Global Markets Weekly Update

U.S.

Nasdaq holds up best among major U.S. indexes

The major U.S. stock indexes finished the week modestly lower, with the tech-heavy Nasdaq Composite Index holding up best. Tariff news dominated the headlines, but market reaction was muted compared with previous tariff announcements. There was little difference in performance between large-caps and small-caps, while growth stocks held up modestly better than value.

Investors have begun to follow airline earnings announcements as something of a bellwether of consumer strength. Delta Air Lines provided a supportive full-year 2025 earnings outlook—after withdrawing its guidance in the wake of the early-April tariff announcements—and said that travelers are returning to the skies. The supportive outlook from Delta lifted shares of U.S. airlines broadly. In single-stock news, NVIDIA hit the $4 trillion market capitalization threshold for the first time, helping put the “mega” in the so-called Magnificent Seven group of mega-cap stocks.

Country-specific and copper tariffs announced

U.S. President Donald Trump announced 25% trade levies on major trading partners South Korea and Japan, as well as tariffs at varying levels on other countries, including Canada, South Africa, Thailand, and Malaysia. He also said that his administration would dramatically increase Brazil’s tariff to 50% in a move linked to the country’s legal proceedings against former right-wing President Jair Bolsonaro.

In addition to the country-specific tariffs, President Trump also announced an upcoming 50% tariff on copper. This triggered an immediate spike in U.S. copper futures contract prices, while benchmark copper futures traded outside the U.S. were little changed to lower. 

FOMC minutes show disagreement about policy direction

In a slow week for economic data releases, investors digested Wednesday’s release of the minutes from the Federal Reserve’s mid-June policy meeting. The minutes showed some disagreement among members of the Federal Open Market Committee (FOMC) about the direction of monetary policy. While “most” policymakers said that they anticipate cutting rates this year, two stated that they would be open to rate reductions as soon as the late-July FOMC meeting. On the other hand, some committee members said that they don’t anticipate cutting rates at all in 2025. Stocks showed little reaction to the FOMC minutes.

U.S. Treasuries lose ground to finish the week 

Treasuries rallied following the release of the FOMC minutes before losing ground to finish the week. The Treasury Department’s auction of new 10-year U.S. Treasury notes on Wednesday saw healthy demand, helping ease recent investor concerns about the attractiveness of longer-maturity Treasuries as the U.S. fiscal situation deteriorates.

The U.S. investment-grade corporate bond market performed worse than Treasuries and generated negative returns. Issuance of investment-grade corporates was slightly higher than expected but was, on average, oversubscribed.

T. Rowe Price high yield bond traders reported that their market mostly tracked equities amid mixed sentiment. They noted light issuance after several new deals priced at the beginning of the week. Our bank loan traders said that the loan primary calendar was active with opportunistic refinancing transactions.

Europe

In local currency terms, the pan-European STOXX Europe 600 Index ended 1.15% higher amid hopes for more trade deals between the U.S. and other countries. But the market turned lower at the end of the week, curbing gains, after U.S. President Trump said he would send a letter notifying the European Union of higher tariffs on its goods. Major stock indexes also rose. France’s CAC 40 Index climbed 1.73%, Germany’s DAX gained 1.97%, and Italy’s FTSE MIB added 1.15%. The UK’s FTSE 100 Index tacked on 1.34% and hit a record high during the week.

UK economy contracts for second month running; housing market steadies

On a seasonally adjusted basis, UK gross domestic product (GDP) shrank unexpectedly by 0.1% in May, after contracting 0.3% in April. Declining production and construction output drove this weakness. Analysts polled by FactSet had expected growth to rebound by 0.1%. Over the rolling three-month period, GDP expanded by 0.5% sequentially, coming off a 0.7% increase in the three months through April.

The Halifax building society said house prices stagnated in May, after falling 0.3% in April, when a tax break for first-time buyers expired. Year over year, house prices rose 2.5% versus 2.6% in the prior month. Halifax said transactions have picked up, with more buyers returning to the market. According to press reports, the UK’s finance minister, Rachel Reeves, is planning to launch a permanent mortgage guarantee scheme to help first-time buyers.

Eurozone retail sales fall amid muted demand

Eurozone retail sales volumes fell 0.7% sequentially in May—slightly more than expected and a sign that consumers remained subdued. In April, sales rose 0.3%. The annual rate slowed to 1.8% from 2.7% the previous month.

German industry output rebounds but trade weak; Italy output falls

Industrial production in Germany rebounded in May, increasing a seasonally adjusted 1.2% from April, when it fell 1.6%. However, trade was weak, with exports shrinking 1.4% month over month, after declining 1.6% in April. In Italy, production softened in May, falling by a seasonally adjusted 0.7%, almost canceling out the 0.9% rise in April, as the manufacturing sector continued to struggle.

Japan

Japan’s stock markets lost ground over the week, with the Nikkei 225 Index falling 0.61% and the broader TOPIX down 0.17%. Tariff-related developments—notably some signs of growing tensions in U.S.-Japan trade relations—and mixed domestic economic data releases weighed on investor risk appetite. The yen weakened to around JPY 146.8 against the U.S. dollar, from about JPY 146.0 at the end of the prior week. The yield on the 10-year Japanese government bond rose to 1.49% from the previous week’s 1.45%.

The U.S. announced that it would implement a slightly higher tariff of 25% on Japanese imports, up from the 24% rate the administration set in early April. However, many investors viewed positively the indication that the higher tariff will only come into force on August 1, 2025, leaving more time for negotiations. On the negative side, Japan is also focused on the July 20 Upper House election, where Prime Minister Shigeru Ishiba’s ruling coalition is expected to lose seats, compounding political risk.

Real wages decline over past year

Domestic economic data releases were mixed. Sentiment was pressured by data showing that Japan’s wage growth slowed sharply in May, raising concerns about the broader economic recovery and reaffirming some expectations that the Bank of Japan could delay its next interest rate hike until next year. Japan’s nominal wages rose 1.0% year on year in May, less than consensus estimates of a 2.4% increase and slowing from 2.0% in April. Real (inflation-adjusted) wages fell 2.9% year on year, more than consensus estimates of a 1.7% fall and following a 1.8% decline.

On the positive side, separate data showed that household spending rebounded 4.7% year on year in May, exceeding consensus 1.2% and following a 0.1% decline in April.

China

Mainland Chinese stock markets rose as data showing persistent deflation spurred hopes for more stimulus. The onshore benchmark CSI 300 Index rose 0.82% and the Shanghai Composite Index added 1.09% in local currency terms, according to FactSet. In Hong Kong, the benchmark Hang Seng Index edged up 0.93%.

The producer price index fell 3.6% in June from a year earlier, the country’s statistics bureau reported Wednesday. June’s decline was worse than economists’ forecasts and marked the 33rd month of factory deflation, as well as the biggest drop for producer prices in nearly two years, according to Bloomberg. The consumer price index unexpectedly rose 0.1%, snapping a four-month streak of declines. However, analysts said the increase was likely driven by recent stimulus measures rather than a sustained improvement in consumer confidence.

The latest inflation report raised the possibility that China’s leaders may roll out more stimulus to lift the economy out of a persistent cycle of falling prices, corporate profits, and wages. Earlier in July, officials at a high-level economic meeting chaired by China’s President Xi Jinping pledged to crack down on “disorderly” low-price competition and phase out outdated industrial capacity, Bloomberg reported, citing state-run media. The report underscored the urgency that China’s leaders have assigned to tackling deflation resulting from weak domestic demand.

Other Key Markets

Türkiye (Turkey)

Revisiting Turkey at Midyear

After a volatile first half of the year for global economies and financial markets, T. Rowe Price sovereign analyst Peter Botoucharov revisited Turkey’s economic and fiscal situation and noted the following:

• The key priority for Turkey’s economic team remains the disinflation process, with the central bank aiming to bring headline inflation—currently around 36%—down to the 20% to 25% range by the end of 2025 and down to the 12% to 15% range by the end of 2026.
• Independent monetary policymaking and maintaining a tight policy stance remain vital for reining in inflation. However, the tight policy stance could be keeping real growth below the economy’s potential. The economy has experienced 2.5% real (inflation-adjusted) growth thus far this year versus projections of 4.0% growth.
• The government’s fiscal performance has improved compared with 2024, but it is likely to underperform the initial 2025 budget deficit target set at 3.1% of GDP.
• The slow but sustained real appreciation of the Turkish lira has been pressuring and reducing the competitiveness of some low value-added industries, such as textiles and furniture manufacturing. There has not been, however, broader economic dislocation from the currency appreciation.

In summary, Botoucharov’s views remain largely unchanged. Although the balance between the current tighter monetary policy and a looser fiscal stance was not fully expected at the start of the year, this policy mix should deliver the desired results, such as lower inflation, lower credit growth, a relatively smooth economic adjustment, and increased accumulation of foreign exchange reserves.. 

Bulgaria

Bulgaria to adopt the euro currency in 2026

Former Soviet bloc country Bulgaria recently received the final legal approval from the European Union (EU) finance ministers to join the eurozone on January 1, 2026. The European Central Bank (ECB) and the European Commission have already confirmed that the country has met all formal requirements to join the single currency zone.

According to T. Rowe Price analyst Peter Botoucharov, joining the eurozone completes almost three decades of Bulgaria’s convergence toward EU policies, institutions, and standards—a process that started with the establishment of the Currency Board in 1997, passed through the EU membership in 2007, and now culminating in becoming the 21st member of the eurozone.

Botoucharov believes that Bulgaria’s macroeconomic background remains solid, that its institutional framework is based on sound principles, and that joining the eurozone will be favorable in a number of ways. For example, eurozone membership should reduce further transaction costs as well as potential risks associated with the banking system.

The country’s fiscal situation is strong: Bulgaria posted a 3% budget deficit in 2024, while its fiscal reserves stood at about EUR 5.4 billion at the end of December. Also, the central government’s debt-to-GDP ratio was around 19% to 20%, which is among the lowest in the EU and comparable to Estonia and Luxembourg.