Trade Policy Developments and Rate Cuts Drive Market Sentiments

In the past week, global markets showed resilience shaped by trade policy developments, economic data, and sector-specific trends, particularly in technology and AI. In this blog, we’ll know in detail what happened last week (June 2, 2025 to June 6, 2025) all across the globe.

US Market Boost on AI and Technology Stocks

The US market saw gains, driven by strength in Al and technology stocks. Positive economic data, including a strong US jobs report and cooling inflation (PCE inflation at 2.1% annualized in April, below forecasts of 2.2%), supported market sentiment. The U.S. Labor Department reported job openings increased to 7.39 million in April from a revised 7.20 million in March.

However, trade tensions with China and tariff uncertainties introduced volatility, though markets remained relatively stable despite President Trump’s remarks on China breaching a trade truce. Robust corporate earnings and a 25bps ECB interest rate cut-bringing a cumulative 2% reduction since June 2025-supported equities.

Rising bond yields and ongoing trade concerns, however, posed challenges. Chinese equities appear undervalued with improving return on equity, but deflation and potential U.S. tariffs remain hurdles.

China PMI Index Dropped

China’s Composite PMI dipped to 49.6 in May 2025, signaling the first output contraction since December 2022.

In Japan, the yen strengthened to JPY 144/USD, with the 10-year JGB yield nearing a 17-year high due to inflation and rate hike expectations. Japan’s unemployment stayed low at 2.6% in April, reflecting a tight labor market.

Indian Equity Market Benefitted from Repo Rate Cut

Back at home, the Indian market showed resilience despite global headwinds and Flls outflows, supported by strong DIIs buying and positive domestic GDP data. It gained momentum after the RBI cut the repo rate by 50 bps to 5.50% and CRR by 100 bps to 3% to provide further durable liquidity.

Strong GDP growth in the March quarter at 7.4% and composite output Index at 59.3 in May 2025, signaling a sharp upturn in aggregate activity, continues to indicate the underlying strength of the domestic economy.

After net buying of ₹11,773.25 crores in May 2025, FIIs turned net sellers to the tune of ₹4,575.59 crores so far in June 2025. However, domestic institutions, which net bought ₹16,170.95 crores, cushioned the market from sharper declines.

Going forward, US-China trade talks remain critical, with tariffs a key risk, especially after the first round of positive discussions between Trump and Chinese President Xi Jinping.

Future Outlook

Investors would also take cues from the closely watched U.S monthly jobs report, which would have a significant impact on the outlook for the economy and the Fed interest rate decision later during the month. In China, investors will watch for stimulus measures to boost consumer demand and counter deflation.

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.