U.S. Markets Hold Gains Despite Volatility
U.S. stock markets showed resilience at the close of last week, with the S&P 500 and Nasdaq-100 both finishing higher despite a slight pullback from Thursday’s record highs. The S&P 500 ended the week up 0.59%, while the Nasdaq-100 rose 1.25%. Investors digested a mix of economic signals, including a 2.7% year-over-year increase in the Consumer Price Index (CPI) for June and a 0.6% rise in retail sales, suggesting steady consumer demand amid persistent inflation pressures.
Tariff Tensions Intensify Across Major Economies
Trade policy dominated headlines as the Trump administration prepared to impose sweeping new tariffs. Japan faces a 25% tariff on all exports to the U.S., with negotiations showing little progress. Analysts warn of short-term political instability in Japan, with concerns over coalition-building and potential policy drift extending into 2026. Meanwhile, Canada braces for a 35% tariff on non-free trade goods starting August 1, impacting a quarter of all Canada-U.S. trade. The Canadian government has so far limited its retaliatory measures, but the threat of a broader renegotiation of the 2018 free trade agreement looms large.
Asian and European Markets Mixed Amid Trade Uncertainty
Asian markets were mixed at the start of the week. Chinese shares advanced after the central bank left key loan prime rates unchanged, easing pressure on policymakers to loosen credit further. The Hang Seng and Shanghai Composite both climbed 0.7%, buoyed by improved economic data and a temporary softening in U.S. rhetoric toward Beijing, raising hopes for a potential trade deal. South Korea’s Kospi also gained 0.7%, supported by a modest uptick in June exports. In contrast, Japanese markets faced headwinds from impending U.S. tariffs and ongoing political uncertainty.
European shares mostly edged higher, reflecting cautious optimism but remaining sensitive to global trade developments and the evolving U.S. tariff strategy.
Currency and Commodity Markets Respond to Policy Shifts
In currency markets, the U.S. dollar slipped against the Japanese yen and euro, reflecting investor caution amid trade tensions. The dollar fell to 147.88 yen, while the euro strengthened to $1.1645. Crude oil prices reversed earlier gains, with U.S. benchmark crude dropping to $65.73 per barrel and Brent crude falling to $68.91, as traders weighed the impact of tariffs on global demand.
Outlook: Trade Policy and Political Risks in Focus
Looking ahead, investors are closely monitoring the escalation of U.S. tariffs and the potential for retaliatory measures from major trading partners. Political uncertainty in Japan and the prospect of renewed trade negotiations with Canada add to the sense of unease. Meanwhile, steady economic data from the U.S. and China provide some reassurance, but markets remain on alert for further policy shifts and their implications for global growth.