In the UK, GDP growth surprised on the upside, with the economy expanding 0.4% in June and 0.3% for the second quarter, ahead of expectations but slower than earlier in the year. The labour market cooled slightly but remained stable - unemployment held at 4.7% while wage growth slowed. Retail sales softened and housing sentiment weakened further, pointing to pressure on households. Across Europe, momentum slowed as eurozone GDP barely grew (0.1% in Q2), industrial production fell, and investor confidence - particularly in Germany - dropped sharply. Norway’s central bank kept rates unchanged at 4.25% but signalled the possibility of further cuts later this year.
US markets ended the week stronger, lifted by growing confidence that the Federal Reserve is edging closer to interest rate cuts. The S&P 500 and Nasdaq touched fresh records midweek before easing into Friday, while the Dow also advanced. Gains reflected optimism that softer headline inflation, resilient consumer demand, and labour-market stability could allow the Fed to start easing policy, even as underlying price pressures remain sticky. Futures now price nearly 90% odds of a September rate cut, with Chair Jerome Powell’s Jackson Hole speech later this month expected to give clearer policy guidance.
US inflation data was mixed. Headline CPI slowed to 0.2% in July, helped by lower energy and grocery prices, but core CPI rose 0.3% - its fastest pace this year. Producer prices also jumped 0.9%, the biggest increase in three years, keeping inflation concerns alive. On the positive side, retail sales rose 0.5% and jobless claims declined, pointing to resilience in household spending and employment. Still, consumer sentiment dipped as inflation worries resurfaced, highlighting the challenge the Fed faces in balancing growth with price stability.
China’s data showed clear signs of slowing momentum. Industrial production, retail sales, and investment all missed expectations, while the property market weakened further with home prices down 2.8%. Household loan demand contracted, inflation was flat, and producer prices fell for the 34th straight month, underscoring persistent deflationary pressures. A 90-day extension on US-China tariff talks provided a short-term lift to sentiment, but weak data reinforced expectations that Beijing will need to ramp up fiscal support to stabilise growth.
Japan was a positive outlier. GDP expanded at an annualised 1.0% in the second quarter, well above forecasts, supported by stronger exports, resilient investment, and firmer consumer spending. Producer prices rose 2.6% year-on-year, adding to evidence of cost pressures. The yen strengthened and 10-year government bond yields climbed, as markets increasingly expect the Bank of Japan could raise rates later this year or in early 2026.
Geopolitical risks also remained in focus. Ukraine’s President Zelenskiy rejected Russian demands to cede the Donbas region ahead of US-Russia talks, while Russia’s banking sector came under renewed strain. State-owned VTB reported a near 50% collapse in lending profits, reflecting the heavy toll of sanctions and war financing.
Global equities advanced last week, with most major indices ending higher. In the US, the Dow Jones gained 1.74%, while the S&P 500 and Nasdaq added 0.94% and 0.81% respectively. European markets were firmer, with the Euro Stoxx 50 rising 1.89% and the FTSE 100 up 0.47%. In Asia, sentiment was buoyant: Japan’s Nikkei jumped 3.73%, Hong Kong’s Hang Seng rose 1.77%, and China’s Shanghai Composite advanced 1.70%.
Market Moves of the Week
South Africa’s unemployment rate edged higher in Q2, rising to 33.2% from 32.9% in Q1, underlining the fragility of the labour market. Manufacturing offered a bright spot, with output up 1.9% year-on-year in June, ahead of expectations and stronger than May’s 0.7% increase. Retail sales were weaker, rising just 1.6% year-on-year, with gains in textiles and clothing offset by declines at general dealers.
On the corporate front, ArcelorMittal South Africa remained in focus as government and the IDC held crisis talks over the future of its Newcastle mill. Without a resolution, the facility could close by 30 September, putting 3,500 direct jobs at risk and affecting industries reliant on its steel. Meanwhile, government announced plans for a $569 million credit-guarantee vehicle to support private infrastructure investment, with R2 billion in equity funding committed by the state.
South Africa’s government also rejected a US administration report that criticised the country’s human rights record, describing it as inaccurate and unreflective of South Africa’s constitutional democracy.
The JSE All Share Index gained 1.09% over the week, lifting year-to-date returns to 21.23%. Financials led the advance, climbing 3.55%, while industrials gained 2.25% and property added 2.06%. Resources pulled back 3.88% but remain the standout performer this year with a 67% gain. Despite headwinds, local equities continue to deliver strong returns in 2025.
Chart of the Week:
July’s US CPI came in at 2.7%, in line with expectations and helped by lower petrol prices, but core inflation rose to 3.1% - the highest since February -driven by services. Producer prices also recorded their biggest rise in three years, highlighting ongoing cost pressures. Still, the data was less severe than feared and, alongside softer labour-market signals, pushed market odds of a September Fed rate cut above 90%. Source: Bloomberg
Credits: Strategiq
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