The markets have progressed, stimulated by the anticipation of a decrease in Fed rates, the extension of the Sino-American commercial truce and the Trump-Puttine meeting.
Increased prospects for rate drops
On the geopolitical level, Trump’s decision to extend the suspension of customs duties on Chinese products by 90 days made it possible to temporarily calm the tensions and disturbances of the global supply chains. Since January, the United States has received $ 115 billion in customs revenue, but the budget deficit remains abyssal (291 billion in July). In addition, the summit carrying so many hopes in Alaska at the end of the week gave birth to a mouse, no agreement having emerged.
In the United States, inflation surprised by its moderation: the CPI of July remained stable at +2.7% in annual sliding, against 2.8% expected. “Core” inflation, excluding food and energy, was 3.1%, in accordance with forecasts. On the other hand, production prices increased by 0.9% over the month, above expectations (+0.4%), signaling tensions in services. These figures have strengthened anticipations of decreasing Fed rates. Some members of the administration, including the Treasury Secretary Scott Bessent, are now campaigning for a higher drop (50 BPS in September and up to 175 bps in total for 2025), but the robust labor market pleads against an overly marked gesture. In terms of activity, retail sales increased by 0.5% in July, driven by the automobile and real estate, after +0.9% in June, while industrial production fell by 0.1%. These contrasting figures confirm a still solid economy, but in the phase of gradual slowdown.
In the euro zone, growth has stagnated, T2 GDP increased by only 0.1%. In Germany, investors’ confidence has deteriorated, a reflection of commercial uncertainties. Nevertheless, European companies display results above expectations: 81% have exceeded consensus on profits per share, with combined profits growth of +11.8% (against +4.9% expected).
In Switzerland, negotiations with Washington are now aimed at reducing 39% surcharge on exports, but the markets have been relatively immune to the news. Macro, growth forecasts were lowered to +1.3% for 2025, with almost zero inflation. The franc remains strong, accentuating pressure on exporters. The BNS could further lower its rates in September, strengthening the attraction of defensive domestic values.
The economy remains fragile in China
In China, retail sales and industrial production of July disappointed, confirming the impact of the trade war. The economy remains weakened by deflation: the PPI decreases 36% over a year and inflation is zero. The real estate sector remains in crisis, illustrated by the Evergrande’s delisting. Despite these weaknesses, the prolongation of the pricing truce temporarily supported the markets: the CSI 300 reached a ten month higher. However, the recovery remains superficial and dependent on punctual support from the authorities.
Over the week, the indices evolved positively: the S & P500 ended up 1.23%, the NASDAQ of 0.80%, the Stoxx Europe 600 of 1.35%and the SMI of 1.72%.
This week will be dominated by the reception of the Ukrainian president at the White House and the Jackson Hole symposium.
The essential in brief
