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Global Market Outlook – July 17, 2025

🇺🇸 United States

• Economic indicators: Q2 earnings season underway—major banks like Bank of America, Goldman Sachs, and Morgan Stanley have reported strong profits in the past two days, lifting indices, though revenues in investment banking remain mixed. Delta Air Lines surprised with strong Q2 results this week, helping push the S&P 500 and Nasdaq to fresh highs as of July 11–16.

• Sentiment & positioning: Bank of America’s “cash rule” flashed a sell signal as cash levels fell to a 12-year low of 3.9%, matching historical trends ahead of corrections. Rising bullish positioning in U.S. equities, tech, and European banks may signal vulnerability despite optimism around a soft landing.

• Policy & tariffs: Pending U.S. tariffs on EU and Mexican goods, due August 1, are rattling markets—traders and strategists warn of escalating volatility and earnings pressure in Q3. Morgan Stanley cautions earnings could suffer materially by Q3 as tariffs hit margins.

• Implications: Markets may continue climbing in the short term, but caution is advised going into late summer. Increased monitoring on tariff resolution, Q3 earnings, and Fed guidance is warranted.

🇬🇧 United Kingdom

• Corporate & inflation data: On July 16, inflation unexpectedly rose to 3.6% in June—an 18-month high—driven by food and fuel, complicating expectations for BoE policy easing. Diageo’s surprise CEO exit after profit warnings added uncertainty.

• Regulatory & trade tensions: Barclays was fined £42m over financial crime failures. Investors are also watching U.S. tariff threats targeting drugs and semiconductors, which could dampen trade sentiment.

• Implications: Sticky inflation may delay the BoE’s rate cuts, keeping sterling supported. But trading risks persist around corporate earnings and global trade dynamics.

🇩🇪 Germany / Eurozone

• Economic backdrop: Growth stagnated in 2025, with Q1 up just 0.4% driven by front-loaded exports ahead of tariffs—Q2 data shows only around 0.1% growth. Germany’s cabinet approved a €500bn infrastructure and defense-funding package on July 16 to offset headwinds.

• Geopolitical risks: Forecasts warn U.S. tariffs could shave 0.25–0.6 pts off GDP, with tentative recovery only in 2026 per IMK, IWH, ifo, and Bundesbank reports.

• Implications: The fiscal boost may shore up sentiment short-term, but Germany’s industrial outlook remains fragile. Export-oriented stocks are at risk until trade tensions ease or fiscal measures gain traction.

🇦🇺 Australia

• RBA news: On July 8, the RBA surprised markets by holding the cash rate at 3.85% amid global uncertainties and inflation concerns, against widespread expectations for a cut.

• Market & consumer response: The AUD rallied on the news. ANZ-Roy Morgan consumer confidence fell sharply post-announcement, and Westpac sentiment remains subdued. Trimmed-mean inflation hit 2.9% in Q1, aligning with RBA targets.

• Outlook: Banks expect the RBA to begin cutting from August onward, but the hold signals caution. Markets will watch August 12 meeting and quarterly CPI for indications of a dovish shift.

📊 Summary & Market Implications

• Trade tensions (U.S.–EU and others) are the common thread uniting risks: they threaten corporate margins, inflation, and central-bank strategies.

• Central banks diverge: Fed still data-dependent; BoE may hold; RBA on pause; ECB (indirectly via Germany) using fiscal tools instead of rate shifts.

• Earnings have so far surprised positively but aggressive positioning and elevated valuations suggest volatility risk remains high.

• Investor stance: Expect outperformance in short windows, yet heightened risk of drawdowns, especially from trade escalations or dovish central-bank pivots.

🔍 Key Dates Ahead

• August 1: U.S. tariffs take effect on EU/Mexico imports—crucial for Germany, UK, and global sentiment.

• September (U.S.): Potential Fed rate cut, conditional on inflation and earnings tone.

• August 12 (Australia): Next RBA decision—expect potential dovish pivot if Q2 CPI confirms softness.

• July–August (Germany): Watch implementation of fiscal plans and any response to tariff fallout.

Bottom line: Markets may tread higher in the near-term, buoyed by earnings and policy support, but headline and trade risks could precipitate volatility, especially during the summer tariff deadline and central-bank windows. Stay diversified and alert.

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