Weekly Market Commentary

Trade tariff worries return to dampen the investment mood

Last week saw trade tariff worries return to dampen the investment mood. In equity markets, the US S&P500 equity index was -0.31% lower on the week after dropping -0.33% on Friday, while over in Europe the pan-European STOXX600 equity index dropped -1.01% on Friday, reducing its weekly gain to +1.15%. Some of the biggest falls over the past week, however, were reserved for within emerging market equities – in the case of Brazil, where US President Trump last week announced a planned 50% tariff rate from 1 August, the Brazilian IBOVESPA equity index suffered its worst week since December 2022, falling -3.59% on the week (-0.41% Friday), all in local currency terms.

Inflation data and key events to watch out for this week

Aside ongoing trade tariff uncertainty, the planned-focus for markets this week will be on the latest inflation readings. We have the most recent monthly Consumer Price Index (CPI) reports due out from the US and Canada (both on Tuesday), the UK (Wednesday) and Japan (Friday). Alongside the CPI data, the US will also publish data on industrial production and producer prices (both on Wednesday), retail sales (Thursday), as well as University of Michigan’s preliminary consumer sentiment survey (Friday). Elsewhere, China is due to publish Q2 GDP (Gross Domestic Product) data (Tuesday). Last but by no means least, this week sees US banks kick off the calendar Q2 corporate earnings results season, led by the biggest US bank JP Morgan’s results (Tuesday).

Tariff threats resurface as the European Union is back in Trump’s crosshairs

Trade policy remains a dominant theme. US President Trump in the past week has announced a series of fresh tariff proposals, with European Union (EU) among the latest in his trade-tariff crosshairs. Over the weekend, the EU received notice of a 30% tariff rate from 1 August, though for context, this was below the 50% tariff that Trump had threatened a month ago. In response, the EU has been measured in their response so far, choosing to extend (also to 1 August) their suspension of trade countermeasures against the US that were originally due to come into force later this week.

Will tariff uncertainty show up in the upcoming company results season?

Last week saw US President Trump’s tariff pause deadline for most countries pushed out from 9 July to 1 August. But the fact remains that these tariff pauses are temporary, and the threat of material tariff rates beyond this new pause ‘cliff-edge’ date still remains. For countries on the receiving end of Trump’s tariff notices, whether this is all just a negotiating tactic (which is, on balance, where the market consensus appears to be broadly at currently), or something more likely to stick is impossible to determine. Either way however, the latest round of tariff uncertainty risks adding unwelcome friction to global trade and corporate profitability. The Q2 results season which kicks off this week will be a timely opportunity to see whether this uncertainty has already showed up on companies’ bottom lines.