Global Market Overview | July 2025

13 August 2025

Written by the FNB Wealth and Investments Research team

News flow in July remained dominated by tariff negotiations, the health of the global economy and interest rate expectations. Investors kept a watchful eye on United States (US) President Donald Trump as several meetings with major trading partners took place ahead of the 1 August tariff deadline. However, trade deal optimism waned as tariff discussions progressed. Thus far, only a handful of regions including the European Union (EU), Japan, Philippines, Indonesia, and the United Kingdom (UK) have struck “best-possible” framework deals with the US. However, Chinese officials and the US remain in intense discussions to try and reach a broader conclusive trade agreement. Despite these uncertainties, global markets remained resilient with emerging markets outperforming developed peers (MSCI World Index: +1.3%, MSCI Emerging Market Index: +2.0%) amid another stellar performance out of China.

Looking more closely at the US, the S&P 500 Index added 2.2% with recent dollar strength, continued strength in tech stocks, and robust economic readings providing some support despite investors expressing caution over ongoing trade talks and central bank independence. In terms of the Federal Reserves’ policy announcement, the committee held rates steady at 4.25% to 4.50% for a fifth straight meeting, as expected, but two governors dissented in favour of a cut – this was the first double dissent since 1993. Fed Chair Jerome Powell said interest rates are in the right place to manage continued uncertainty around tariffs and inflation, also tempering expectations for a rate cut in September. Officials downgraded their view of the US economy, saying that growth had “moderated” in the first half of the year, having previously characterised growth as expanding “at a solid pace”. The committee remained of the view that the labour market is “solid” and inflation “remains somewhat elevated”, also repeating that uncertainty “remains elevated”.

Moving over to the Asia-pacific region, the MSCI China Index rallied 4.8% as markets participants continued to cheer ongoing stimulus measures and a handful of positive economic readings. On the flipside, US and Chinese negotiators have not settled on a trade deal yet but have agreed, in principle, to push back the deadline for escalating tariffs. Another 90-day delay is a possibility, according to US Treasury Secretary Scott Bessent, however, any extension would need President Trump’s approval. Chinese trade negotiator, Li Chenggang, also confirmed that both sides agreed on maintaining the truce, without elaborating on how long it will last.

European markets logged marginal gains with the Euro Stoxx 600 Index trading 1.0% higher by month end. Ongoing concerns about the health of the European economy persisted amid a mixed bag of economic data. European Commission President Ursula von der Leyen and President Trump announced that the US and EU had agreed on a major trade deal, establishing a new baseline for transatlantic commerce and setting a 15% tariff ceiling (half the 30% rate previously indicated by President Trump) on most EU exports to the US. In terms of monetary policy movements, the European Central Bank (ECB) kept interest rates unchanged in July, effectively marking the end of its current easing cycle after eight cuts over the past year which brought borrowing costs to their lowest levels since November 2022. ECB President, Christine Lagarde, noted that the central bank is “in a good place” but will maintain a “wait-and-see” approach due to the difficulty in assessing how tariffs will affect price outlooks, given a mix of both inflationary and disinflationary pressures.

The local bourse locked in decent gains over the month in rand terms (All Share Index: +2.3%, USD terms: -0.4%), with resource counters being among the top performers. The South African Reserve Bank (SARB) was also in the spotlight, unanimously reducing interest rates by 25bps to 7%, the lowest level since November 2022. The cut was widely anticipated amid concerns over a new US tariff regime threatening the already fragile economy. Policymakers emphasised ongoing global uncertainty, noting that many countries have yet to finalise trade agreements before the US tariff deadline. Local investors now look ahead to the tariffs that are planned to be imposed on South Africa, with some speculating that local exports will face similar tariff levels to other non-major US trade partners (perhaps around the 15% to 20% level), while others expect a higher percentage to be imposed initially which will then be reduced later once the US and SA reach a conclusive deal. Department of Trade, Industry and Competition (DTIC) Minister, Parks Tau, recently reiterated that a "reset is unavoidable" in the trade relationship between the two nations and that government officials have no intention of decoupling from the US.

Outlook

Local

• Global uncertainty remains elevated as countries navigate more adverse trade dynamics. While a few trade frameworks between the US and its larger trade partners have been announced, smaller economies will either see their “Liberation Day” tariffs reinstated or face a new broader regime with tariffs of between 15 and 20%. A broader, lower effective tariff regime will help alleviate policy uncertainty and competitive disadvantage; however, headwinds should persist for countries with weak bilateral relations with the US.
• Unfortunately, SA falls in the latter basket and while government has made efforts to avoid a reinstation of the initial 30% reciprocal tariff, progress appears to be limited. As government refines other measures to counter more cumbersome trade with the US, the SA economy is still reeling from weak domestic economic activity at the start of 2025.
• That said, trading partner activity has been resilient and indications on the performance of the productive sectors are improving. Furthermore, low inflation and additional interest rate cuts should be supportive to demand. We forecast growth of 1.0% this year before a pickup in momentum over the medium term pushes growth towards 2.0%.
• Inflation was 3.0% in June, and we maintain our expectation for an average of 3.5% this year. Subdued inflation has supported space for further monetary policy easing. The latest 25bps cut delivered at the July meeting is probably the last one for this year. In fact, had SA maintained a 4.5% inflation objective, this would have also been the last cut in the cycle – as a 7% repo rate would mean monetary policy is neutral. The SARB has continued its push for a lower inflation target. Its latest baseline forecasts show a bold incorporation of a 3% target, which is expected to be achieved over the medium term. Therefore, 3% has become the de facto target even as processes are underway to formalise the move.
• We agree that a lower inflation target will support lower neutral interest rates and longer-term borrowing costs across the economy – with positive spillover effects to fiscal policy. However, the speed of adjustment in government price setting and broader inflation expectations will dictate how quickly headline inflation becomes anchored at 3% and when further interest rates changes will be delivered.
  

Global

• Proposed policy changes by President Trump (tariffs, taxes, deportations, and deregulation) are increasing uncertainty in global markets and economies. Implementation (or lack thereof) of these policies will dictate the direction of markets over the next few months. Some trade agreements have been reached (with Japan, EU) that could remove some uncertainty, but the levels are still higher than what was expected at the beginning of the year. Geopolitical events (Israel/US/Iran and Russia/Ukraine) are also contributing to the uncertainty.
• US growth expectations for 2025 have fallen from 2.3% at the start of the year to about 1.4%, mainly on the back of the uncertainty of tariff implementation (timing and end-rate). Expectations improved somewhat during July as hard data remained strong.
• This month, US CPI and core CPI came out at 2.7% and 2.9%, respectively, slightly higher than expectations. Goods inflation is showing some evidence of tariff passthrough. Inflation expectations, however, improved marginally from a high base: University of Michigan one-year inflation expectations fell to 4.4% from 5.1% in the previous month. This is still some way off the 2% target of the Fed. Shelter inflation and core services should continue to trend lower, causing overall inflation to move down towards target, but risks remain that inflation proves “stickier” than expected (depending on the rates where tariffs eventually settle).
• The Fed’s interest rate cutting cycle that started in September 2024 has come to a halt as they paused rates again at their latest July meeting. Officials downgraded their view of the economy. The uncertainty of potential policy changes (like tariffs and deportations) should keep them more data dependent going forward.
• In emerging markets, China’s 2Q25 GDP surprised to the upside, reaching 5.2% y/y versus expectations of 5%. Overall, data for July has underwhelmed however, reinforcing authorities to stimulate the economy with fiscal support. Exports to the US have fallen sharply but exports to the rest of the world have increased by a similar amount as China seeks new trading partners to overcome steep US tariffs.
• The US dollar rebounded in July, rising by 3%, however, the dollar index is still down by 8% year-to-date. Capital flows for the year have been out of the US into other less expensive markets as uncertainty remains (with Europe and emerging markets the biggest beneficiaries).
• Gold also traded sideways in July but remained at elevated levels. Reasons include central bank buying, geopolitical tensions, uncertainty around policies, and growing investor appetite. Platinum prices stabilised in July, after moving up by 30% in June.
• Given all the above uncertainties, we are closely aligned to our strategic asset allocation benchmarks, with a slight defensive twist.