Friday 15 August 2025
End the week
15 August 2025
U.S. inflation data drive September rate cut speculation
Equities hit records on rate cut hopesU.S. stocks advanced across the board last week, with small-cap shares leading gains. The Russell 2000 outpaced the S&P 500 by the widest margin since April, while the S&P 500 and Nasdaq both touched new highs before easing slightly into Friday’s close. Optimism was fueled by expectations that the Federal Reserve may cut rates in September.
Tariffs were less of a market driver, though the U.S. and China extended their trade truce by 90 days, delaying higher duties while negotiations continue.
Inflation data mixed
CPI (July): Headline inflation cooled slightly to 0.2% m/m, helped by lower food and energy costs. Core CPI ticked higher to 0.3%, pushing annual inflation to 3.1%, the strongest since February.
PPI (July): Wholesale prices rose 0.9% m/m, well above expectations, driven mainly by services.
Markets initially rallied on the softer CPI print but gave back some gains after the hotter PPI data reduced odds of a September cut.
Consumer data
Retail Sales: July retail sales climbed 0.5%, boosted by autos, with June revised higher.
Consumer Sentiment: The University of Michigan’s survey fell to 58.6, with inflation expectations edging up to 4.9%.
Bonds
The Treasury curve steepened: short yields fell modestly while long yields rose, especially after PPI data.
Investment-grade corporate bonds outperformed with strong demand, and high yield debt also posted gains.
Major Indexes (Weekly Change | YTD)
Dow Jones: 44,946.12 | +770.51 | +5.65%
S&P 500: 6,449.80 | +60.35 | +9.66%
Nasdaq: 21,622.98 | +172.96 | +11.97%
MidCap 400: 3,172.49 | +48.45 | +1.65%
Russell 2000: 2,286.52 | +68.10 | +2.53%
Markets gain on trade optimism and easing tensionsThe STOXX Europe 600 rose 1.18%, supported by optimism around trade and hopes for a U.S. rate cut. France’s CAC 40 led with a 2.33% gain, Italy’s FTSE MIB rose 2.47%, Germany’s DAX added 0.81%, and the UK’s FTSE 100 gained 0.47%.
Key data
UK: GDP rebounded 0.4% in June, beating expectations. Job losses slowed, though unemployment held at 4.7%. Wage growth cooled to 4.6%.
Eurozone: Industrial production fell 1.3% m/m in June, worse than forecasts. Germany’s ZEW sentiment index slid to 34.7, reflecting weaker confidence.
Norway: Norges Bank kept rates at 4.25%, signaling potential further easing this year.
Stocks hit records on strong GDP and earningsJapan’s Nikkei 225 rose 3.7% and TOPIX climbed 2.8%, both reaching record highs. Q2 GDP grew 1.0% q/q (annualized), well above expectations. Exports surged ahead of U.S. tariffs, and consumption surprised to the upside.
The yen strengthened slightly to ~146.9 per dollar, while the 10-year JGB yield rose to 1.57% as speculation builds the Bank of Japan may hike rates sooner than expected.
Markets rise as tariff truce extendedThe CSI 300 gained 2.37% and Shanghai Composite 1.70%, while Hong Kong’s Hang Seng added 1.65%. Gains were fueled by news of a 90-day extension of the U.S.–China tariff pause.
Economic signals mixed
CPI: Flat y/y in July.
PPI: -3.6% y/y, extending a long deflationary streak.
Retail Sales: Grew 3.7% y/y, slowest pace since December.
Industrial Output: Rose 5.7% y/y, softer than June’s 6.8%.
Fixed Asset Investment: Up 1.6% YTD, also below expectations.
Hungary: July inflation eased to 4.3% y/y, but with core inflation at 4%, policymakers are expected to hold rates at 6.50% into 2025.
Mexico: The central bank cut rates by 25 bps to 7.75%. While growth has been firm, policymakers flagged economic slack, trade risks, and a softer inflation outlook as justification to extend the easing cycle.