No Summer Doldrums for Markets

For the week ending 8 August 2025

As of midday Friday, global equities were modestly firmer on the week amid solid earnings reports. The yield on the US 10-year note edged 4 basis points higher from last week amid tepid auction demand for US coupons. The price of a barrel of West Texas Intermediate crude oil fell nearly $4 to $63.95 despite threats of secondary sanctions on buyers of Russian oil. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), fell to 17.50 from 19.60 a week ago.

MACRO NEWS

Fed leans more dovish, Trump nominates Miran

In addition to the two US Federal Reserve governors who voted to cut rates at last week’s FOMC meeting, three more members this week expressed openness to easing policy in the months ahead. San Francisco Fed President Mary Daly, Minneapolis Fed President Neel Kashkari and Governor Lisa Cook all voiced concerns about the US labor market and several said the Fed may need to cut rates two or more times before the end of the year. Odds of a September rate cut have risen to more than 90%. In other Fed news, last Friday, Adriana Kugler announced her resignation from the Board of Governors, effective 8 August. Her term expires in January 2026. President Donald Trump on Thursday nominated Stephen Miran, the chair of the Council of Economic Advisers, to fill out the remainder of Kugler’s term while mulling his options over the appointment of the next Fed chair, having narrowed the list to three individuals. Trump said Treasury Secretary Scott Bessent has taken himself out of consideration for the post while stating that Kevin Warsh and Kevin Hassett are strong contenders for the role. Bloomberg reported Thursday that Trump’s economics team is impressed with Fed Governor Christopher Waller, one of the two dissenters who voted to cut rates at last week’s meeting. Waller has met with the search team, but hasn’t yet met with Trump.

Trump announces semiconductor tariffs

After foreshadowing the move for months, President Trump announced that the US will impose 100% tariffs on semiconductor imports. However, there are broad exemptions to the levies for companies that are investing heavily in US production facilities, including the largest Taiwanese and South Korean chipmakers. After committing an additional $100 billion to procure US-produced components for its products, Apple products will avoid the levy.

Trump: No Putin meeting without Zelensky

The Kremlin announced Wednesday that Putin and Trump would meet in coming days. But with the US increasing pressure on Russia to agree to a ceasefire in Ukraine, the White House said Thursday that President Trump will only meet with Russian President Vladimir Putin if the Russian leader also meets with Ukrainian President Volodymyr Zelensky. Trump is considering additional sanctions on Russia’s “shadow fleet” of oil tankers if Putin does not agree to a ceasefire. The US this week also hit India with 25% tariffs, on top of the 25% reciprocal level put in place August 1, to punish India’s continued purchases of Russia oil. Bloomberg reported Friday morning that the US and Russia aim to freeze the war in place with Ukraine ceding territory to Russia, and paving the way for a peace treaty.

Bank of England cuts rates, as expected, in an unexpected way

Investors widely expected the Bank of England to cut rates 0.25% to 4% on Thursday, and they did just that. What they didn’t expect was for the Monetary Policy Committee having, for the first time in history, to vote twice on the matter. The first tally was tied at 4–4–1, with one member voting to cut rates 50 basis points. That member switched to a 0.25% cut in the second round of voting, producing a 5–4 majority in favor of the quarter-point cut. As a result of the close vote, markets now expect a slower pace for BOE rate cuts. Similar to the challenge faced by the Fed, the committee grappled with a trying backdrop of slowing economic growth and still-sticky inflation. Following the meeting, BOE Governor Andrew Bailey said that the path for interest rates is still downward over time. 

QUICK HITS

OPEC+ announced that in September it will unwind the balance of the voluntary 2.2 million barrels a day production cap put in place in late 2023, adding an additional 574,000 barrels a day to global output.

US durable goods orders fell 9.4% in June, led by a decline in aircraft orders. Stripping out transportation, orders rose 0.2%. Nondefense capital goods orders ex-transportation fell 0.8%.

Eurozone retail sales rose a stronger-than-expected 3.1% year over year in June.

President Trump fired Bureau of Labor Statistics Commissioner Erika McEntarfer in the wake of last Friday’s massive downward nonfarm payrolls revision.

US Commerce Secretary Howard Lutnick said Thursday that the US is likely to extend the trade truce with China for another 90 days.

On Thursday, the Bank of Mexico cut its overnight lending rate 0.25% to 7.75%.

President Trump signed an executive order Thursday easing the way for alternative assets such as cryptocurrencies and private equity to be included in 401(k) plans.

Italy announced this week it will build a bridge linking the Italian mainland with Sicily, a project that has been contemplated for decades. The Italian government said the bridge will be a security asset, which allows it to categorize the project as a military expense and count it toward its NATO spending commitments. 

Swiss President Karin Keller-Sutter left Washington this week after failing to reach agreement with the US on reducing the 39% tariff on US imports from Switzerland. Keller-Sutter said negotiations continue and that Switzerland will not take retaliatory action, for now.

While weekly US jobless claims remain low, continuing claims rose to a high of 1,974,000 for this cycle, indicating it is increasingly difficult for the unemployed to find jobs.

Germany is preparing to launch a €100 billion investment fund to help bolster strategic sectors such as defense, energy and critical raw materials. The investment vehicle, the Germany Fund, will be designed to attract international investors, including venture capital and family offices, to magnify government resources.

The Canadian economy shed nearly 41,000 jobs in July, much weaker than forecasts for a gain of 10,000. The unemployment rate held steady at 6.9% while wages rose a greater-than-expected 3.5% year over year.

US Customs and Border Protection has clarified that one-kilogram and 100-ounce gold bars are subject to reciprocal tariffs enacted by President Trump and are not exempt as the industry had initially understood, causing chaos in the futures markets. Switzerland feels the impact particularly hard due to the 39% US baseline tariff on Swiss imports as it is a large gold refiner.

Weak investor demand at this week’s 3-, 10- and 30-year US Treasury auctions bears watching if repeated in the months ahead. Yields backed up modestly on the week.

EARNINGS NEWS

With about 90% of the constituents of the S&P 500 Index having reported for Q2 2025, blended earnings per share (which combines reported data with estimates for those that have yet to report) show that earnings rose around 11.7% compared with the same quarter last year, according to data from FactSet. Blended sales rose 6.3% year over year.

THE WEEK AHEAD

Monday: Germany CPI

Tuesday: Australia RBA meeting; UK unemployment; US CPI

Wednesday: Japan PPI

Thursday: UK GDP: eurozone GDP: US PPI

Friday: Japan GDP: US retail sales, existing home sales

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.