Friday 22 August 2025

22 August 2025

Equities ended the week mixed. The S&P 500 recovered Friday on Fed Chair Jerome Powell’s Jackson Hole remarks, which hinted that rate cuts may soon be warranted given restrictive policy levels and rising downside risks to employment. Value stocks and cyclical sectors (energy, financials, real estate, materials) outperformed, while the Nasdaq lagged on profit-taking in AI-linked names.

Treasuries rallied late in the week, driving yields lower after Powell’s comments. On the macro side, PMI data surprised to the upside: services remained strong (55.4) while manufacturing surged to a 39-month high (53.3). At the same time, input costs climbed sharply, with tariffs cited as a key factor. Jobless claims came in higher than expected, adding to concerns around labor market weakness.

Major indexes closed as follows:

Dow Jones: 45,631.74 (+685.62; +7.26% YTD)

S&P 500: 6,466.91 (+17.11; +9.95% YTD)

Nasdaq: 21,496.54 (-126.44; +11.32% YTD)

MidCap 400: 3,255.98 (+83.49; +4.33% YTD)

Russell 2000: 2,361.95 (+75.42; +5.91% YTD)

The STOXX Europe 600 rose 1.4% on optimism about lower U.S. rates. Italy and the UK led gains, with the FTSE 100 hitting a record high. Eurozone PMI data showed expansion (51.1), led by manufacturing, though consumer confidence slipped. In the UK, inflation accelerated to 3.8% y/y while services inflation hit 5.0%. Business activity picked up with composite PMI at 53.0. Sweden’s Riksbank held rates steady at 2% but left the door open for cuts later this year.

Equities fell, with the Nikkei down 1.72%. The yen weakened into the mid-158s per dollar, while JGB yields rose to 1.61%, their highest since 2008. July CPI rose 3.1% y/y, above forecasts, reinforcing expectations of a possible BoJ hike by October. Exports fell 2.6% y/y, pressured by U.S. tariffs and weaker demand across key regions.

Mainland equities extended gains, with the CSI 300 up 4.18% to a decade high and the Shanghai Composite up 3.49%. The rally has been driven largely by retail investors using margin debt, which is nearing record levels last seen in 2015.

Romania: July inflation spiked to 7.84% y/y (vs. 5.66% in June) as electricity caps ended and taxes were adjusted, likely keeping the policy rate at 6.5% for now.

Peru: The central bank held rates at 4.5%, noting inflation steady at 1.7% y/y with expectations around 2%. Economic activity remains near potential.