Global Markets at a Crossroads: Tariffs and Rate Cut Hopes Define a Volatile Week

A Week of Divergence and Decision

Global financial markets navigated a complex and often contradictory landscape during the final week of August 2025. The period was characterised by a profound divergence in performance and sentiment, driven by the powerful crosscurrents of anticipated monetary easing in the United States and the stark economic reality of a burgeoning trade war. On one hand, persistent hopes for a U.S. Federal Reserve interest rate cut in September propelled American and Australian equities to cap off another strong month near record highs. On the other hand, the implementation of steep U.S. tariffs on Indian goods sent a chilling shockwave through emerging markets, triggering a sharp sell-off in Mumbai and underscoring the fragility of the global economic order.

This bifurcation was further complicated by the corporate earnings season, where investors demonstrated a near-zero tolerance for uncertainty. Technology companies in the U.S. that delivered anything less than flawless forward guidance were punished severely, even in the face of record revenues. In Asia, this dynamic was magnified, with mainland Chinese markets staging a powerful, liquidity-fueled rally while Hong Kong-listed shares were dragged down by disappointing results from a single index heavyweight. European markets, meanwhile, contended with their own set of challenges, as nagging inflation concerns, weakening economic sentiment, and renewed political jitters in key member states dampened investor appetite. The week concluded not with a clear direction, but with a series of unresolved tensions, setting the stage for a potentially volatile and decisive September.

Table 1: Global Market Performance at a Glance (Week Ending August 29, 2025)

The U.S. Market: A Record-Setting Month Ends with a Cautious Pause

Weekly Performance Overview

United States equity markets concluded August with their fourth consecutive month of gains, a testament to the enduring strength of the ongoing rally.¹ The S&P 500 and the Dow Jones Industrial Average both surged to new all-time highs on Thursday, continuing a trend that has defined the summer trading season.² However, the week ended on a note of caution, with all three major indices pulling back during Friday’s session. This retreat was widely attributed to profit-taking and a general reduction in risk exposure ahead of the long Labour Day holiday weekend, a common phenomenon as traders are hesitant to hold large positions over an extended period when unexpected news could break.¹

For the week, the S&P 500 managed a modest gain of approximately 0.30%, finishing a strong month up 1.9%.¹ By Friday’s close, the indices settled at the following levels:

• The S&P 500 fell 41.60 points, or 0.6%, to close at 6,460.26.¹
• The Dow Jones Industrial Average dropped 92.02 points, or 0.2%, to 45,544.88.¹
• The Nasdaq Composite, heavily weighted with technology stocks, saw the steepest decline, giving up 249.61 points, or 1.2%, to finish at 21,455.55.¹

The Inflation-Fed Nexus

The central focus for investors throughout the week was the release of the July Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred metric for tracking inflation.² The report presented a nuanced picture that fueled both optimism and caution.

The headline PCE figure showed a year-over-year increase of 2.6%, which was perfectly in line with economists’ expectations and unchanged from the previous month’s reading.¹ This stability in the headline number was interpreted by many as giving the Federal Reserve the “green light” to proceed with a much-anticipated interest rate cut at its September meeting.⁶ However, a closer look at the data revealed a more persistent inflationary undercurrent. Core PCE, which strips out volatile food and energy prices, ticked higher to 2.9% from 2.8% in June, marking its highest level since February and remaining stubbornly above the central bank’s 2% target.¹

Despite the stickiness in core prices, the market’s interpretation was decidedly dovish. Bolstered by signals from Federal Reserve Chair Jerome Powell in the prior week, traders priced in an overwhelming likelihood of monetary easing.¹ According to data from the CME Group, the probability of a 25-basis-point rate cut at the next Fed meeting stood at a remarkable 87%.¹ This expectation of cheaper borrowing costs has been a primary engine for the market’s record-setting run.

Tech Sector Under the Microscope

The week’s most significant underperformance came from the technology sector, as reflected in the Nasdaq’s 1.2% drop on Friday.¹ A series of high-profile earnings reports highlighted a market environment where even exceptional past performance was being overshadowed by the slightest hint of future uncertainty.

Several technology bellwethers experienced sharp declines following their quarterly announcements:

• Dell Technologies (DELL) became the biggest decliner in the S&P 500, with its shares sliding 8.9%. The drop occurred despite the company reporting second-quarter revenue that surpassed analysts’ expectations. The catalyst for the sell-off was the company’s commentary on future margin pressures and persistent weakness in its personal computer (PC) revenue stream.¹
• Marvell Technology (MRVL) saw its stock plummet by a staggering 18.6%. The chip designer’s third-quarter sales guidance fell short of Wall Street’s increasingly lofty expectations, triggering a massive wave of selling.¹
• Nvidia (NVDA), the undisputed leader of the artificial intelligence boom, was not immune. Its shares fell more than 3% as its earnings report, while objectively strong, failed to clear the extraordinarily high bar set by investors, particularly concerning its data centre revenue figures.¹ The disappointment rippled through the entire semiconductor industry, with the broader PHLX Semiconductor Index (SOX) dropping by more than 3%.²

However, the news was not uniformly negative. Autodesk (ADSK) provided a notable counterpoint, with its shares climbing 9.1% after the software company beat expectations and raised its full-year guidance.¹ Similarly,

Petco Health & Wellness (WOOF) shares jumped 23.5% after the company delivered better-than-expected quarterly results and an improved outlook.¹

The severe market reaction to the earnings reports from companies like Dell and Marvell is highly instructive. These companies were not punished for poor performance in the rearview mirror; they were punished for casting doubt on the trajectory of future performance. This dynamic reveals a market that has become “priced for perfection,” where valuations are stretched to a point that they leave no room for error or even moderation in growth. When investor focus shifts so completely from past results to the certainty of future growth, any signal that the rapid expansion might be slowing—whether through margin pressure, cautious guidance, or simply failing to exceed stratospheric expectations—is met with an outsized and immediate negative reaction. This hypersensitivity is a classic characteristic of a mature bull market where investors are becoming increasingly wary of downside risk.

Furthermore, a subtle but significant disconnect appears to be growing between the market’s enthusiasm for monetary easing and the underlying state of the real economy. Traders are betting heavily on a Federal Reserve rate cut, an action typically taken to stimulate a weakening economy.¹ At the same time, the latest survey of consumer sentiment from the University of Michigan fell to its lowest level since May, with consumers citing heightened concerns about prices and the health of the economy.¹ This creates a paradox: the market is celebrating the prospect of policy medicine while seemingly downplaying the severity of the economic illness that necessitates it. This suggests a potential vulnerability for equities. If the economic slowdown proves to be deeper or more prolonged than anticipated, a single rate cut may not be sufficient to sustain the market’s upward momentum, potentially leading to a sharp repricing of risk.

Europe: Inflation and Political Jitters Dampen a Month of Gains

Weekly Performance Overview

European equity markets concluded the week and the month on a decidedly negative note, breaking a period of sustained gains. The pan-European STOXX 600 index fell 1.7%, marking its first weekly decline in a month and closing Friday’s session at a 13-day low.⁷ Despite this late-month stumble, the index managed to eke out a modest gain of 0.74% for August as a whole, indicating that the earlier positive momentum was nearly erased by the final week’s headwinds.¹⁰

The downward trend was consistent across the continent’s major national bourses:

• The FTSE 100 in the United Kingdom ended Friday’s session at 9,187.34, down 0.32% on the day. The index was particularly burdened by weakness in its heavyweight banking sector.⁹
• Germany’s DAX closed at 23,902.21, registering a 0.57% decline for the day. The German index underperformed over the entire month, finishing August with a loss of 0.68%.¹⁰

Persistent Headwinds

The negative sentiment that swept across European markets was not driven by a single event but rather by a confluence of factors that underscored the region’s mounting economic fragility.

The primary catalyst for the sell-off was the re-emergence of inflation as a top-tier concern for investors.⁹ While inflation data released from France, Spain, and Italy came in slightly below consensus forecasts, the numbers still pointed to persistent and elevated price pressures across the Eurozone.⁷ This backdrop created a tense atmosphere as traders anxiously awaited more comprehensive inflation figures from Germany and, crucially, the U.S. PCE report, which has significant implications for global monetary policy.⁷

This inflationary pressure coincided with clear signs of a weakening economic outlook. The European Commission’s economic sentiment indicator for August unexpectedly declined to 95.2 from 95.7 in July, thwarting expectations for a slight improvement and signalling waning confidence among businesses and consumers.¹³ This macroeconomic gloom was given a sharp focus in Germany, the continent’s economic engine. The latest labour market data revealed that unemployment in Germany had risen by 45,700, pushing the total number of jobless individuals to a 10-year high and providing concrete evidence of an economy that continues to struggle.⁷

Compounding these economic woes was a renewed sense of political uncertainty in key European nations. In the United Kingdom, shares of major banks slumped on Friday after a prominent think tank floated the idea of a potential windfall tax on the sector, spooking investors with the prospect of an unexpected policy shift that could impact profitability.⁹ Simultaneously, in France, concerns grew over the stability of the government, with Prime Minister François Bayrou calling a confidence vote for September 8 regarding his controversial deficit-cutting budget proposals. This move introduced a significant element of political risk that weighed on market sentiment.⁷

Corporate and Geopolitical Factors

Amidst the prevailing gloom, there were some isolated pockets of positive news. On the trade front, the European Union announced plans to eliminate tariffs on U.S. industrial goods. This proactive measure was aimed at de-escalating trade tensions and, specifically, shielding European automakers from the threat of steeper retaliatory duties from the United States.¹³ The announcement provided a tangible lift to some export-oriented companies, such as the French spirits manufacturer Remy Cointreau, whose shares rose on the news.⁷

However, a sobering report from the International Monetary Fund (IMF) on Hungary served as a reminder of the deep-seated challenges facing many of the smaller economies within the European bloc. The IMF’s assessment highlighted Hungary’s stagnant economic output, persistently high inflation, and significant downside risks, painting a picture of a nation at a “challenging juncture”.¹⁴

The confluence of rising inflation, falling economic sentiment, and increasing unemployment across the Eurozone points toward a classic and perilous stagflationary environment. This economic condition, characterised by stagnant growth and high inflation, places the European Central Bank (ECB) in an exceptionally difficult bind. The standard policy response to accelerating inflation is to tighten monetary conditions by raising interest rates. Conversely, the typical remedy for a faltering economy and rising unemployment is to loosen policy by cutting rates. The ECB is therefore caught between two conflicting mandates: fighting inflation and supporting growth. Any decisive action to address one of these problems is likely to exacerbate the other. This policy paralysis creates a profound sense of uncertainty for investors and helps to explain the notable underperformance of European equities relative to their U.S. counterparts this week.

Furthermore, the market’s sharp and immediate negative reactions to domestic political developments in both the UK and France signal a significant shift in investor psychology. For many months, the market narrative has been almost exclusively dominated by macroeconomic data points like inflation and the corresponding actions of central banks. This week, however, market-moving headlines were generated by a policy proposal from a think tank in London and a procedural political maneuver in Paris. This indicates that political stability, which had largely been taken for granted, is now being actively questioned. Investors are demonstrating a heightened sensitivity to the risk of unpredictable policy changes, such as new taxes, or the potential for government instability to disrupt economic activity. This re-emergence of political risk is adding a new and unwelcome layer of uncertainty to European assets.

Asia’s Divergent Paths: China’s Bull Run Contrasts with Regional Headwinds

A Tale of Two Markets

The narrative for Asian markets in the final week of August was one of stark and dramatic divergence. While mainland Chinese markets embarked on a powerful bull run, fueled by a surge of domestic liquidity, equities listed in Hong Kong slumped under the weight of disappointing corporate earnings. This created a significant performance gap between the two closely watched markets and resulted in a mixed picture for the broader region.⁷ Overall, the MSCI Asia-Pacific ex-Japan index, a broad measure of the region’s performance, registered a modest weekly decline of 0.35%.¹⁵

The rally in mainland China was particularly noteworthy. The CSI 300 index, which tracks the largest companies listed in Shanghai and Shenzhen, surged, with some sources reporting a weekly gain as high as 11%.⁸ This powerful, “liquidity-driven rally” has pushed the index up 14% year-to-date and has captured the attention of global investment banks.¹⁶ Both JPMorgan and Goldman Sachs issued bullish reports, upgrading their targets for Chinese equities and citing the powerful combination of strong institutional inflows and a surge in participation from retail investors.¹⁶ The momentum was so intense that it prompted speculation that the Chinese government might need to implement measures to prevent the market from overheating.¹⁵

In sharp contrast, Hong Kong’s Hang Seng Index fell 1.3% for the week.¹⁵ The decline was largely attributable to the poor performance of a single, heavily-weighted constituent, which dragged the entire index lower. Meanwhile, Japan’s Nikkei 225 index remained remarkably stable, finishing the week essentially flat with a gain of less than 0.01%.¹⁵

Catalysts for Divergence

The primary driver behind this dramatic split in performance was corporate earnings. The single biggest factor weighing on the Hang Seng was the dismal report from Meituan, a food delivery and local services giant. The company’s shares plunged after it reported a staggering 98% year-on-year drop in earnings before interest and taxes (EBIT), a result of intense competition in its core business. Compounding the issue, Meituan issued guidance for a significant loss in the upcoming quarter, spooking investors and triggering a massive sell-off in its stock.¹⁵ Given Meituan’s substantial weight in the index, its individual performance had an outsized negative impact on the entire Hong Kong market.

This divergence was amplified by observable capital flows. Market analysts noted a pattern of investors taking profits on their holdings of Hong Kong-listed H-shares and reallocating that capital into the booming A-share market on the mainland. This rotation of funds served to accelerate both the rally in Shanghai and the decline in Hong Kong.¹⁵

The powerful narrative surrounding artificial intelligence also played a key role. Alibaba (BABA) shares jumped after the e-commerce and cloud computing giant not only beat earnings expectations but was also the subject of a report claiming it had developed a new, more versatile AI chip.² This news was seen as a significant step in China’s ambition to develop its own domestic AI capabilities and compete directly with the United States in this critical technological arena, boosting sentiment around mainland-focused tech stories.

The growing performance gap between mainland A-shares and Hong Kong H-shares is more than a simple trading anomaly; it reflects a fundamental decoupling driven by different investor bases and distinct market sentiments. The A-share market is dominated by domestic Chinese investors, both institutional and, increasingly, retail.¹⁶ Their investment decisions are heavily influenced by local liquidity conditions, policy signals from Beijing—often referred to as the “PBOC put,” or the belief that the central bank will intervene to support markets—and a structural reallocation of capital away from low-yielding domestic bonds into equities.¹⁶ In contrast, the H-share market in Hong Kong is more open and accessible to international investors. Their sentiment is shaped by global risk appetite, geopolitical tensions between China and the West, and the specific performance of large-cap technology companies like Meituan, which are subject to greater international scrutiny.¹⁵ Consequently, the A-share rally reflects domestic optimism and abundant liquidity, while the H-share weakness is a product of global caution and company-specific disappointments. This decoupling signifies that “investing in China” is no longer a monolithic concept; a clear distinction must be made between the dynamics of the onshore and offshore markets.

Moreover, the news of Alibaba’s reported breakthrough in AI chip development should be viewed as a significant geopolitical and strategic event, not merely a positive corporate headline. The United States has been actively implementing policies to block China’s access to critical Western AI technology and advanced semiconductors.² Global leader Nvidia has faced considerable challenges in selling its advanced chips in China due to these restrictions and local security concerns.² Alibaba’s development of a more advanced, proprietary chip is a direct and strategic response to this American pressure.² It signals a clear imperative from Beijing to foster a domestic AI ecosystem that is self-sufficient and independent of Western technology. The long-term implications of this are immense. It could systematically erode the market share of U.S. technology giants within the vast Chinese market and, over time, create a formidable new competitor in the global AI race, fundamentally altering the competitive landscape for companies like Nvidia, AMD, and their peers.

India Under Pressure: U.S. Tariffs Trigger a Sharp Sell-Off

Weekly Performance Overview

Indian financial markets endured a brutal week, emerging as the worst-performing major region globally as they buckled under the immediate and severe impact of new United States trade tariffs. The sell-off was sharp and widespread, sending both of the country’s benchmark indices tumbling. For the week ending August 29, the BSE Sensex fell by 1.84%, while the Nifty 50 lost 1.78%.¹⁷ Some reports indicated that both indices had shed over 2% of their value during the week, reflecting the severity of the market’s reaction.¹⁸

The week concluded with another day of losses:

• The BSE Sensex closed at 79,809.65, down 270.92 points or 0.34% on Friday.¹⁹
• The Nifty 50 settled at 24,426.85, slipping 74.05 points or 0.30% for the session.¹⁹

The Tariff Shockwave

The overwhelming and singular catalyst for the market’s collapse was the official enforcement of a steep 50% U.S. tariff on a wide range of Indian imports, which took effect on August 27.²¹ The move, part of a broader escalation in trade tensions, sent an immediate shockwave through the Indian economy and its financial markets.

Economists and market analysts moved quickly to quantify the potential damage. Projections suggested that if the tariffs were to remain in place for a full year, they could shave between 60 and 80 basis points from India’s Gross Domestic Product (GDP) growth.¹⁷ The policy directly threatens key export-oriented sectors, with industries such as textiles, gems and jewellery, shrimp, and furniture standing in the immediate line of fire.¹⁷

The most visible and immediate consequence was a dramatic collapse in the nation’s currency. The Indian Rupee plunged against the U.S. dollar, breaching the psychological 88-level for the first time in history. It ended the week at a record closing low of 88.20.¹⁷ The currency’s freefall was driven by a perfect storm of factors: the prospect of sharply lower export earnings, a rush of hedging demand from importers bracing for higher costs, and a massive outflow of foreign capital.¹⁷

This capital flight was a critical component of the week’s turmoil. The tariffs triggered a profound negative shift in sentiment among foreign investors. Foreign Institutional Investors (FIIs), who had already been net sellers in recent months, turned aggressively bearish. On Thursday alone, FIIs offloaded Indian shares worth a net ₹3,856 crore.¹⁸ Crucially, market strategists observed that FIIs were not merely liquidating their existing positions; they were actively increasing their

short positions—a direct and bearish bet that Indian markets had further to fall.²⁰

The Domestic Counterbalance

In a stark display of contrasting sentiment, Domestic Institutional Investors (DIIs), which include Indian mutual funds and insurance companies, stepped into the breach. As foreign capital fled, DIIs went on a buying spree, purchasing a net ₹6,920 crore worth of shares on Thursday.¹⁸ However, this massive wave of domestic buying proved insufficient to turn the tide. The sheer force of the negative sentiment driven by the tariff shock and FII selling overwhelmed the domestic support, and the market continued its slide.²⁰

The market’s severe reaction this week was more than a simple, rational repricing of tariff-related risk; it devolved into a full-blown crisis of confidence that created a dangerous and self-reinforcing negative feedback loop. The initial shock of the tariffs prompted FIIs to begin selling Indian equities.¹⁷ This large-scale selling of rupee-denominated assets put immediate and direct downward pressure on the Indian Rupee’s exchange rate.¹⁷ As the rupee weakened, it created a further incentive for FIIs to sell, as the value of their remaining Indian investments eroded when measured in U.S. dollars. This, in turn, spooked Indian importers, who rushed to hedge their future dollar-denominated payables, thereby increasing demand for dollars and further weakening the rupee.¹⁷ This sequence created a vicious cycle: FII selling weakens the rupee, which triggers more FII selling and panicked importer hedging, which further weakens the rupee. Breaking this powerful downward spiral will likely require a significant positive catalyst, such as a diplomatic de-escalation of the trade dispute or a major policy intervention from the Indian government or the Reserve Bank of India.

Furthermore, the starkly opposing actions of foreign and domestic institutional investors reveal a deep and fundamental schism in perception regarding India’s economic future. FIIs, viewing the situation through a global lens, clearly see the U.S. tariffs as a major threat to India’s growth narrative and are aggressively de-risking their exposure to what they perceive as an overvalued market.²⁰ They are, in effect, voting with their feet. In contrast, DIIs, operating from a domestic perspective, appear to view this as a temporary, politically motivated shock. Their focus remains on India’s strong domestic consumption story and the potential for countervailing policy responses from New Delhi, such as GST reforms or fiscal stimulus packages.²⁰ They are “buying the dip,” betting on the nation’s long-term economic resilience. This intense tug-of-war between foreign fear and domestic faith is now the key dynamic in the Indian market. The resolution of this tension—whether the FIIs’ bearish view or the DIIs’ bullish one prevails—will define the market’s direction for months to come.

Oceania’s Resilience: Australia Caps a Strong Month at Record Highs

Weekly Performance Overview

In a notable display of strength amidst regional and global uncertainties, the Australian share market demonstrated significant resilience, concluding a robust month of gains at or near record high levels. The benchmark S&P/ASX 200 index advanced by a healthy 1.4% for the week.²⁴ The final trading session on Friday saw only a marginal dip of 6.9 points, or 0.08%, to bring the index to a close of 8,973.1.²⁵ The performance for the month of August was particularly impressive, with the index rising 2.6%. This marked its best monthly performance since May and, remarkably, its best August showing in sixteen years, a period that is often seasonally weak for equities.²⁵

Earnings Season Finale

The week’s trading was heavily influenced by the conclusion of Australia’s corporate earnings season, which was characterised by extreme volatility and what some analysts described as “once-in-a-generation moves” in blue-chip stocks.²⁵ The final days of reporting produced a number of standout winners and losers:

• Big Winners: Retail conglomerate Harvey Norman (HVN) saw its shares soar 11.5% to an all-time high after the company reported a 47% surge in full-year profit, largely driven by property revaluations.²⁵ Shipbuilder
  Austal (ASB) also hit a record high, with its stock rising 15.1% after announcing a sixfold increase in net profit.²⁵ The technology sector also had a star performer in data centre operator
  NextDC (NXT), which jumped 17.4% after its annual revenue beat guidance.²⁵
• Notable Losers: Earlier in the week, supermarket giant Woolworths (WOW) had experienced its worst single-day selloff since 1994, with its stock tumbling over 10% on the back of a weak profit result and concerns about margin pressure.²⁵ On Friday, the country’s big four banks—Commonwealth Bank, NAB, Westpac, and ANZ—were all in negative territory, weighing on the broader index.²⁵

Supportive Macro Environment

The market’s overall strength was underpinned by a foundation of several positive macroeconomic and policy factors. The momentum from a recent interest rate cut by the Reserve Bank of Australia (RBA) continued to provide a supportive backdrop for equities, signalling a favourable monetary policy environment.²⁴

Positive cues from the global stage also contributed to the bullish sentiment. Strong performance on Wall Street earlier in the week, before its Friday pullback, and a general sense of easing global tariff concerns (outside of the specific U.S.-India dispute) helped to bolster investor confidence.²⁴ Furthermore, the heavyweight mining sector, a crucial component of the Australian market, had a stellar month, soaring more than 11% in August.²⁶ On Friday, major miners BHP and Rio Tinto both posted modest gains, helping to offset losses elsewhere.²⁵

Despite the record highs and the strong monthly performance, an undercurrent of caution persists among some market observers. The Australian market appears to be a prime example of a rally that is “climbing a wall of worry.” While the ASX 200 is trading at or near its all-time peak and just recorded its best August performance in 16 years, economists are sounding notes of concern.²⁴ An economist from AMP, for instance, explicitly warned that the market remains at risk of a correction in the coming month due to “stretched valuations and risks around US tariffs and US debt”.²⁵ This suggests that the current rally is not built on a foundation of unbridled optimism. Instead, it reflects a market that is performing exceptionally well but is also acutely aware of significant external risks on the horizon. This creates a fragile dynamic where the market could be vulnerable to a sharp reversal if any of these identified risks were to materialise in September.

Furthermore, the extreme price movements observed in individual blue-chip stocks during this earnings season point to a market structure that is increasingly influenced by thematic trends and amplified by automated trading systems. A Morningstar strategist highlighted that the “once-in-a-generation moves” seen in stocks like Woolworths were unprecedented for such large, stable companies.²⁵ The season’s big winners, such as NextDC, are directly plugged into the powerful global AI narrative, with its CEO speaking of “scaling for extraordinary AI and cloud demand”.²⁵ Conversely, the big losers, like Woolworths, are facing headwinds related to consumer spending and margin pressures, which are key concerns in the current inflationary environment.²⁷ The strategist went on to suggest that the proliferation of “passive money and algorithmic trading might be ‘amplifying the noise'”.²⁵ This implies that the market is becoming less about broad-based fundamentals and more of a bifurcated system. Companies that align with strong secular growth themes are being rewarded handsomely, while those facing cyclical or structural headwinds are being punished with extreme severity. The speed and scale of these moves are then magnified by automated trading strategies, leading to the exceptional volatility witnessed over the past month.

Conclusion: Navigating an Uncertain September

The final week of August served as a microcosm of the key tensions defining global markets in 2025. A powerful tug-of-war is underway between the optimism fueled by the prospect of looser monetary policy and the pessimism stoked by geopolitical friction and signs of economic fragility. In the United States, investors are betting that a forthcoming Federal Reserve rate cut can sustain a market already at record valuations, even as core inflation remains sticky and consumer sentiment begins to wane. This hope for cheaper money provided a tailwind that also helped lift markets in Oceania.

However, the week’s most dramatic development—the imposition of severe U.S. tariffs on India—was a stark reminder that macroeconomic policy does not operate in a vacuum. The resulting sell-off in Indian assets demonstrated how quickly trade disputes can destabilise a major emerging market, triggering capital flight and a currency crisis. This divergence was also evident in Asia, where a domestically-fueled, liquidity-driven rally in mainland China stood in stark contrast to the earnings-driven slump in Hong Kong. Europe, meanwhile, remains caught in a difficult position, grappling with its own inflation challenges, weakening growth, and the re-emergence of political risk.

Looking ahead, investors will be navigating a landscape fraught with uncertainty. The September Federal Reserve meeting now looms as the pivotal event of the month, with the preceding August U.S. jobs report and further inflation data set to be scrutinised for any information that could sway the central bank’s decision. Developments in the U.S.-India trade relationship will be watched closely, as any escalation or de-escalation could have significant ripple effects across global supply chains and emerging market sentiment. The divergence seen this week between regions and even within them—between domestic and international sentiment, between cyclical and secular growth stories—is likely to persist, making for a challenging and potentially volatile trading environment as the market enters the final third of the year.

Disclaimer

This report is for informational purposes only and does not constitute financial, investment, or trading advice. The analysis and views expressed herein are based on publicly available information as of August 29, 2025, and are subject to change without notice. While every effort has been made to ensure the accuracy of the information provided, no guarantee is given. The authors and the publisher of this report disclaim any liability for any direct or indirect loss or damage arising from any reliance on this report or its contents. Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of this publication. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not a reliable indicator of future results.

References

1. Stocks pull back from their latest all-time highs on Wall Street – Pittsburgh Post-Gazette, accessed on August 30, 2025, https://www.post-gazette.com/business/money/2025/08/29/wall-street-today-august-29-2025/stories/202508290082
2. Dow Jones Today: S&P 500, Dow Retreat From Record Highs as …, accessed on August 30, 2025, https://www.investopedia.com/dow-jones-today-08292025-11800305
3. Stocks pull back from their latest all-time highs on Wall Street, accessed on August 30, 2025, https://www.bnnbloomberg.ca/markets/2025/08/29/world-shares-are-mostly-lower-ahead-of-a-us-inflation-update/
4. Weekly Trader’s Stock Market Outlook | Charles Schwab, accessed on August 30, 2025, https://www.schwab.com/learn/story/weekly-traders-outlook
5. Stocks pull back from their latest all-time highs on Wall Street, accessed on August 30, 2025, https://apnews.com/article/technology-stocks-nvidia-japan-china-f46f70b94fd5d68d4968f23c85944285
6. Schwab’s Market Open Update | Charles Schwab, accessed on August 30, 2025, https://www.schwab.com/learn/story/stock-market-update-open
7. Markets Today: German Unemployment at 10 Year Highs, FTSE Slides on Head & Shoulders Breakout. US PCE Up Next – MarketPulse, accessed on August 30, 2025, https://www.marketpulse.com/markets/markets-today-german-unemployment-at-10-year-highs-ftse-slides-on-head-shoulders-breakout-us-pce-up-next/
8. Weekly market update – 29-08-2025 – AMP, accessed on August 30, 2025, https://www.amp.com.au/resources/insights-hub/weekly-market-update-29-08-2025
9. London, US & European Stock markets | Regular Market Reports …, accessed on August 30, 2025, https://www.hl.co.uk/shares/stock-market-news/market-reports
10. Market News – Dow Jones | Morningstar, accessed on August 30, 2025, https://www.morningstar.com/news/dow-jones
11. Markets data – stock market, bond, equity, commodity prices – FT.com, accessed on August 30, 2025, https://markets.ft.com/data
12. Market Reports from UK, US & EU Stock Markets – Fidelity International, accessed on August 30, 2025, https://www.fidelity.co.uk/shares/stock-market-news/market-reports/
13. EMEA Morning Briefing: E.U. to Scrap Duties on U.S. Industrial Goods | Morningstar, accessed on August 30, 2025, https://www.morningstar.com/news/dow-jones/20250829122/emea-morning-briefing-eu-to-scrap-duties-on-us-industrial-goods
14. IMF Executive Board Concludes 2025 Article IV Consultation with Hungary, accessed on August 30, 2025, https://www.imf.org/en/News/Articles/2025/08/29/pr-25286-hungary-imf-executive-board-concludes-2025-article-iv-consultation
15. Week in Review: August 29, 2025, accessed on August 30, 2025, https://global.morningstar.com/en-ea/markets/week-review-august-29-2025
16. Why these Wall Street banks are bullish on the world’s second-largest stock market, accessed on August 30, 2025, https://www.morningstar.com/news/marketwatch/20250829171/why-these-wall-street-banks-are-bullish-on-the-worlds-second-largest-stock-market
17. Rupee breaches 88-mark for the first time; Sensex, Nifty tank 2% during the week, accessed on August 30, 2025, https://indianexpress.com/article/business/market/rupee-breaches-88-mark-for-the-first-time-sensex-nifty-tank-2-during-the-week-10219570/
18. Market Wrap, August 29: SENSEX slips below 80K mark, NIFTY50 ends 74 points lower; RIL, M&M top losers – Upstox, accessed on August 30, 2025, https://upstox.com/news/market-news/stocks/market-wrap-august-29-sensex-slips-below-80-k-mark-nifty-50-ends-74-points-lower-ril-m-and-m-top-losers/article-180430/
19. Stock Market Highlights: Sensex settles 271 pts lower, Nifty below …, accessed on August 30, 2025, https://m.economictimes.com/markets/stocks/live-blog/bse-sensex-today-live-nifty-stock-market-updates-29-august-2025/liveblog/123574289.cms
20. Stock market today: Nifty50 closes in red after positive opening; BSE Sensex down over 270 points, accessed on August 30, 2025, https://timesofindia.indiatimes.com/business/india-business/stock-market-today-nifty50-bse-sensex-august-29-2025-donald-trump-tariffs-dalal-street-indian-equities-global-markets/articleshow/123575637.cms
21. Top stocks to buy today: Stock recommendations for August 29, 2025 – check list, accessed on August 30, 2025, https://timesofindia.indiatimes.com/business/india-business/top-stock-recommendations-for-august-29-2025-godawari-power-and-ispat-limited-apollo-micro-systems-stocks-to-buy-today/articleshow/123575247.cms
22. Stock Market News Today | Edward Jones, accessed on August 30, 2025, https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/daily-market-recap
23. Sensex Nifty Live Updates August 29: Flat Start for Indian Indices Amid Mixed Global Cues, accessed on August 30, 2025, https://www.5paisa.com/blog/sensex-nifty-stock-market-live-updates-august-29-2025
24. Australia’s Leading Fixed Income & Yield Investing Report, accessed on August 30, 2025, https://www.yieldreport.com.au/
25. ASX Today Live Market Report & Financial News, accessed on August 30, 2025, https://www.morningstar.com.au/market/asx-market-report
26. Australian shares post best August in 16 years as earnings season ends, accessed on August 30, 2025, https://www.indopremier.com/ipotnews/newsDetail.php?jdl=Australian_shares_post_best_August_in_16_years_as_earnings_season_ends&news_id=203985&group_news=IPOTNEWS&taging_subtype=MARKETOVERVIEW&name=&search=y_general&q=australian%20shares,%20ASX%20200,%20NZX%2050,&halaman=1
27. Weekly Wrap 29 August – Bell Direct, accessed on August 30, 2025, https://www.belldirect.com.au/smarter/insights/videos/weekly-wrap-29-august