 Index rose 1.43%. 

ECB holds interest rates; eurozone private sector shows resilience 

At its July 24 meeting, the ECB kept its key interest rate, the deposit facility rate, unchanged at 2%. The decision to hold the rate steady, after eight cuts since June 2024, had been widely anticipated. 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 exceptionally uncertain, especially because of trade disputes. 

ECB President Christine Lagarde said that the central bank was in a “wait-and-watch” situation, citing uncertainty caused by trade and tariffs. She reiterated the bank’s determination to keep inflation at its target and its commitment to data-dependent decision-making. Lagarde’s comments suggesting that the central bank would not be swayed by small deviations away from its inflation target were largely seen as hawkish.

On the economic data front, eurozone business activity grew at an increased rate in July, with the HCOB Flash Eurozone Composite PMI Output Index rising to 51.0, from 50.6 in June, with output increasing modestly across both the services and manufacturing sectors. Confidence among businesses in Germany strengthened but deteriorated among French firms. 

UK economic data continue to soften

In the UK, data released by the Office of National Statistics showed that 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. 

S&P Global’s preliminary UK composite PMI fell to 51.0 in July from 52.0 in June. While the manufacturing PMI improved, the services PMI fell slightly. A significant move down in the employment balance provided evidence of a weakening labor market. Both the budget measures of the UK government—the decision to make firms pay more in staff social security contributions from April this year and the impact of higher trade tariffs—weighed on the private sector.

Japan

Japan’s stock markets registered strong gains over the week, with both the Nikkei 225 Index and the broader TOPIX Index rising 4.1%. 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 favorable. It was also announced that the Japanese government would support investments totaling 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.  

Domestic political backdrop remains uncertain

Largely as a result of domestic political uncertainty, the yield on the 10-year Japanese government bond rose to 1.59%, from 1.53% at the end of the previous week. 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. 

Greater clarity about tariffs keeps alive expectations for rate hike this year

On the economic data front, the Tokyo-area core consumer price index (CPI), regarded as a leading indicator of nationwide price trends, rose 2.9% year on year in July, short of consensus expectations of a 3.0% increase and easing from 3.1% in June. However, with inflation remaining well above the Bank of Japan’s (BoJ’s) 2% target and given that the Japan-U.S. trade deal to some extent reduced uncertainty about the economic outlook, more investors converged around the view that the BoJ could again raise interest rates this year, having last raised rates in January.

Japan’s flash PMI data showed that business activity in the services sector expanded at a solid pace in July, while the PMI reading for manufacturing saw a sharp contraction over the month, owing to negative tariff developments—although the segment could likely rebound with Japan and the U.S. reaching a trade deal.

China

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%, and the Shanghai Composite Index rose 1.67% in local currency terms, according to FactSet. In Hong Kong, the benchmark Hang Seng Index advanced 2.27%.

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. News of the Stockholm talks raised hopes for a continued stabilization in U.S.-China relations after both countries had appeared on track for decoupling when the Trump administration imposed 145% tariffs on China in April. 

Other Key Markets

Hungary

Rates on hold amid inflation risks and expectations for growth to accelerate

On Tuesday, the National Bank of Hungary (NBH) held its regularly scheduled policy meeting and kept its key policy rate, the base rate, at 6.50%. The NBH also held the overnight collateralized lending rate—the upper limit of an interest rate “corridor” for the base rate—at 7.50%. In addition, the central bank kept the overnight deposit rate, which is the lower limit of that corridor, at 5.50%.

According to the central bank’s post-meeting statement, the global economic environment remains uncertain due to ongoing trade and geopolitical tensions, but policymakers noted that “expenditure-increasing programmes announced in the European Union and those approved in the United States could stimulate growth from the next year onwards.” While they observed that inflation decreased in most countries around the world in the first half of the year, they also believe that tariffs, rising global food prices, and “high price dynamics in market services” are the main risks to an increase in inflation.

In Hungary, central bank officials acknowledged that the economy “stagnated” in the first quarter, with high-frequency data suggesting “subdued” second-quarter performance. However, they believe “internal and external factors will support the acceleration of growth” over the next year. These factors include rising real wages, tax reductions, and “the recovery of the European economy.”

As for inflation, policymakers noted that inflation in June rose to 4.6% while core inflation fell to 4.4%, and they claimed that “mandatory and voluntary price restriction measures had a significant diminishing effect on inflation.” The absence of those measures would suggest that inflation pressures are still quite elevated in the Hungarian economy. Unsurprisingly, central bank officials decided to leave interest rates unchanged. 

Türkiye (Turkey)

Policymakers reduce rates but remain somewhat hawkish

On Thursday, Türkiye's central bank held its scheduled monetary policy meeting, and policymakers decided to reduce the one-week repo auction rate by 300 basis points, from 46.0% to 43.0%. This action largely reverses the central bank’s 350-basis-point rate increase back in April. Simultaneously, policymakers cut the overnight lending rate from 49.0% to 46.0% and the overnight borrowing rate from 44.5% to 41.5%.

According to the post-meeting statement, policymakers believe that recent economic data are showing signs “that the disinflationary impact of demand conditions has strengthened.” This seems to be the justification for the reduction in rates at this time. However, policymakers seem to have remained somewhat hawkish, as they stated that inflation expectations and pricing behavior “continue to pose risks to the disinflation process.” Also, they asserted that the “tight monetary policy stance…will be maintained until price stability is achieved” and that “coordination of fiscal policy will contribute” to the disinflation process.

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IMPORTANT INFORMATION

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price affiliated companies and/or associates.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy. There is no guarantee that any forecasts made will come to pass.

Past performance is not a guarantee or a reliable indicator of future results. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor and T. Rowe Price Associates, Inc., investment adviser.

202507-4696062

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