Economic News: Sunday, July 27, 2025 – The US and EU Close to a Trade Agreement, Markets Await Signals from the Fed
Global financial markets are closing the week on an optimistic note. The United States and the European Union are on the verge of concluding a significant trade agreement, which is enhancing risk appetite among investors. At the same time, attention is focused on the upcoming Federal Reserve meeting, where it is expected that the monetary policy course will be maintained. In the CIS markets, the key topic remains the recent sharp rate cut by the Bank of Russia and its implications for the ruble and local assets. Below is a detailed overview of key economic and financial news for July 27, 2025, prepared in a business style for investors.
US Markets: Record Rally and Fed Decision Expectations
The American stock market continues to show impressive growth. The S&P 500 and Nasdaq indices set new historical highs daily over the past week – a rare “perfect week” when records were fixed every trading day. At the end of Friday’s session, the S&P 500 gained about 0.4% (to approximately 6,389 points), while the Nasdaq rose by 0.2% (approximately 21,108 points), resulting in weekly index growth of 1–1.5%. The rally is fueled by strong quarterly earnings reports and signs of resilience in the US economy. Recent data indicates that consumer and investment activity has remained stable: although total orders for durable goods dropped by 9.3% in June following a spike in May (driven by large aircraft contracts), orders excluding transportation rose by 0.2% month-over-month, indicating solid business investments. Additionally, the number of initial unemployment claims fell to a three-month low, reflecting a healthy labor market.
Investors are positively assessing progress in external trade and easing inflationary pressures. The conclusion of a trade deal with Japan and the anticipated US–EU agreement on tariffs alleviate some geopolitical uncertainty, supporting the markets. At the same time, the rate of price growth in the US has slowed, with the Fed sending “dovish” signals. At the upcoming meeting (July 29–30), the Federal Reserve is likely to keep the key rate at the current level of 5.25%. Moreover, futures already imply about a 60% probability of a rate cut by September, given the moderate inflation. These expectations of additional stimulus in the second half of the year are driving stock prices, particularly in the technology sector. Analysts note that the rapid rise in the shares of IT giants has led to one of Wall Street’s best first halves in decades, amplifying the FOMO (fear of missing out) effect among market participants. However, the high level of valuations (the S&P 500 price-to-earnings ratio is approaching 22–23 versus a historical norm of about 16) prompts investors to remain vigilant: any disappointment – whether in trade negotiations or Fed comments – could trigger increased volatility.
Europe: Neutral Dynamics and Trade Agreements
European stock markets closed the week relatively calmly. The pan-European STOXX 600 index hovered around the 547-point mark, virtually unchanged for the week. Macroeconomic signals from Europe were mixed. In Germany, the Ifo Business Climate Index unexpectedly rose slightly in July to 88.6 points (up from 88.4 in June), although analysts had anticipated a decline. This small increase in business confidence indicates that the largest economy in Europe is temporarily avoiding a deepening recession, although the level of optimism remains low. In the UK, in contrast, consumer sentiment statistics were moderate: retail sales in June rose by 0.9% month-over-month (following a decline in May), which raises hopes for household spending resilience despite high inflation; however, the GfK consumer confidence index fell slightly (to -19 points from -18), reflecting public caution.
Key drivers of sentiment in Europe remain news on global trade. Amid ongoing trade disputes, European companies are incurring costs due to reciprocal tariffs – for instance, a recent report from Volkswagen AG showed a more than 30% decline in operating profit in Q2, partly due to additional tariffs on exports to the US. Investors are now looking optimistically toward negotiations between the EU and Washington: a principle agreement is expected to be announced this weekend, which would avoid the imposition of increased tariffs from August 1. The meeting between European Commission President Ursula von der Leyen and President Donald Trump, scheduled for Sunday in Scotland, is intended to cement this trade compromise. The prospect of resolving the dispute supports the European market: despite industrial difficulties, hopes for the swift removal of barriers and ongoing business adaptation have allowed most regional stock indices to remain in positive territory. However, caution remains – if the deal collapses at the last moment or proves incomplete, it could return tension to the markets.
Asia: Slowdown in China and Political Uncertainty in Japan
The Asia-Pacific markets exhibited mixed dynamics by the end of the week amid local risks and global trends. Focus is on the pace of economic growth in China, which has noticeably slowed down. According to official data, China's GDP growth in Q2 was around 5.2% year-on-year, slowing after a higher start to the year. Key reasons include cautious behavior from Chinese consumers and weak external demand. Domestic statistics indicate a decline in retail sales and investment activity, signaling that the post-pandemic recovery is entering a more challenging phase. Chinese authorities have announced a series of targeted stimulus measures – from programs to boost domestic demand to tax incentives for businesses – but global investors are skeptical that these steps will be sufficient to achieve the targeted annual growth of around 5.5–6%. The softer trajectory of the Chinese economy is reflected across the region, particularly impacting resource and goods exporters from the APEC region.
Additional pressure on sentiment in Asia comes from trade and political factors. Uncertainty continues regarding US–China trade relations: despite potential compromises with allies, a significant portion of US tariffs on goods from China remains in place, and the prospects for their removal in the second half of the year are unclear. Export-oriented economies in Asia – especially high-tech sectors in Japan, South Korea, and Taiwan – are vulnerable to possible trade disputes escalations. Furthermore, in Japan, domestic politics is in focus over the weekend: elections for the upper house of parliament are taking place on July 27. There is a risk that the ruling coalition may lose its stable majority, adding uncertainty. However, many investors believe that the election outcome will not lead to a dramatic shift in economic policy. The Japanese Nikkei 225 index rose approximately 0.4% on Friday, anticipating the continuation of accommodative monetary policy regardless of political reshuffling. Meanwhile, the Japanese yen weakened to ¥148 per $1, reaching its lowest levels in recent years, under pressure from a combination of political intrigue and expectations that the Bank of Japan will maintain its ultra-loose stance due to low inflation (around 3% in Tokyo). Overall, the collective index of Asia-Pacific stocks has shown little change over the week: support from positive news from Wall Street and hopes for trade deals was balanced by local risks and investor caution in Asia.
Commodity Markets: Oil Balances, Gold Holds Its Position
The commodity markets are maintaining relative price equilibrium. Brent crude oil has been trading in a narrow range of around $67–70 per barrel for the past few weeks. By the end of this week, Brent quotes stabilized around $69 per barrel – slightly above the levels at the beginning of the week. On one hand, the positive news background supports oil bulls: progress in trade negotiations between the US and key partners strengthens hopes for an increase in global demand for energy. In particular, the discussed easing of tariff disputes between the US and EU eliminates the threat of economic slowdown, which in turn supports oil consumption. Additionally, supply constraints persist: OPEC+ countries continue voluntary production limits, and specific export disruptions (such as the temporary suspension of Azeri BTC crude oil shipments through the Turkish port of Ceyhan) have temporarily reduced market supply. These conditions prevent prices from falling significantly below current levels.
On the other hand, the potential for oil price growth is limited by signs of slowing global economic growth. Mixed macroeconomic statistics from the US and cooling in China lead to forecasts of only moderate increases in raw material demand in the second half of the year. Many analysts remain cautious: estimates from several investment banks suggest Brent may end the year around $60 per barrel if the risks of weak demand re-emerge. Thus, oil prices are currently balancing between supporting factors (OPEC+ supply cuts and export limitations from some countries) and pressure factors (economic slowdown and potential increases in non-OPEC supplies, for example, in the event of sanctions relief).
The precious metals market continues to show high activity. Gold remains near historical highs, although its price slightly retreated from peak levels by the end of the week. After a record surge in the first half of July (to approximately $3,350 per troy ounce), profit-taking has been observed in recent days: gold quotes fell to around $3,340–3,350, which is 0.5–1% below recent peaks. The pressure on the precious metal was fueled by increased investor interest in risk assets and a moderate strengthening of the US dollar amidst optimism regarding trade. Furthermore, strong employment data from the US reduced expectations for an imminent Fed rate cut, causing Treasury yields to rise – making gold somewhat less attractive in the short term. Nevertheless, the fundamental factors supporting gold remain unchanged. Inflation in Western economies still exceeds central banks' target benchmarks, geopolitical tensions remain high, and central banks could shift toward a softer policy if economic growth slows. In such an environment, gold continues to serve as a "safe haven." With ongoing uncertainty, any new spikes in volatility or signs of recession could once again push prices higher. Other precious metals also corrected after the recent rally: for example, platinum, which had reached decade highs, retreated by a few percentage points, reflecting profit-taking by investors.
Currency Markets: Dollar Stable, Pressure on Yen and Ruble
By the end of the week, major currency pairs moved in different directions on the currency market. The US dollar recovered some ground after a decline in mid-July. The dollar index (DXY) settled near the 100-point mark. The dollar was supported by strong economic data and rising US bond yields, as investors reassessed expectations about the Fed's further actions. Positive surprises in the US economy – from a robust labor market to strong corporate earnings – reinforced the view that the Fed is unlikely to rush into rate cuts. Consequently, the dollar ended the week at roughly the same level as the previous week, interrupting the weakening phase seen earlier in the month.
The euro remained virtually unchanged against the dollar over the week, consolidating around the $1.17 level. The restrained tone of the European Central Bank and the lack of new drivers led to sideways dynamics in the euro/dollar pair. The British pound also stabilized (~$1.35) after rising at the beginning of the month, receiving mixed signals: on one hand, a surprising increase in retail sales supported the currency, while on the other hand, a decline in consumer confidence and persistently high inflation limit investor enthusiasm.
The Japanese yen continued to weaken, with the USD/JPY rate rising to ¥148 per $1 – the lowest level for the yen in recent years. The pressure on the Japanese currency stems from a combination of internal and external factors: political uncertainty ahead of elections, chronically low inflation, and expectations that the Bank of Japan will maintain ultra-low rates drive investors to exit the yen in favor of more yielding currencies. Until signals indicating a potential tightening of policy in Japan emerge, the yen remains under pressure, and market participants are pricing in the possibility of further depreciation.
Emerging market currencies had a less fortunate week. Amid dollar strengthening and declining interest rates within certain countries, some EM currencies depreciated. The Russian ruble faced moderate pressure following the Central Bank of Russia's decision to cut rates. The official dollar exchange rate set by the Bank of Russia for the weekend rose to approximately 79.5 ₽ (up from ~78.9 ₽ the previous week). The decline in yields on ruble-denominated assets made them less attractive; additionally, importers are ramping up their purchases of foreign currency as imports of goods recover – both factors are weighing on the ruble. However, sharp declines in the exchange rate did not occur: partly due to the fact that the markets had anticipated this step. Other currencies from the CIS countries also demonstrated a downward trend over the week, reflecting both the dollar's strengthening in the global market and individual internal circumstances. In the longer term, the dynamics of emerging market currencies will depend on investors' risk appetite and decisions from leading central banks.
Russia: Rate Cut Effect and Corporate Signals
For the Russian financial market, the week ended with a major event – the Bank of Russia significantly reduced the key rate. The regulator's decision following the meeting on July 25 to lower the rate by 2 percentage points (from 20% to 18% per annum) was more decisive than most analysts had projected. This move was facilitated by ongoing inflation slowdown: annual price growth slowed to ~7-8%, significantly below the peaks seen at the beginning of the year. In its accompanying statement, the Central Bank noted that inflation expectations among the population are decreasing, while consumer demand remains subdued – conditions have been created for cheaper credit without the threat of overheating prices. The regulator improved its inflation forecast for the end of 2025 and indicated that, assuming current trends persist, it sees room for further rate cuts. Many experts now suggest that by December, the rate could drop to 15-16%, which would provide additional stimulation for the economy.
Markets reacted positively overall to the Central Bank's bold decision, though without unanimity. The debt market experienced an influx of buyers: yields on government bonds (OFZ) significantly decreased, raising bond prices, as cheaper funding improves prospects for borrowers. In the stock market, the reaction was mixed. Sectors sensitive to rates – primarily energy, real estate, and consumer companies – received a growth impulse due to expectations of cheaper credit and stimulated demand. Conversely, bank stocks fell, as declining interest rates narrow their interest margins and may limit the profitability of financial institutions. As a result, the MOEX index finished Friday close to its opening level (around 2,820 points), meaning it changed little during the session, although intra-day volatility increased. The ruble, as mentioned above, weakened slightly following the announcement of the decision – lower rates diminish the attractiveness of ruble deposits and bonds for investors. Nevertheless, a dramatic drop in the exchange rate did not occur, partly because the markets had already accounted for the possibility of such a move. Participants' attention is now shifting to the Central Bank's future actions: if inflation continues to slow, the regulator may continue its easing cycle to support economic activity.
Corporate reports from Russian companies reflect the challenging situation in the economy in the wake of the previous tight monetary policy. For instance, one of Russia's largest metallurgical holdings, PAO Severstal, reported a sharp decline in financial results. Severstal's net profit in Q2 fell by 55% year-on-year (to ~15.7 billion rubles) due to several factors. The company blames the deteriorating conditions primarily on high credit rates, which hindered investment and demand in the economy: management estimates that due to the high cost of borrowing, consumption of metal products in Russia fell by ~15% in the first half of the year, particularly impacting demand from construction and machine engineering. Furthermore, relatively low global steel prices and a strengthening ruble, which limits export opportunities, negatively affected the company. Faced with declining profits, Severstal even decided to temporarily forgo dividend payments to preserve financial stability. However, management welcomed the Central Bank's decision to lower rates and noted that cheaper credit should, over time, revitalize steel demand in the second half of the year.
Corporate Reports: From IT Giants to Consumer Brands
The quarterly earnings season continues, and the financial results of the largest public companies serve as important benchmarks for the market. Recent reports provide a diverse picture: some businesses are growing confidently, while others are facing challenges. Below are key highlights from reports of companies across various sectors:
- Alphabet (Google) – The tech giant showcased strong results for Q2. Revenue grew by approximately double-digit figures (around +14% year-over-year, to ~$95-96 billion), and profit exceeded analysts' expectations. The main drivers were steady growth in advertising and cloud services revenues, as well as the early fruits of the company's significant investments in artificial intelligence. Alphabet's management noted that AI technology adoption is already enhancing the efficiency of its search business and cloud platform. Google’s solid performance boosted investor confidence in the tech sector: Alphabet shares rose by about 1% on the news, instilling optimism in other megacap companies.
- Tesla – The world's largest electric vehicle manufacturer disappointed the market with its quarterly report. While Tesla's revenue continued to grow due to increasing vehicle sales, profit and margins came under pressure. The company reported a decrease in operating margin, driven by aggressive pricing discounts on electric vehicles and rising costs. A further negative signal came from Elon Musk's comments: the founder and CEO of Tesla warned of “several tough quarters” ahead due to the reduction of government subsidies for electric vehicles in the US and intensifying competition. These statements heightened concerns about Tesla's future growth rates. Following the report’s release, the company's shares fell by over 8%, and year-to-date, Tesla's market capitalization has decreased by approximately a quarter, reflecting investor caution in the EV (Electric Vehicles) sector.
- Intel – The semiconductor industry continues to face difficulties, as evidenced by the report from the largest American chipmaker. For Q2, Intel reported a loss per share (about -$0.10 against expectations of minor profit), despite revenue exceeding forecasts (~$12.9 billion versus anticipated $11.9 billion). High production costs and stiff competition in the personal computer and data center processor segments negatively impacted profitability. Intel’s management also provided a cautious forecast for the upcoming quarters, noting the need for further cost-cutting. The company announced plans for optimization and staff reductions to return the business to profitability. The market responded coldly to this report: Intel's shares decreased, reflecting investor concerns about downturns in the industry and the transitional period the company is undergoing in its efforts to catch up to competitors.
- Deckers Brands – The footwear and apparel manufacturer, known for the UGG and HOKA brands, delighted investors with unexpectedly strong results. Deckers' quarterly revenue grew at double-digit rates, and profit significantly exceeded Wall Street expectations. The company reported high demand for its products in both domestic and international markets – particularly successful were sales of popular UGG winter footwear in Asia and HOKA sneakers in North America. Management raised the full-year financial outlook, anticipating continued consumer interest. This news triggered a sharp rise in Deckers' shares: on Friday, the company’s stock jumped by ~11%. Deckers' success serves as a positive signal for the consumer goods sector, indicating that even in a climate of rising prices, consumers are willing to spend money on sought-after branded products.
Together, corporate news reflects divergent trends in the global economy. Successes in the technology and consumer sectors indicate growth points – investments in innovation and sustained demand support their results. Simultaneously, challenges in the industrial sector (automotive, metallurgy) remind us of limiting factors – high rates, trade barriers, and costs. Investors will need to closely monitor the progress of the earnings season, as several megacorporations (including Apple, Microsoft, Amazon, and Meta) are set to report their results next week. Their reports and forecasts may significantly shape market sentiment in mid-summer when financial authorities from leading countries also clarify the future course of monetary policy. A balanced investment allocation and close attention to fundamental indicators remain essential for a successful strategy amid such mixed signals from different segments of the economy.
