Interest Rate & Market Commentary for Week Ending 18th July 2025
Weekly Overview
The S&P 500 and Nasdaq composite rose to new highs last week after corporate earnings reports and economic data signalled that the U.S. is still powering through President Trump’s trade war headwinds.
Bumper bank profits showed that businesses and consumers kept opening their purses last quarter. Record earnings for the world’s largest chip maker, Taiwan Semiconductor Manufacturing, propelled potentially tariff-sensitive semiconductor stocks higher. A University of Michigan survey suggested consumer sentiment is rebounding slightly in July, while inflation expectations are declining.
The upbeat data at a moment of economic uncertainty helped the S&P 500 gain 0.6% this week. The tech-heavy Nasdaq rose 1.5%, while the Dow Jones Industrial Average edged 0.1% lower.
The 10-year Treasury yield finished the week slightly higher, settling at 4.432% after rising to 4.5% during the week.
Treasury yields come down from sharp increases triggered by signs that tariffs boosted June’s inflation, ending the week, little changed. Renewed speculation about a potential early dismissal of Fed Chair Powell also swung bond markets this week. A decline on yields today, mostly in the short end, was linked to Governor Waller’s call for an interest rate cut this month, in a likely dissention for the July 30 rate decision. Markets price in a Fed hold and data due next week are unlikely to change that. The two-year bond yields declined slightly ( 0.037) to finish the week at 3.876%.
Rumours and debate over the future of US trade policy again filled global headlines this week, the most significant discussion being around a mooted industry tariff for pharmaceutical imports which would start at a low rate but could rise to as much as 200%. US data meanwhile offered an update on the impact of tariffs on consumer inflation to date. The pull-forward of imports ahead of tariff implementation, the modest 10% tariff rate for most nations during the 90-day negotiation period and soft consumer demand all arguably limited passthrough in June. Still, in the CPI detail there is clear evidence of firms beginning to pass higher costs on, where possible.
Within core goods, inflation for household furnishings, apparel and recreation items all lifted noticeably, respectively to 1.0%, 0.4% and 0.4%. Used and new vehicles (-0.7% and -0.3%) were the counterpoint, likely weighed down by weak demand – durables consumption having declined at a near 4% annualised pace in Q1 GDP and the Atlanta Fed’s nowcast for Q2 GDP consistent with further weakness in total consumption.
The Australian share market has finished last week at a record high for the third time this week, with every sector gaining ground in the exchange’s biggest rally in three months.
The benchmark S&P/ASX200 index on Friday gained 118.2 points, or 1.37 per cent, to 8,757.2, while the broader All Ordinaries rose 116 points, or 1.3 per cent, to 9,006.
The gains were the ASX200’s biggest since a 4.5 per cent rally on April 10 and the first time it has crossed 8,700. For the week the index rose 3.4 per cent, its best weekly performance since a 3.4 per cent gain in mid-December.
The Australian labour market added 2000 jobs in June, missing to the downside of consensus estimates at 20,000. As a result, the unemployment rate increased 21 bps to 4.3% from last month’s 4.1% level. Underemployment ticked to 6%.
Overview of the US Equities Market
The S&P 500 and Nasdaq composite rose to new highs last week after corporate earnings reports and economic data signalled that the U.S. is still powering through President Trump’s trade war headwinds.
Bumper bank profits showed that businesses and consumers kept opening their purses last quarter. Record earnings for the world’s largest chip maker, Taiwan Semiconductor Manufacturing, propelled potentially tariff-sensitive semiconductor stocks higher. A University of Michigan survey suggested consumer sentiment is rebounding slightly in July, while inflation expectations are declining.
The upbeat data at a moment of economic uncertainty helped the S&P 500 gain 0.6% this week. The tech-heavy Nasdaq rose 1.5%, while the Dow Jones Industrial Average edged 0.1% lower.
Still, there are warning signs ahead as investors enter the midst of earnings season next week. Economists fear that the trade-war boost to prices in June’s inflation report is set to continue. At the same time, Trump’s threat to fire Federal Reserve Chair Jerome Powell holds the potential to wreak havoc across global markets. This is likely to keep volatility and uncertainty high.
Reports this week of Trump’s shake-up threat sparked a momentary pivot by investors to snap up gold futures—seen as a haven in times of financial stress—as well as a selloff in the U.S. dollar and long-dated Treasurys. Those moves quickly moderated after the president denied such a plan. On Friday, U.S. stocks wavered despite another round of strong earnings reports. The S&P 500 pulled back slightly from Thursday’s record, while the Nasdaq eked out a small gain for its fifth-straight all-time high.
The best-performing sectors were utilities, up 1.64%, and industrials, up 1.2%. The worst-performing sectors were energy, down 3.31%, and healthcare, down 2.43%. Large-cap stocks rose 0.69%, mid-cap stocks rose 0.75%, and small-cap stocks rose 0.23%. Growth stocks gained 1.78%, blend stocks rose 0.52%, and value stocks lost 0.89%.
In corporate news, Netflix, which lifted its annual forecasts late Thursday, dropped 5.1% Friday. American Express slid 2.3% and Post-it Note maker 3M fell 3.7%, even after posting better-than-expected results. The companies were the two worst-performing stocks in the Dow. Utilities were among the standouts in Friday’s subdued trading. Shares of Talen Energy soared 24% after the company said it is purchasing two natural-gas-fired plants. Constellation Energy and Vistra, which are also independent power producers, both rose 4% or more.
As trade-war uncertainty rattled markets in recent months, the resulting volatility has been a boon to banks and brokerage firms. Shares of Interactive Brokers rose 7.8% Friday after it reported double-digit trading volume growth last quarter, while surging trading activity boosted Charles Schwab profits and pushed its stock 2.9% higher.
Results from the Magnificent Seven tech giants will kick off next week.
Meanwhile, Wall Street is looking ahead to the Aug. 1 tariff-pause expiration and related drama. President Trump backed away from threats to fire Federal Reserve Chair Jerome Powell this week but continues to say rates should be lower.
On Friday, Fed governor Christopher Waller said he would accept the top job at the central bank, if offered. Powell’s term as chair ends next year. Waller has pushed for an interest-rate cut this month, a move that aligns with Trump’s demands for looser policy. Investors see only a marginal chance of an imminent cut, however.
New survey data from the University of Michigan showed consumer sentiment continued to recover this month, reaching a five-month high, though the mood remains considerably worse than it was at the end of last year.Next week, earnings season will continue to ramp up. Results from the Magnificent Seven tech giants will kick off Wednesday with reports from Alphabet and Tesla.
Exhibit 1 – Weekly Performance of Global Equity Markets
Exhibit 1 – shows the broadness of the current bullish investor sentiment across global equity markets. Over the past week, the best performing global equity markets included Thailand, Russia and Singapore (Most EM markets) while the worst performance has been seen in Brazil, India and Malaysia. The ASX All Ords performance was noteworthy – higher than the S&P500, Nasdaq and European stock markets.
Overview of the US Treasuries Market
The 10-year Treasury yield finished the week slightly higher, settling at 4.432% after rising to 4.5% during the week.
Treasury yields come down from sharp increases triggered by signs that tariffs boosted June’s inflation, ending the week, little changed. Renewed speculation about a potential early dismissal of Fed Chair Powell also swung bond markets this week. A decline on yields today, mostly in the short end, was linked to Governor Waller’s call for an interest rate cut this month, in a likely dissention for the July 30 rate decision. Markets price in a Fed hold and data due next week are unlikely to change that. The two-year bond yields declined slightly ( 0.037) to finish the week at 3.876%.
The odds of a cut in September rose to 58% from 51% yesterday, according to CME data.
The benchmark 10 year US Treasury Government bond yield remain little changed year to date.Over the past week, the 10 year rates finished flat around 4.43% after rising to as high as 4.5% in the middle of the week.
Exhibit 2: US 10-Year Bond Yields – YTD Perspective
Rumours and debate over the future of US trade policy again filled global headlines this week, the most significant discussion being around a mooted industry tariff for pharmaceutical imports which would start at a low rate but could rise to as much as 200%. US data meanwhile offered an update on the impact of tariffs on consumer inflation to date. The pull-forward of imports ahead of tariff implementation, the modest 10% tariff rate for most nations during the 90-day negotiation period and soft consumer demand all arguably limited passthrough in June. Still, in the CPI detail there is clear evidence of firms beginning to pass higher costs on, where possible.
Within core goods, inflation for household furnishings, apparel and recreation items all lifted noticeably, respectively to 1.0%, 0.4% and 0.4%. Used and new vehicles (-0.7% and -0.3%) were the counterpoint, likely weighed down by weak demand – durables consumption having declined at a near 4% annualised pace in Q1 GDP and the Atlanta Fed’s nowcast for Q2 GDP consistent with further weakness in total consumption.
While hard to distinguish, the 0.3% gain for food was also likely supported by tariffs given the proportion of US food imported from Mexico and Canada and it’s comparatively short shelf life. Helpfully for the overall consumer inflation view and expectations is that shelter inflation continues to decelerate, registering a 0.2% gain in June, equivalent to a 2.5% annualised rate compared to the 3.8% growth between June 2024 and June 2025.
Based on producer price inflation, which decelerated from 3.2%yr to 2.6%yr after a flat result in June, and the fact that tariff increases have been delayed until at least 1 August, the impact of tariffs on inflation is likely to remain modest in the very near term. Still, with business margins coming under pressure and firms needing to invest to maintain capacity let alone expand it, it is inevitable that price increases at the wholesale level will feed through to end users. The alternative is to cut other costs, which would most likely mean a reduction in hours worked and wages growth.
In the July edition of Beige Book, respondents referenced “modest to pronounced input cost pressures related to tariffs, especially for raw materials used in manufacturing and construction” and that “Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges, although some held off raising prices because of customers’ growing price sensitivity, resulting in compressed profit margins”. Economic activity was said to have increased “slightly” and employment “very slightly”.
In the meantime, growing fears that Japan’s upcoming parliamentary election will strain its fiscal position sent yields on long-dated government bonds sharply higher.
Markets are fretting the Upper House election on July 20 could strip the ruling coalition of its majority and spur an increase in fiscal spending, one that might be financed by more bond issuance. The 20-year yield on Japanese government debt rose 4.5 basis points to 2.650% early on Tuesday, its highest since November 1999, according to data provider Quick. The 30-year yield rose 4.0 basis points to a record high of 3.195%, while the 10-year yield rose 2.5 basis points to 1.595%, the highest since October 2008.
Market participants seem to be bracing for election scenarios that could have a major impact on the Japanese government bond market, such as consumption-tax cuts, Ataru Okumura, senior Japan rates strategist at SMBC Nikko Securities, said in a commentary.
Overview of the Australian Equities Market
The Australian share market has finished last week at a record high for the third time this week, with every sector gaining ground in the exchange’s biggest rally in three months. The benchmark S&P/ASX200 index on Friday gained 118.2 points, or 1.37 per cent, to 8,757.2, while the broader All Ordinaries rose 116 points, or 1.3 per cent, to 9,006.
The gains were the ASX200’s biggest since a 4.5 per cent rally on April 10 and the first time it has crossed 8,700. For the week the index rose 3.4 per cent, its best weekly performance since a 3.4 per cent gain in mid-December. The broad-based rally further supports positive sentiment that is currently building on all risk markets. All 11 sectors finished in positive territory, with a mix of defensives, cyclicals and growth stocks leading the market.
Materials sector surged as BHP rallied 3.0% to $40.29 after delivering record production in FY25 across key commodities, including 8% copper production growth to 2.01 million tonnes and iron ore output reaching 263 million tonnes. Though the gains might’ve been more had it not reported blowout capex for its Jansen potash project.
The ASX 200 Healthcare Index hit a five-month high after CSL gained 3.6% to $257.38 for a weekly gain of 7%, its best since December 2021, after UBS reaffirmed its buy rating with a $310 price target. Mesoblast soared 34.7% to $2.41 following strong early sales of its FDA-approved therapy Ryoncil. Mesoblast rallied 34.6 per cent to $2.41 after the Melbourne biotech company announced it had made $US13.2 million in sales, following the launch of its stem-cell treatment for a complication of bone marrow transplants in children in March. The big four banks finished on the green, with CBA rising 0.9 per cent to $182.46, Westpac adding 18. per cent to $34.31, ANZ advancing 1.2 per cent to $30.82 and NAB growing 1.3 per cent to $39.19.
Looking beyond last week and month, Exhibit 3 shows the growth trajectory of the Australian share market. Investors have been well rewarded for staying invested in the market despite various risks and macro-headwinds, including the Trump Tariff Bump. Ultimately though, the bullish expectations of investors have to be supported by earnings growth which remains in doldrums domestically.
Exhibit 3 – 3-year Perspective of the All Ordinaries Index
Overview of the Australian Government Bond Market
The Australian labour market added 2000 jobs in June, missing to the downside of consensus estimates (20,000). As a result, the unemployment rate increased 21 bps to 4.3% from last month’s 4.1% level. The participation rate rose 10 bps to 67.1% while the employment-to-population ratio was relatively steady around 64.2%.
The ABS noted “the trend unemployment rate has risen to 4.2 per cent, after remaining at 4.1 per cent over the previous three months.” The unemployment rate is now where the RBA forecast it would be for the June quarter, and the RBA expect the rate to remain steady around here for the foreseeable future with leading indicators supportive of this expectation.
On the back of this data, Australian government bonds rallied strongly with rate cut expectations firming further. Three-year government bond yields fell 9 bps while the ten-year government bond yields dropped 6 bps immediately after the data was released, holding most of these gains into the days close. The Futures Market is pricing in a near 100% probability of an August rate cut by RBA, and then another cut in November, down to 3.35%. The data release last week gives the RBA flexibility to cut, however inflation is arguably more a focus at this stage given the cross-currents from Trump Tariffs. The next inflation data is June quarter CPI, which is scheduled for July 30th, well ahead of the next RBA meeting (August 12th).
Over the week, the biggest move across the curve was seen in the 2-year Government bond yield which dropped 7 bps after the employment data. The 1-year Bond yield moved down 4bps while the 10 year and 30-year bond yields were relatively flat.
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- Figure 4: Australia 3 and 10-year Bond Yield Spread
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- Figure 5: US 2 and 10-year Bond Spread
Market Summary Table
| Name | Week Close | Week Change | Week High | Week Low |
|---|---|---|---|---|
| Cash Rate% | 3.85 | |||
| 3m BBSW % | 3.71 | -0.0308 | 3.725 | 3.71 |
| Aust 3y Bond %* | 3.37 | -0.064 | 3.486 | 3.396 |
| Aust 10y Bond %* | 4.338 | 0.008 | 4.405 | 4.33 |
| Aust 30y Bond %* | 5.019 | 0.013 | 5.067 | 5.006 |
| US 2y Bond % | 3.873 | -0.014 | 3.959 | 3.873 |
| US 10y Bond % | 4.436 | 0.056 | 4.489 | 4.427 |
| US 30y Bond % | 5.0031 | 0.0991 | 5.018 | 4.973 |
| iTraxx | 67 | 0 | 71 | 67 |
| $1AUD/US¢ | 65.26 | 0.23 | 65.75 | 64.57 |
Looking Ahead: Major Economic Releases for the Week Ending 11th July
For the week ending July 18, 2025, U.S. economic data will be in the spotlight, with Core CPI (MM and YY) and headline CPI (MM and YY) expected to show rising inflationary pressures, with consensus forecasts indicating month-on-month increases of 0.3% for both Core and headline CPI, and year-on-year figures climbing to 3.0% and 2.7%, respectively. Industrial Production is anticipated to rebound slightly to 0.1% from -0.2%, while the Philly Fed Business Index may improve marginally to -1 from -4, suggesting cautious optimism in manufacturing sentiment.
In Australia, Employment data is expected to show a gain of 20,000 jobs, recovering from a prior decline of 2,500, with the Unemployment Rate holding steady at 4.1%. These releases could signal resilience in Australia’s labour market, though global trade uncertainties, including U.S. tariff policies, may continue to pose risks to both economies.
Major Economic Releases for the Week ending 25 Jul, 2025
| Date | Country | Release | Consensus | Prior |
|---|---|---|---|---|
| Wednesday, 23/07 | Australia | Composite Leading Idx MM | n/a | -0.06 |
| Wednesday, 23/07 | United States | Existing Home Sales | 4 | 4.03 |
| Wednesday, 23/07 | Australia | S&P Global Mfg PMI Flash | n/a | 50.6 |
| Wednesday, 23/07 | Australia | S&P Global Svs PMI Flash | n/a | n/a |
| Wednesday, 23/07 | Australia | S&P Global Comp PMI Flash | n/a | n/a |
| Thursday, 24/07 | United States | Initial Jobless Clm | 228 | 221 |
| Thursday, 24/07 | United States | S&P Global Mfg PMI Flash | 52.5 | 52.9 |
| Thursday, 24/07 | United States | S&P Global Svcs PMI Flash | 53 | 52.9 |
| Thursday, 24/07 | United States | S&P Global Comp PMI Flash | n/a | 52.9 |
| Thursday, 24/07 | United States | New Home Sales-Units | 0.65 | 0.623 |
| Friday, 25/07 | United States | Durable Goods | -10.5 | 16.4 |
For more detailed weekly updates, YieldReport Weekly_18th July 2025