Global Markets Weekly Review: Rate Cut Hopes Clash with Tariff Fears (Week Ending August 8, 2025)

The Global Overview: A Tug-of-War for Market Sentiment

Global financial markets were caught in a powerful and complex tug-of-war during the week ending August 8, 2025. On one side, escalating geopolitical tensions and aggressive trade actions, primarily from the United States, cast a long shadow over the economic outlook and threatened corporate profitability.¹ On the other, a surprisingly sharp slowdown in the U.S. labour market dramatically shifted expectations for monetary policy, fueling a “bad news is good news” rally built on the near certainty of a U.S. Federal Reserve interest rate cut.³ This dynamic created a fragile equilibrium where resilient corporate earnings, particularly from the U.S. technology sector, provided a fundamental cushion, allowing investors to look past immediate risks toward the promise of cheaper capital.²

The week’s narrative was dominated by three interconnected themes. First, geopolitical risk, driven by the Trump administration’s trade policy, served as the primary catalyst for uncertainty. The global implementation of new tariffs on August 1, a punitive 50% tariff hike on select Indian goods, a new 100% tariff on imported semiconductors, and a looming deadline for a Russia-Ukraine ceasefire agreement created a constant stream of market-moving headlines.⁶ Second, this uncertainty was met by a decisive dovish pivot from central banks. Weak economic data, most notably the U.S. jobs report, solidified expectations for imminent rate cuts from the Federal Reserve, a move already undertaken by the Bank of England and the Reserve Bank of India, signalling a coordinated global shift toward monetary easing.¹⁰ Finally, this macro drama played out against a backdrop of a strong second-quarter earnings season, which largely beat expectations but was accompanied by cautious forward guidance from companies increasingly citing the negative impact of tariffs.¹

This environment produced a notable bifurcation in market focus. At a high level, major stock indices, especially in the United States, demonstrated remarkable resilience, appearing to become “numb to tariff headlines” as they advanced for the week.¹ This strength was not a sign that tariffs were benign, but rather a calculated bet that the central bank’s remedy—lower interest rates—would be more potent than the economic disease. The market was trading on the belief that the Federal Reserve’s response would override the direct damage from the trade war. However, a granular look at individual company reports and sector performance revealed a different story. Companies from U.S. apparel maker Under Armour to Indian textile exporters reported tangible economic pain, suspended orders, and issued dire warnings about the impact of these same tariffs.⁹ This created a precarious rally, one highly dependent on the Federal Reserve delivering on its expected stimulus, while masking significant underlying stress in specific sectors of the real economy.

United States: Tech Strength and Fed Hopes Defy Economic Jitters

U.S. stock markets rebounded strongly, with major indices erasing the prior week’s losses and the technology sector leading the charge to new heights. The week was characterised by choppy trading as investors weighed strong corporate earnings against a backdrop of unsettling economic data and geopolitical friction.¹ The tech-heavy Nasdaq Composite was the standout performer, setting a new all-time high, while the S&P 500 reclaimed lost ground to close just shy of its own record.¹ For the week, the S&P 500 rose 0.8% to 6,389.45, the Dow Jones Industrial Average climbed 0.5% to 44,175.61, and the Nasdaq Composite added 1.0% to finish at a record 21,450.02.¹

The Economic Data Conundrum

The most influential event of the week was the release of the July employment report, which sent a shockwave through markets. The headline figure of 73,000 new nonfarm payrolls fell short of expectations, but the more stunning news was a massive downward revision of 258,000 jobs for the prior two months.³ This revision, the largest outside of a recession since 1968, fundamentally altered the perception of the U.S. labour market, suggesting a significant cooling was already well underway.¹⁶ The unemployment rate also ticked up to 4.2%.³

This clear signal of a weakening labour market stood in contrast to other, more robust data points. The advanced reading of second-quarter GDP showed the economy had expanded at a solid 3.0% annual rate, a positive turnaround from the previous quarter’s slight contraction.³ However, other indicators aligned with the jobs report’s cautionary tone. The Institute for Supply Management (ISM) services purchasing managers’ index (PMI) slowed to 50.1 in July, barely above the 50-point threshold that separates growth from contraction, while initial jobless claims rose.¹⁰

The Fed’s Impending Pivot

The weak jobs report was the final piece of evidence the market needed to fully price in a Federal Reserve interest rate cut. The probability of a 25-basis-point reduction at the Fed’s September meeting soared to over 90%, according to the CME FedWatch Tool.⁴ This sentiment was reinforced by dovish commentary from several Fed officials during the week, as well as President Trump’s nomination of a potentially policy-easing candidate, Stephen Miran, to an open seat on the Fed’s Board of Governors.¹⁰ The bond market reacted swiftly, with Treasury yields falling. The yield on the benchmark 10-year Treasury note ended the week around 4.28%.¹ This market behaviour revealed a clear feedback loop: negative economic news is now interpreted as a positive for asset prices because it strengthens the case for central bank intervention. Investors are no longer trading on the economic data itself, but on the Federal Reserve’s anticipated reaction to it.

Corporate and Sector Spotlight

Amidst the macroeconomic turmoil, the second-quarter earnings season provided a crucial pillar of support. With the vast majority of S&P 500 companies having reported, an impressive 82% have beaten earnings-per-share estimates, leading analysts to revise the blended earnings growth rate for the quarter up from an initial projection of around 5% to over 8.5%.³

Technology companies, powered by the durable “AI theme,” were the primary drivers of the market’s weekly gains.¹ Strong results and outlooks from mega-cap names like Apple and Nvidia propelled the Nasdaq higher.¹ Other notable winners included Gilead Sciences, which jumped 8.3% after beating forecasts and raising its guidance, and Expedia Group, which rose 4.1% on encouraging results.¹ On the other side of the ledger, the real-world impact of tariffs was evident in the performance of several companies. Entertainment giant Paramount Skydance slid 10.5% following its merger close, while companies like Under Armour and The Trade Desk saw their shares plunge after issuing weak guidance that specifically cited the negative effects of tariffs.¹

Europe: A Rate Cut in London Amidst Geopolitical Crosswinds

European equity markets finished the week with gains, though sentiment was more cautious and performance more varied than in the U.S. The region’s bourses were buffeted by a major central bank decision, mixed economic data, and their proximity to geopolitical flashpoints. For the week, the pan-European STOXX 600 index rose a solid 2.11%.¹⁸ However, performance diverged sharply at the national level, with Germany’s DAX surging over 3% while the UK’s FTSE 100 managed only a modest 0.30% gain.¹⁹

Central Bank in Focus: The Bank of England’s “Finely Balanced” Cut

The most significant regional event was the Bank of England’s (BoE) decision to cut its main interest rate by 25 basis points to 4.0%, its lowest level since March 2023.²¹ This was the fifth reduction since August 2024 and was prompted by mounting concerns over a slowing U.K. economy and a weakening labour market.¹²

The decision itself was fraught with internal division, passing only after an unprecedented 5-4 split vote within the Monetary Policy Committee (MPC).¹² This tight vote highlighted the central bank’s dilemma: trying to support a sluggish economy while simultaneously battling inflation that remains well above its 2% target and is forecast to rise to 4% in the near term.²¹ In his comments, Governor Andrew Bailey adopted a hawkish tone, stating that future rate cuts would need to be “gradual and careful”.²¹ This tempered market expectations for a rapid easing cycle and provided a floor of support for the pound sterling, which strengthened following the announcement.²⁴

Geopolitical and Economic Headwinds

Investor caution in Europe was amplified by several factors. The August 8 deadline set by President Trump for Russia to agree to a ceasefire in Ukraine, with the threat of expanded sanctions, kept markets on edge throughout the week.⁷ The ongoing U.S. trade war also remained a top concern, with European companies continuing to assess the impact of the new tariff landscape on their global supply chains and end-market demand.¹⁵ Meanwhile, economic data from Germany, Europe’s largest economy, showed a sharp 1.9% sequential contraction in industrial output for June, raising concerns about the health of the manufacturing sector.¹⁰

The divergent performance between the UK’s FTSE 100 and Germany’s DAX highlights the different sensitivities to the week’s main drivers. The FTSE 100’s muted gain was largely a function of local factors. The stronger pound, a direct result of the BoE’s hawkish-sounding rate cut, acts as a headwind for the index’s many multinational companies that earn a large portion of their revenue in foreign currencies.²⁴ In contrast, Germany’s DAX, which is heavily weighted toward global exporters in the automotive and industrial sectors, was more sensitive to the global macro story. For these firms, the prospect of worldwide rate cuts led by the Fed and hopes for a potential de-escalation of the war in Ukraine are significant positives, suggesting stronger future demand for their goods. The DAX was thus able to rally on the global theme, while the FTSE was held back by a domestic currency and policy narrative.

Asia: A Region of Stark Divergence

Asian markets presented a fractured picture, demonstrating clearly how specific geopolitical events and trade relationships can create starkly different outcomes, overriding any single regional trend. Trading was described as “mixed” as investors navigated the cross-currents of U.S. tariff policy.⁸

Performance Breakdown

The week’s performance in Asia underscored that a monolithic view of the region is deeply flawed. The outcome for each market was determined less by a general sentiment and more by its specific exposure to U.S. trade policy.

• Japan’s Outperformance: The Tokyo Stock Exchange was the undisputed leader in the region. The Nikkei 225 index jumped 1.9% on Friday alone, capping a strong week.⁷ This powerful rally was ignited by a specific and highly positive development: news that the U.S. had agreed to correct a tariff problem related to Japanese exports.¹ This was powerfully supplemented by a string of strong corporate earnings reports from index heavyweights like SoftBank and Sony, which both posted robust results.⁸
• China and Hong Kong Under Pressure: In sharp contrast, markets in China and Hong Kong languished under the direct weight of the trade war. The Shanghai Composite ended the week flat, while the Hang Seng index in Hong Kong slipped 0.9%.⁷ These markets are at the epicentre of the tariff conflict and were directly impacted by the Trump administration’s new and punitive 100% tariff on imported semiconductors and chips, a critical component of the region’s technology supply chain.⁸
• Other Regional Markets: The rest of the region was a mixed bag, with modest gains seen in New Zealand, Malaysia, and Taiwan, while markets in Singapore and South Korea registered declines.⁸

The Semiconductor Tariff Storm

The U.S. decision to impose a 100% tariff on imported semiconductors and chips, while providing an exemption for domestic U.S. builders, sent a shockwave through Asia’s tech-heavy economies.⁸ This policy is a direct blow to the intricate supply chains of major electronics and technology exporters across the region, creating significant volatility in tech, chip, and export-focused stocks and weighing heavily on markets like South Korea and Taiwan, even as the latter managed a small gain.²⁶

Economically, data from China on new energy vehicle (NEV) sales for July showed a month-on-month decline, with sales falling back below the one million unit mark, a potential sign of softness in a key consumer growth sector.²⁷ In Japan, the yen remained highly sensitive to global factors, particularly the prospect of U.S. rate cuts, which influences the pivotal USD/JPY exchange rate and has significant implications for the profitability of Japanese exporters.⁵

India: Grappling with Punitive U.S. Tariffs

Indian financial markets came under severe pressure, ending the week sharply lower and marking their sixth consecutive week of losses—the longest such streak since the COVID-19 market crash in early 2020.²⁸ The BSE Sensex plunged 742 points for the week, while the Nifty 50 index shed 202 points.¹¹ The selling pressure intensified on Friday, with both benchmarks falling nearly 1% after President Trump ruled out immediate trade talks to resolve the dispute.¹¹

The Tariff Shock

The overwhelming driver of the negative sentiment was an executive order from President Trump that doubled the import tariff on a range of Indian goods to a punitive 50%.⁶ The administration cited India’s continued purchases of Russian oil as the reason for the unprecedented tariff hike on a major trading partner.⁶

The impact of this action is highly sector-specific. Export-oriented industries such as textiles, chemicals, auto ancillaries, gems, and seafood are facing acute distress. Reports emerged of U.S. buyers suspending orders and exporters facing collapsing profit margins.⁹ However, the broader market indices were somewhat insulated from the worst of the direct impact. The Nifty 50 has a relatively limited direct exposure to the specific goods targeted, and its largest sector by weight, IT services, remains exempt from these goods-based duties.⁹

Capital Flows and RBI Response

The tariff shock triggered a significant flight of foreign capital. Foreign Institutional Investors (FIIs) extended their selling streak to ten consecutive sessions, pulling a substantial $4 billion out of Indian equities since the start of July.⁹ This sustained outflow indicates deep concern among global investors about the escalating trade friction.

In a move to shore up the domestic economy against these external headwinds, the Reserve Bank of India’s (RBI) Monetary Policy Committee voted to cut its benchmark repo rate by 25 basis points to 6.25%.¹¹

The week’s events exposed a notable disconnect between the perspectives of foreign and domestic investors. The heavy and sustained selling by FIIs represented a clear and decisive risk-off move, reflecting a negative assessment of India’s near-term outlook in a global context.⁹ In contrast, many domestic analysts advised local investors to “remain calm” and view the tariff-induced correction as a healthy buying opportunity to “gradually accumulate fundamentally strong stocks” within what they still see as a long-term secular bull market.⁶ This suggests FIIs, with a global mandate, perceive a heightened systemic risk that may be underestimated by some domestic market participants focused on India’s long-term growth story.

Oceania: Buoyed by Commodities and Rate Speculation

Australia’s stock market bucked the negative trend seen across much of Asia, with the benchmark S&P/ASX 200 index posting a solid 1.9% weekly gain, its first positive week in three.³⁰ While the index finished Friday’s session with a slight dip to close at 8,824.90, it comfortably held onto its weekly advance.⁸ The market’s performance demonstrated how it can uniquely benefit from the very global instability that harms other economies.

Key Drivers

The resource-heavy Australian index found support from several key tailwinds. A primary driver was the strength in commodities. Global trade tensions and rising expectations of central bank rate cuts drove the price of gold to a two-week high, providing a significant boost to Australia’s large contingent of gold mining stocks.³¹ Higher copper prices also lifted mining behemoths like BHP, which was further supported by analyst expectations of a larger-than-forecast dividend payment.³²

A second major driver was growing speculation of a forthcoming interest rate cut by the Reserve Bank of Australia (RBA). With the Fed and BoE pivoting to a more dovish stance, markets increasingly expect the RBA to follow suit at its upcoming meeting on August 12, aligning the Australian market with the global theme of anticipated monetary easing.³⁰

Sector Cross-Currents

Despite the strong headline performance, the gains were not uniform across the market. The positive momentum in the mining sector masked underlying weakness and specific threats elsewhere. Healthcare stocks, particularly major pharmaceutical exporters like CSL, were pressured by the looming threat of U.S. tariffs of up to 250% on their products.⁸ The technology sector also slipped, tracking some of the volatility on Wall Street, while Australia’s major banks declined ahead of their upcoming earnings reports.³⁰ This shows that while Australia’s market benefited from the second-order effects of global instability—namely higher gold prices and the prospect of rate cuts—its non-resource sectors remain just as vulnerable to direct tariff threats as their global peers.

Conclusion and Outlook

The week ending August 8, 2025, was defined by a global market wrestling with the conflicting forces of an aggressive U.S. trade policy and the powerful antidote of anticipated central bank easing. While major U.S. indices displayed remarkable resilience, this high-level performance masked significant stress and divergence across regions and sectors. India faced a direct tariff assault, Japan benefited from a specific trade resolution, and Australia’s resource sector profited from the flight to safety. The “bad news is good news” dynamic, where weak economic data is cheered for its potential to unlock monetary stimulus, is now firmly in control of market sentiment, but it has created a fragile foundation for asset prices, highly susceptible to any change in central bank tone.

Looking ahead, several key events will test this fragile equilibrium.

• U.S. Inflation Data: With Federal Reserve policy now the paramount driver of markets, the upcoming U.S. Consumer Price Index (CPI) report will be critical. A higher-than-expected inflation reading could challenge the narrative of imminent and sustained rate cuts, potentially triggering significant volatility.⁵
• Reserve Bank of Australia Meeting: The RBA’s interest rate decision on August 12 will be closely watched. Markets will be looking to see if the central bank formally signals a dovish pivot, following the trend set by its global peers.³⁰
• Geopolitical Developments: The situation between Russia and Ukraine, along with the constant potential for new trade-related announcements from the Trump administration, remains a key source of headline risk that could shift market sentiment abruptly.⁷

Disclaimer

This report has been prepared for informational purposes only and is not intended to serve as financial advice. The securities and market trends mentioned are for illustrative purposes and do not constitute a recommendation to buy or sell any financial instrument. Market conditions are subject to rapid change, and past performance is not indicative of future results. Readers should conduct their own independent research and consult with a qualified financial professional before making any investment decisions. The views and opinions expressed herein are based on information available as of August 8, 2025, and are subject to change without notice.

Works cited

1. Wall Street clocks another winning week – Toledo Blade, accessed on August 9, 2025, https://www.toledoblade.com/business/stock-market/2025/08/08/wall-street-clocks-another-winning-week/stories/20250808127
2. Weekly market commentary | BlackRock Investment Institute, accessed on August 9, 2025, https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/weekly-commentary
3. Weekly Trader’s Stock Market Outlook | Charles Schwab, accessed on August 9, 2025, https://www.schwab.com/learn/story/weekly-traders-outlook
4. Weekly Stock Market Update | Edward Jones, accessed on August 9, 2025, https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/stock-market-weekly-update
5. Nasdaq Hits Highs as Apple Has Best Week Since ’20: Markets …, accessed on August 9, 2025, https://www.swissinfo.ch/eng/nasdaq-hits-highs-as-apple-has-best-week-since-20%3A-markets-wrap/89800995
6. Top stocks to buy today: Stock recommendations for August 8, 2025 …, accessed on August 9, 2025, https://timesofindia.indiatimes.com/business/india-business/top-stock-recommendations-for-august-08-2025-jsw-energy-hindustan-aeronautics-limited-hal-stocks-to-buy-today/articleshow/123178090.cms
7. Early market roundup: Stocks mixed in Europe; Futura Medical dives …, accessed on August 9, 2025, https://www.ajbell.co.uk/articles/latestnews/291583/early-market-roundup-stocks-mixed-europe-futura-medical-dives
8. Friday 8th August 2025: Asian Markets Mixed Amid Tariff Uncertainty …, accessed on August 9, 2025, https://www.ictrading.com/blog/friday-8th-august-2025-asian-markets-mixed-amid-tariff-uncertainty/
9. Stock market crash today: Nifty50, BSE Sensex end at 3-month low as Donald Trump’s tariffs hit sentiment – top 5 reasons for market fall, accessed on August 9, 2025, https://timesofindia.indiatimes.com/business/india-business/stock-market-today-nifty50-bse-sensex-august-08-2025-donald-trump-tariffs-on-india-impact-india-us-trade-deal-talks-global-markets/articleshow/123178261.cms
10. Global markets weekly update – T. Rowe Price, accessed on August 9, 2025, https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html
11. Weekly Market Recap As of August 08, 2025: Sensex Falls 742 pts, Nifty Down 202 pts; RBI Cuts Rate – Angel One, accessed on August 9, 2025, https://www.angelone.in/news/market-updates/weekly-market-recap-as-of-august-08-2025-sensex-falls-742-pts-nifty-down-202-pts
12. Bank Rate reduced to 4% – August 2025, accessed on August 9, 2025, https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2025/august-2025
13. Daily market snapshot – Edward Jones, accessed on August 9, 2025, https://www.edwardjones.com/us-en/market-news-insights/stock-market-news/daily-market-recap
14. Schwab’s Market Open Update, accessed on August 9, 2025, https://www.schwab.com/learn/story/stock-market-update-open
15. Weekly Market Recap — Manulife John Hancock Investments, accessed on August 9, 2025, https://www.jhinvestments.com/weekly-market-recap
16. Revise the Messenger | American Enterprise Institute – AEI, accessed on August 9, 2025, https://www.aei.org/articles/revise-the-messenger/
17. Dax Index News: Forecast Eyes 24500 Amid Putin-Trump Peace Talks, Fed Pivot, accessed on August 9, 2025, https://www.fxempire.com/forecasts/article/dax-index-news-forecast-eyes-24500-amid-putin-trump-peace-talks-fed-pivot-1539784
18. STOXX Europe 600 Index Ends the Week 2.11% Higher at 547.08 — Data Talk, accessed on August 9, 2025, https://www.morningstar.com/news/dow-jones/202508088734/stoxx-europe-600-index-ends-the-week-211-higher-at-54708-data-talk
19. Germany Stock Market Index (DE40) – Quote – Chart – Historical Data – Trading Economics, accessed on August 9, 2025, https://tradingeconomics.com/germany/stock-market
20. FTSE 100 Index Ends the Week 0.30% Higher at 9095.73 — Data Talk | Morningstar, accessed on August 9, 2025, https://www.morningstar.com/news/dow-jones/202508088735/ftse-100-index-ends-the-week-030-higher-at-909573-data-talk
21. Monetary policy: Bank of England trims rate to 4%; signals cautious easing ahead, accessed on August 9, 2025, https://timesofindia.indiatimes.com/business/international-business/monetary-policy-bank-of-england-trims-rate-to-4-signals-cautious-easing-ahead/articleshow/123172248.cms
22. The Bank of England cuts its main interest rate to 4%, the lowest level since March 2023, accessed on August 9, 2025, https://apnews.com/article/britain-bank-england-interest-rate-cut-monetary-e2560865eefa985052dbdd483e53becc
23. UK interest rate cut: what does it mean for mortgages and savings? – The Guardian, accessed on August 9, 2025, https://www.theguardian.com/business/2025/aug/07/uk-interest-rate-cut-bank-of-england-mortgages-savings
24. Lunchtime market roundup: Stocks mixed but Petra Diamonds shines | AJ Bell, accessed on August 9, 2025, https://www.ajbell.co.uk/news/articles/lunchtime-market-roundup-stocks-mixed-petra-diamonds-shines
25. Weekly Market Recap – J.P. Morgan Asset Management, accessed on August 9, 2025, https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf
26. IC Markets Asia Fundamental Forecast | 8 August 2025, accessed on August 9, 2025, https://www.icmarkets.com.au/blog/ic-markets-asia-fundamental-forecast-8-august-2025/
27. China Jul NEV retail falls below 1 million, with hybrids seeing first-ever year-on-year decline, accessed on August 9, 2025, https://cnevpost.com/2025/08/08/china-jul-nev-retail-falls-below-1-million/
28. Stock market close highlights: Sensex down 765 pts, Nifty at 24363; SMIDs, metal, realty top drag, accessed on August 9, 2025, https://www.business-standard.com/markets/news/stock-market-live-updates-august-8-nse-bse-sensex-today-nifty-ipo-tata-motors-sbi-q1-results-trump-tariffs-gift-nifty-125080800122_1.html
29. Nifty Weekly Outlook: Reversal confirmed, big moves expected around August 8, says Harshubh Shah – The Economic Times, accessed on August 9, 2025, https://m.economictimes.com/markets/stocks/news/nifty-weekly-outlook-reversal-confirmed-big-moves-expected-around-august-8-says-harshubh-shah/articleshow/123072482.cms
30. Australia Stock Market Index – Quote – Chart – Historical Data – News, accessed on August 9, 2025, https://tradingeconomics.com/australia/stock-market
31. 5 things to watch on the ASX 200 on Friday 8 August 2025 – Motley Fool, accessed on August 9, 2025, https://www.fool.com.au/2025/08/08/5-things-to-watch-on-the-asx-200-on-friday-08-august-2025/
32. Brokers name 3 ASX shares to buy today 8 August 2025 – Motley Fool, accessed on August 9, 2025, https://www.fool.com.au/2025/08/08/brokers-name-3-asx-shares-to-buy-today-8-august-2025/