Easing Trade Tensions and Softer Inflation Boosted the Markets

In the week gone by, global stock markets rallied, lifted by softer-than-expected U.S. inflation data, easing trade tensions, and central bank optimism. US indices surged to record highs mid-week, supported by growing confidence in monetary easing. In this blog, we’ll know in detail what happened last week (August 11, 2025 to August 15, 2025) all across the globe.

US Fed Rate Cut Hopes

European equities, including the UK’s FTSE 100, posted steady gains, while Chinese markets advanced gradually on rising liquidity. Japan’s Nikkei 225 soared to new peaks before a mild pullback. The macroeconomic backdrop reflected a mix of improving fundamentals, policy uncertainty, and shifting global economic dynamics.

Investors now see a 94% probability that the U.S. Federal Reserve may cut rates by 50bps in September and another 25 bps by end-2025. A rate reduction would lower borrowing costs, boost consumption and investment, and provide momentum to the U.S. economy-the main driver of global growth.

Inflation trends reinforced market optimism with headline CPI held steady at 2.7%, below expectations of 2.8%, supporting the case for policy easing. In the eurozone, inflation stayed anchored at 2.0% in July, reinforcing price stability. However, the European Central Bank is expected to maintain higher rates for longer, with potential cuts delayed to March 2026 amid resilient data.

Europe’s labor market remained firm with unemployment near multi-year lows, and GDP growth showed moderate stability. Sentiment in Germany dipped sharply in August, reflecting concerns over U.S.-EU trade relations. Nevertheless, improved business confidence elsewhere in Europe supported equity valuations.

China’s Higher Liquidity

In China, optimism from increased market liquidity was tempered by structural challenges-weak consumer confidence, ongoing property sector stress, and high household savings. Retail sales grew 5% year-on-year in the first half of 2025, beating expectations, with May recording 6.4% growth, driven by a 12.3% surge in food sales.

Japan’s market strength was fueled by expectations of a U.S. rate cut and better U.S.-China trade relations, with the Nikkei 225 setting fresh all-time highs. However, profit-taking led to a slight pullback late in the week.

Overall, the week’s gains were underpinned by moderating inflation, prospects of central bank easing, and signs of economic resilience across key regions. While near-term sentiment remains constructive, geopolitical risks, trade policy developments, and the durability of economic data will remain critical factors shaping market direction in the weeks ahead.

Indian Market Relieved on US Data

Back at home, the domestic stock market staged a relief rally, buoyed by positive global cues. Softer U.S. retail inflation and a weak labor market have strengthened the expectation of a Federal Reserve rate cut in September, alongside easing domestic retail inflation further lifted investor sentiment.

PSU banks dominated the spotlight following Q1 results from a major lender, with broad-based gains seen across sectors. CPI fell to an eight-year low, fueling hopes for a revival in discretionary spending, particularly in autos and consumer goods.

Optimism also stemmed from anticipation of the upcoming US-Russia Summit, which could pave the way for easing geopolitical tensions. However, a note of caution persists, as the full impact of U.S. trade tariffs on the global supply chain still remains uncertain. Investors continue to monitor trade tensions, muted corporate earnings, and elevated market valuations.

Future Outlook

Despite these short-term headwinds, India’s long-term growth story remains intact, driven by domestic consumption and ongoing bilateral trade deal between India and the U.S. A Morgan Stanley report projects that India will become the world’s third-largest economy by 2028, with GDP expected to more than double to $10.6 trillion by 2035.

This robust outlook, combined with improving macroeconomic indicators, suggests that while near-term volatility may persist, the underlying fundamentals continue to support a positive medium-to long-term market trajectory. So, open Demat account with SMC Global Securities and invest as per your investment objective and risk profile.

Reference:
SMC Global Securities’ Research Team

Author: All Content is verified by SMC Global Securities.