Global News Summary: 28 July - 1 Aug 2025

Global markets swung sharply into risk-off mode as weak U.S. payrolls data (+73k jobs, major downward revisions) and intensifying trade tensions rattled investor confidence. The Fed held rates at 4.25%, resisting Trump’s aggressive push for cuts, but markets now fully price in two rate cuts by year-end amid collapsing bond yields and rising volatility (VIX > 20). Trump escalated his tariff regime—raising average rates to 15% and targeting Canada, India, Switzerland, and Brazil—while formalizing deals with the EU and South Korea. U.S.–China trade talks continued, but geopolitical risks surged as the U.S. moved nuclear subs in response to Russia. Gold jumped 2.1% as a safe haven, while the S&P 500 fell 1.6%, marking its worst day since May. Meanwhile, AI investment boomed with Anthropic, Groq, and Surge AI targeting billion-dollar raises, and Google agreed to EU’s AI code. Despite the IMF raising global growth forecasts to 3%, cracks in labor, inflation divergence, and central bank credibility hint at rising fragility beneath the market surface.

United States

• Monetary Policy & Fed Tensions:

  • Fed held rates at 4.25% (July 31), signaling a likely pause through September.

  • Trump launched an aggressive campaign to cut rates to 1%, publicly clashed with Powell, and called for firing the Fed Chair and BLS Commissioner.

  • Fed Governor Adriana Kugler resigned, giving Trump a chance to shift the board composition.

  • Markets responded with aggressive rate cut bets after weak labor data; 2Y yields plunged 28 bps to 3.68%, with a 90% chance of a September cut now priced in.

• Trade Escalation:

  • Trump finalized tariff deals with the EU and UK, but hit India (25%), Canada (35%), Switzerland (39%), and Brazil (50%) with sweeping levies.

  • Average U.S. tariff rate rose to 15%, the highest since the 1930s.

  • Formalized deals include South Korea (15% tariff + $100B in U.S. energy purchases).

  • U.S.–China talks in Stockholm discussed extending the ceasefire, but final approval still pending.

• Labor Market:

  • July nonfarm payrolls rose by only 73,000 (vs. expectations >150k).

  • Prior two months revised down ~260,000.

  • Three-month average job growth dropped to 35,000; unemployment ticked up.

  • Markets saw this as a major pivot point for Fed easing.

• Markets:

  • S&P 500 fell 1.6% on Aug 2, worst day since May.

  • Nasdaq 100 down 2%, VIX spiked above 20.

  • Gold surged 2.1% to $3,357.53/oz on geopolitical and Fed fears.

  • Bloomberg Dollar Index fell 0.9%, ending a 6-day rally.

European Union

• Trade & Diplomacy:

  • U.S.–EU deal imposes 15% tariffs on European goods including cars, wine, and spirits.

  • In exchange, EU agrees to hundreds of billions in U.S. energy and weapons purchases.

  • France and Germany criticized the deal’s long-term economic impact.

• Economic Data:

  • EZ Q2 GDP rose 0.1%, driven by France and Spain.

  • ECB warned that diverted cheap Chinese goods could create import-driven disinflation in the eurozone.

• Monetary Risks:

  • ECB's Schaaf cautioned that rising USD-linked stablecoin adoption could undermine eurozone monetary control.

United Kingdom

• Policy & Sentiment:

  • Capital gains tax revenue fell 18% YoY to £12.1B in FY2023–24, despite halving of the tax-free allowance.

  • 80%+ of business leaders pessimistic about outlook (IoD survey) — worst since July 2016.

  • Nurses rejected 3.6% pay rise, demanding better compensation amid persistent staffing shortages.

• Inflation:

  • Food inflation rose to 4.0% in July (June 3.7%); BRC warned further tax hikes could push retailers to raise prices.

Japan

• Monetary Policy & Growth:

  • BoJ held benchmark rate at 0.5%, raised inflation outlook, and signaled delay on next hike.

  • Gov. Ueda: "we don’t see the fog suddenly lifting" — signaling cautious outlook despite U.S. trade deal progress.

  • Industrial production rose 1.7% MoM in June.

• Labor Market:

  • Unemployment steady at 2.5%, but job-to-applicant ratio fell to 1.22 (from 1.24), suggesting labor tightness may be easing.

China

• Manufacturing & Housing:

  • Official PMI (July) fell to 49.3, lowest in 3 months.

  • Caixin PMI fell to 49.5 (June: 50.4).

  • New-home sales by top 100 developers dropped 24% YoY in July to ¥211.2B ($29.3B).

• Policy Response:

  • Xi Jinping vowed to crack down on excessive competition to fight deflation and ease trade frictions.

  • China–U.S. ceasefire extension under negotiation, outcome uncertain.

Economic Growth

• IMF raised global growth forecasts: 3.0% in 2025, 3.1% in 2026, citing muted trade war impact and weaker dollar.

• EZ Q2 GDP: +0.1% (vs. 0.0% expected).

• China and Japan showed fragility in factory output and housing, but Japan's IP rebounded.

Jobs

• U.S.: Labor market weakness now central to Fed decision-making.

• Japan: Employment holding up, but demand-side pressures emerging.

• UK: Nurse pay unrest and pessimistic hiring sentiment grow.

Debt & Central Bank Policy

• Fed: Held steady at 4.25%; now market expects up to 2 cuts by year-end, starting September.

• BoJ: Held at 0.5%, upgraded inflation outlook.

• ECB: Focused on trade risks and monetary independence challenges.

• Bond Market: 2Y Treasury yield plunged 28bps to 3.68%; 10Y fell to 4.22% on Aug 2.

Artificial Intelligence

• Funding Boom:

  • Anthropic: $5B raise led by Iconiq; $170B valuation (tripled in 4 months).

  • Groq: Raising $600M at $6B valuation.

  • Surge AI: In talks for $1B at $25B valuation.

  • Anaconda: Raised funds at $1.5B valuation.

• Corporate Developments:

  • Google to sign EU AI code of practice.

  • Meta gave bullish Q3 guidance, citing AI ad revenue.

  • OpenAI expanding Stargate to Norway.

  • Beijing summoned Nvidia over security concerns despite prior approval for made-for-China chips.

ESG / Geopolitics

• U.S. moved nuclear subs in response to Russian threats (Medvedev).

• Gold surged 2.1% on geopolitical instability and tariff-fueled inflation fears.

• ESG not central this week, but tariff policy and energy procurement reshaping green transition timelines.

Inflation

• U.S.: Above-expected growth and inflation supported Fed’s hold (for now).

• UK: 4.0% food inflation; retailers warn of tax-induced price hikes.

• Japan: Inflation outlook revised higher.

• Eurozone: Potential for disinflation from diverted Chinese exports.

• China: Deflation signs continue via PMI and property data.

Recession Risk

• U.S.: Job growth collapse, tariff shock, and Fed–White House conflict elevate downside risk.

• EU: Structural fiscal deficits (Germany: €170B) and inflation vulnerability.

• China: Export slowdown + housing crash = fragile recovery.

• Global: Despite IMF optimism, recession risks rising as policy credibility, trade friction, and inflation combine.