Global financial markets advanced notably this week, driven by renewed optimism surrounding the U.S.-China trade deal and growing expectations of monetary policy easing by the Federal Reserve. A finalised trade framework, combined with the de-escalation of geopolitical tensions and the withdrawal of proposed tax penalties, bolstered investor confidence. Major equity indices across the U.S., Europe, and Asia posted significant gains, with the S&P 500 and Nasdaq approaching record levels. Simultaneously, weakening inflation indicators and a softer dollar reinforced forecasts of imminent rate cuts.
U.S.–China Trade Deal and Fed Hopes Fuel Market Surge
Global stock markets ended the week on a high note, boosted by fresh momentum in U.S.–China trade negotiations and rising expectations of Federal Reserve interest rate cuts. According to Bloomberg, the S&P 500 and Nasdaq 100 edged close to record highs, while Dow futures also posted gains.
Commerce Secretary Howard Lutnick confirmed that both Washington and Beijing had finalised a framework for cooperation, while China pledged to resume rare earth exports and ease tech restrictions. These moves signalled progress in easing long-standing tensions between the world’s largest economies. Vasileios Gkionakis, senior economist and strategist at Aviva Investors, said in a statement that
What we have right now is potentially some optimism about some trade deals. We have come from quite low levels in the aftermath of the Liberation Day in April. To a certain extent, we have also had some mini-selloff on the back of the events in the Middle East, and in that sense, we’re rebounding.
The U.S. is closing in on trade deals with 10 key partners ahead of a July 9 deadline, aiming to avoid a new wave of tariffs. At the same time, a deal with G-7 nations to eliminate the contentious “revenge tax” has eased corporate concerns and could spur more investment into the U.S., according to Treasury Secretary Scott Bessent.
These developments, along with expectations of multiple Federal Reserve rate cuts, have helped fuel Wall Street’s rally. While policymakers remain cautious, markets have already priced in two rate reductions, with rising odds of a third, as inflation trends are closely monitored.
Global Equities Climb Amid Geopolitical Easing and Resilient Data
Equity markets in Europe and Asia also advanced, supported by improved investor sentiment amid declining geopolitical tensions. In Europe, the Stoxx 600 climbed 0.9%, supported by modest inflation data and renewed optimism around trade. Germany’s DAX and France’s CAC 40 led regional gains, while Britain’s FTSE 100 also advanced. ECB policymakers remain confident about hitting their 2% inflation target without tightening monetary policy prematurely.
Asian markets delivered mixed performance as Japan’s Nikkei rose on easing inflation, while Chinese stocks fell amid weak industrial profits, underscoring ongoing economic strain. South Korea and Australia also declined, reflecting regional caution. Meanwhile, oil posted its sharpest weekly drop in two years following an Israel-Iran ceasefire that reduced geopolitical risks. Copper prices surged on looming tariff-driven supply concerns, while gold extended losses for a second week amid fading demand for safe-haven assets.
Inflation Data, Jobs Report, and Policy Deadlines in Market Focus
As the second half of the year begins, investor focus has shifted to key U.S. economic indicators, particularly the Fed’s preferred inflation metric, the core PCE index, which is expected to show its weakest rise since the pandemic. With job growth projected to slow and unemployment potentially ticking higher, markets remain sensitive. Although equities have rebounded since April’s tariff shock, any disappointing data on inflation or employment could quickly reverse sentiment, as the Fed cautiously weighs rate cuts against persistent inflation risks.
Adding to market uncertainty, Washington’s push for a major tax-and-spending bill ahead of the July trade deadline is drawing close attention. Investors are watching to see how much fiscal stimulus will be introduced, and whether it sparks fresh concerns over widening deficits. Despite the S&P 500’s 4% gain year-to-date and July’s typical seasonal strength, market sentiment remains cautious, with economic data, policy decisions, and trade developments set to shape the weeks ahead.
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