FinX Weekly 11th Aug 2025

Global equities were underpinned by stronger-than-expected US earnings, shrugging off the commencement of new tariffs.  

The Bank of England cut interest rates in a narrow vote. The RBA is expected to cut rates tomorrow, while the Norges Bank is set to hold later this week.  

President Trump will meet Vladimir Putin next week to seek a Ukraine ceasefire, but Kyiv has rejected proposals involving territorial concessions. 

Besides the RBA meeting, the NAB surveys and employment data will be released this week. Chinese trade talks continue, and there will be GDP releases in the Eurozone, UK, and Japan. 

Investor sentiment remained firm through the week, with global equity markets supported mainly by better-than-expected US corporate earnings, offsetting the drag from renewed tariff tensions.  

The United States raised tariffs on imports from India to 50%, up from 25%, citing India’s continued purchase of Russian oil as a breach of US policy goals. In an accompanying executive order, President Trump accused New Delhi of indirectly financing Russia’s war effort and applied additional pressure on India to scale back such purchases. Indian officials are reportedly considering targeted concessions in areas such as agriculture and dairy, sectors that are politically sensitive and central to rural incomes. Indian exporters have expressed deep concern, warning that the measures could cause more disruption than the pandemic, and Prime Minister Narendra Modi has pledged to take all necessary steps to shield the agricultural sector from harm. 

The negotiation period for the current trade talks with China is set to expire this week, but a 90-day extension is expected to be announced. Although Trump has threatened further tariffs if China continues buying Russian oil, senior adviser Peter Navarro suggested the likelihood of such measures was limited, warning they could backfire on US interests. Nonetheless, the uncertainty is likely to keep businesses cautious in investment and supply chain planning. 

President Trump confirmed plans to meet Russian President Vladimir Putin in Alaska next Friday in a bid to secure a ceasefire in Ukraine. The proposed deal would involve some form of “territorial swapping”, an idea that Kyiv has categorically rejected.  

Other trading partners also featured in the week’s tariff diplomacy. Brazil indicated it would not retaliate against recent US measures, suggesting it prefers to avoid escalation at this stage. Switzerland failed to secure a reduction in its 39% tariff rate during talks in Washington. This setback has prompted calls within the Swiss parliament to cancel a CHF 7.3 billion deal to purchase three dozen F-35A fighter jets from Lockheed Martin. Meanwhile, the US appears close to resolving a dispute with Japan over the stacking of tariffs, which had resulted in higher-than-intended levies. Under the expected agreement, Japan’s 15% reciprocal tariff rate would incorporate existing most-favoured-nation duties, with refunds issued for any excess payments. Japanese officials were said to have received verbal assurances in the past, and the US move is seen as an attempt to restore trust. 

Markets also reacted to shifting expectations for the scope and breadth of future US tariff policy. President Trump stated that pharmaceuticals could face tariffs as high as 250% and semiconductors 100%, unless manufacturing is moved to the United States. At the same time, confusion emerged over whether gold bars should be subject to tariffs, triggered by a formal ruling from a US agency, which unsettled bullion markets until the White House clarified its intent to exempt gold from duties.  

Economic data from the United States offered mixed signals. The ISM services PMI pointed to continued expansion in business activity and new orders, reflecting some resilience in domestic demand. However, the employment component remained in contraction territory, and the export and import indices both moved from expansion to contraction, indicating that tariff disputes and slowing global trade are taking a toll. The survey also noted higher price pressures, adding to the challenge for policymakers seeking to balance growth and inflation objectives. 

US Treasury markets softened late in the week following a weak 30-year bond auction, which saw tepid investor demand ahead of this week’s inflation figures. 

On the policy front, the composition of the Federal Open Market Committee shifted after Stephen Miran was appointed to temporarily replace Adriana Kugler, whose term is due to end in January 2026. The number of policymakers favouring rate cuts now appears to have risen to three. Other members of the FOMC are due to speak this week. 

The process of selecting the next Federal Reserve chair also accelerated, with Christopher Waller emerging as a favoured candidate among the President’s advisers. Treasury Secretary Scott Bessent has been tasked with leading the search, conducting initial interviews and narrowing the field before final discussions with the President. Although Bessent himself was considered for the role, he has opted to remain in his current position. 

In the United Kingdom, the Bank of England delivered a -0.25% interest rate cut to 4.0% in an unusually close 5–4 vote, requiring two rounds of voting for the first time in the Monetary Policy Committee’s 28-year history. Governor Andrew Bailey stated that rates are now on a downward trajectory but emphasised that the timing and pace of further moves remain uncertain. The Bank also warned that continued sales of long-dated gilts risk amplifying strains in the government bond market, hinting at a potential slowdown in its quantitative tightening programme. Sterling strengthened on the decision, reflecting investor confidence that the UK’s rate path remains moderately supportive for the currency. 

Eurozone data underlined the ongoing challenges for the bloc’s industrial sector, with German industrial production falling by -1.9% in June from the prior month, and factory orders registering a -1.0% decline. The weakness adds to concerns over a broader slowdown in European manufacturing. 

In Asia, Chinese equity markets recovered from early losses after July trade data came in well ahead of expectations. Exports grew by an annual +7.2%, while imports rose by +4.1%, suggesting that both external and domestic demand may be stabilising despite the trade policy threat. These results provided some relief to markets, which have been closely watching China for signs of economic stabilisation. 

Last week’s rising Australian trade balance and stable job advertisements will not be a barrier to a rate cut. The RBA is widely expected to cut the cash rate by -0.25% to 3.6% tomorrow. Domestically, the week ahead will also bring the NAB business survey and labour market data, both of which will help shape expectations for the RBA’s policy stance into year-end. The local reporting season is also set to gather pace throughout the week. 

Internationally, the week ahead will be closely watched for several key developments: the outcome of Chinese trade negotiations and the meeting between the US and Russia, GDP releases from the Eurozone, UK, and Japan, the ZEW survey for European economic sentiment, and the Norges Bank’s policy meeting, where rates are expected to remain on hold. US CPI figures are due to be published on Tuesday night, with PPI, industrial production and retail sales following later in the week.

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