Stock Markets Reacted to Trade Tensions and Central Bank Stance

In the week gone by, global equity markets displayed divergent performances, shaped by a complex mix of escalating trade tensions, macroeconomic signals, and central bank commentary. In this blog, we’ll know in detail what happened last week (July 7, 2025 to July 11, 2025) all across the globe.

US Market Touched All-Time Highs

In the United States, stock markets extended their upward momentum, touching new all-time highs. This rally was underpinned by stronger-than-expected non-farm payroll data for June, which recorded 147,000 job additions, while the unemployment rate remained stable at 4.1%.

Analysts projected a moderate 5% year-on-year growth in Q2 corporate earnings, contributing to investor optimism. Despite a slight rise in jobless claims, the labor market’s resilience reinforced market expectations that the Federal Reserve would hold its key policy rate steady in the 4.25% – 4.50% range, indicating a prolonged phase of monetary stability.

However, these positive signals were overshadowed by a renewed wave of protectionist rhetoric from the U.S. administration, which announced fresh tariff threats against Japan, South Korea, and several BRICS nations, ranging between 25% and 70%.

While these announcements introduced uncertainty, U.S. equity markets remained largely unaffected, reflecting continued investor confidence in domestic economic fundamentals.

Europe’s Cautious Monetary Policy Stance

In Europe, early optimism gave way to caution as fears of retaliatory U.S. tariffs weighed heavily, particularly on Germany’s export-heavy industries. The European Central Bank, faced with softening inflation and sluggish growth, opted for a cautious monetary stance, reaffirming its wait-and-watch approach.

Meanwhile, the UK equity market broke away from the broader European trend, with the FTSE 100 hitting a record high, supported by strength in financial and industrial sectors.

However, domestic issues such as increasing cybersecurity threats and rising public debt levels continued to cloud sentiment.

China’s Market Remained Stable

In Asia, Japan’s equity market ended the week slightly lower due to rising concerns over prospective U.S. tariffs targeting key Japanese exports, particularly in manufacturing and technology. Political uncertainty ahead of local elections also weighed on sentiment.

On the other hand, Chinese markets held relatively stable, supported by slight improvements in manufacturing and services PMIs and cautious optimism around diplomatic trade engagements. Nevertheless, China’s broader outlook remained subdued, with full-year GDP growth expectations capped below 5%, reflecting ongoing structural and external challenges.

Indian Equity Market Weighed on Global Uncertainty

Domestically, the Indian equity market traded within a narrow range, mirroring global uncertainty while responding to sector-specific cues and macroeconomic data. Financial stocks performed steadily, while IT and pharma shares underperformed, largely due to cautious sentiment ahead of earnings.

Foreign portfolio flows remained volatile, as equity inflows were partially offset by bond outflows driven by global risk aversion and valuation concerns. However, strong participation from domestic institutional investors and retail investors, coupled with a vibrant IPO market, reflected ongoing confidence in India’s growth trajectory.

On the macro front, consumer price inflation dropped to a multi-year low of 2.8% in May. RBI Governor Sanjay Malhotra reiterated the strength of the Indian economy, emphasizing domestic demand and capital expenditure.

Future Outlook

Overall, Indian equities exhibited resilience, supported by benign inflation, stable domestic flows, and improving economic indicators, though global trade tensions and upcoming Q1 earnings will be key drivers of short-term market direction. 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.