• With a light week for economic data, tariff developments returned to the forefront last week. Although the tariff pause was extended, new levies, some higher than initial rates, have raised concerns
• Global equities ended the week mixed, with major U.S. indexes closing lower alongside declines in Japan and India, while European and Chinese stocks posted gains.
• Treasury yields rose, the US dollar strengthened, and oil prices edged higher.
• Gold ended the week strongly on spiking trade risks

Last week in review

Harare- Global markets navigated a relatively light economic data calendar, bringing tariff developments back into sharp focus. The U.S. extended its 90-day tariff pause, originally set to expire on July 9, to August 1, but new levies, some significantly higher than initially proposed stoked concerns.

Brazil’s tariff rate surged from 10% to 50%, while the EU and Mexico face a 30% tariff and Canada a 35% one.

A 50% tariff on copper imports to the U.S. also drove copper prices to record highs, reflecting heightened trade risks.

Global equities delivered mixed results: major U.S. indices, alongside Japan and India, closed lower, while European and Chinese stocks posted gains.

Treasury yields climbed, the U.S. dollar strengthened by 0.7%, and oil prices edged higher.

Gold, a traditional safe-haven asset, ended the week strongly, with the LBMA Gold Price PM in USD rising 0.6% to $3,352/oz, extending its year-to-date gain to an impressive 28.5%.

Despite a stronger dollar and weakening ETF inflows (down 0.6%), spiking trade risks, fuelled by renewed U.S. tariff threats propelled gold’s performance.

However, market positioning showed divergence: ETF inflows slowed, net longs in gold futures dipped slightly, yet bullish sentiment in the options market improved significantly.

The falling gold/silver ratio suggests gold may be underperforming relative to other precious metals, which are gaining traction after years of investor neglect. While structural support exists for these metals, growth headwinds could temper their industrial demand.

United States

In the U.S., economic signals were mixed. Minutes from the Federal Reserve’s June meeting revealed a divided stance on rate cuts, with some officials open to easing in July while others favoured a prolonged hold.

Unexpectedly, weekly initial jobless claims dropped to a seven-week low of 227,000, signalling labour market resilience despite cooling trends.

Analysts project S&P 500 earnings growth to slow to 4.8% in Q2, the weakest since Q4 2023.

Europe

In Europe, consumer demand remained weak, with Eurozone retail sales falling 0.7% month-on-month in May. Germany’s exports declined 1.4% month-on-month as U.S. tariff frontloading ended, though industrial production rebounded by 1.2% in May after April’s 1.6% drop.

The UK economy contracted for the second consecutive month in May, down 0.1%, underscoring faltering growth.

Asia

In Asia, China saw export growth accelerate in June, bolstered by the U.S.-China tariff truce, contributing to a rising trade surplus.

The State Council introduced new job support measures, including subsidies and special loans to boost hiring, particularly among youth.

In Japan, real wages fell 2.9% year-on-year in May, the sharpest drop in nearly two years, as inflation outpaced wage gains, raising concerns about economic recovery.

Meanwhile, the Reserve Bank of Australia held rates at 3.85%, defying expectations of a cut but hinting at potential future easing.

Africa

In Africa, economic data was less prominent, but the continent’s commodity-driven markets, particularly in copper and precious metals, felt the ripple effects of global trade tensions and rising commodity prices, with South Africa and Zambia closely monitoring the impact of U.S. tariffs on their exports.

This week,

Markets face heightened uncertainty as global trade risks remain elevated. President Trump’s extension of the tariff pause to August 1, coupled with renewed tariff threats, continues to support safe-haven demand for assets like gold.

Political pressures are also resurfacing, with Trump and his allies criticizing Federal Reserve Chair Jerome Powell’s handling of the Fed headquarters’ renovation, reigniting discussions about his potential removal.

Such a move could trigger selloffs in the dollar and Treasuries, further bolstering gold’s appeal.

The U.S. Consumer Price Index (CPI) for June, due Tuesday, will be a focal point. A modest uptick is expected due to tariff-driven price pressures on goods, though a sluggish service sector may partially offset this.

If inflation remains sticky, as anticipated, the Fed might scale back rate cut expectations, especially given Powell’s cautious stance and recent tariff spikes.

However, softer-than-expected inflation could reinforce the stagflation narrative unwind, balancing positive growth surprises with negative inflation surprises.

In the U.S., June’s industrial production data (Wednesday) is expected to show a slight uptick, supported by a rising ISM manufacturing PMI, while retail sales (Thursday) may remain flat after May’s 0.9% drop.

The Fed’s Beige Book, also due Wednesday, will provide further economic insights.

In Europe, industrial production data for June (Tuesday) may show slight improvement, driven by German strength, but looming tariffs could keep activity subdued.

UK inflation (Wednesday) is likely to remain unchanged, with rising food and beverage prices offset by weaker service costs.

In Asia, Japan’s June CPI (Friday) may see softer headline inflation due to lower energy costs, but core inflation could reveal firms passing on rising labour costs to consumers.

In Africa, markets will likely remain sensitive to global commodity price movements and trade policy shifts, particularly for resource-rich nations like Nigeria, South Africa, and Ghana, where currency pressures and export revenues are critical.

Looking ahead

Investors should monitor several key developments. In the U.S., the interplay between inflation data, Fed policy signals, and tariff impacts will shape market sentiment. Europe’s industrial and consumer demand trends will remain under pressure from trade uncertainties. In Asia, China’s GDP growth and Japan’s inflation dynamics will provide critical clues about regional resilience.

For Africa, the focus will be on how global commodity price trends and trade policies affect economic stability, particularly for countries reliant on metals and energy exports.

Gold’s consolidation phase may be nearing an end, potentially resuming its uptrend as trade risks and monetary policy uncertainties persist.

However, investors should remain cautious, as growth headwinds could cap gains in industrial metals, and evolving Fed dynamics could introduce volatility across asset classes.

Equity Axis News