United Kingdom
In the UK, the Labour government’s first major legislative push is taking shape, and it’s all about the economy. Chancellor Rachel Reeves has signalled that the Autumn Budget will include a suite of tax reforms aimed at balancing fiscal discipline with “growth-anchored fairness.” There’s speculation of changes to CGT and non-dom status, though nothing confirmed yet.
Meanwhile, the Bank of England is holding its cards close to its chest. Governor Andrew Bailey said inflation is “on a knife-edge,” with the latest CPI print holding steady at 2.0% year-on-year. The market had priced in a rate cut for September, but that’s now looking uncertain.
In financial markets, sterling gained slightly on the dollar this week, buoyed by stronger-than-expected retail sales figures and positive PMI readings from the services sector. UK equities, however, remain under pressure from broader global risk sentiment and China-linked commodity weakness.
United States
All eyes were on the Fed this week as Chair Jerome Powell delivered testimony to Congress. His message? The Fed is “closer to confidence” in inflation returning to target, but rate cuts are still data dependent. Market participants took this as dovish – US equities rallied, and the dollar softened slightly.
This week, Washington and Tokyo finalised a landmark US-Japan Strategic Trade Partnership Agreement, marking a significant step in reshaping global supply chains and reinforcing bilateral ties amid rising geopolitical tensions.
At the heart of the agreement is a mutual reduction of tariffs on key industrial and agricultural goods, including semiconductors, automotive components, and high-grade beef. The deal also introduces a framework for digital trade cooperation, committing both countries to data flow standards, cybersecurity alignment, and AI regulation discussions – a clear signal of shared ambition in the tech race with China.
Crucially, the agreement includes provisions designed to de-risk supply chains in critical sectors such as rare earths, EV batteries, and advanced manufacturing. Both governments have pledged funding support for joint R&D initiatives and infrastructure investment, with an eye on building resilience outside of Chinese dependency.
On the geopolitical front, the deal serves as a counterweight to Beijing’s influence in the Indo-Pacific. It echoes elements of the former TPP structure (now CPTPP), from which the US withdrew in 2017, but with a more targeted, bilateral flavour. Officials on both sides have framed the agreement as “future-facing,” aligning national security concerns with economic cooperation.
Markets responded positively, with Japanese equities seeing a modest boost, particularly in the tech and industrial sectors. US officials hinted that similar bilateral frameworks could follow with other Quad members, especially Australia and India.
This agreement underscores a broader strategic shift – trade deals are no longer just about tariffs; they are instruments of economic security and technological sovereignty.
Tech earnings were a highlight this week, with Tesla and Alphabet both surprising to the upside. On the flip side, consumer sentiment dipped for a second consecutive month – hinting that higher-for-longer rates are beginning to hit the household level.
Europe
Europe was once again at the centre of geopolitical friction this week, as the European Union formally adopted its 18th sanctions package against Russia, deepening the bloc’s commitment to economic pressure over the war in Ukraine. The package sharpens restrictions on Russian energy exports, notably:
Lowering the G7 crude price cap to $47.60/barrel, aimed at further choking Moscow’s revenues.
Banning the import of refined petroleum products made from Russian crude, even if processed in third-party countries.
The move prompted an immediate response from Russia, with the Kremlin threatening retaliatory action on European imports of industrial metals and warning of potential restrictions on gas flows through TurkStream. The energy market took notice – diesel prices spiked, and gasoil premiums soared.
Elsewhere, tensions are rising inside the EU itself, particularly between Brussels and national governments. Italy is facing heat over its budget trajectory, as the European Commission flagged Rome’s debt load and spending plans as “incompatible” with revised fiscal rules. Hungary and Slovakia, meanwhile, remain openly critical of the new sanctions, arguing they risk further damaging European competitiveness.
On the economic front, the picture remains uneven. Flash PMI data released this week showed continued stagnation in the Eurozone. Germany’s manufacturing sector is still in contraction territory, dragged down by weak exports and a sluggish China. However, services PMIs in France and Spain surprised to the upside, offering a glimmer of resilience in the consumer-driven parts of the economy.
The European Central Bank released minutes from its July meeting, revealing an increasingly divided Governing Council. While some members see room to cut rates as early as September, others want to wait for clearer disinflation signals – especially with core inflation proving sticky in services.
Politically, eyes are also turning to European defence cooperation, with NATO-aligned EU members pushing for greater integration of procurement and arms manufacturing. This follows a joint statement from Germany, Poland, and the Netherlands supporting an “EU-wide strategic deterrence doctrine” – seen as a response to both Russian aggression and uncertainty over future U.S. commitments.
In markets, the euro edged slightly lower against the dollar as bond yields remained under pressure. European equities saw mixed performance, with energy and defence stocks outperforming on the back of sanctions news and geopolitical recalibration.
China
China is once again walking a tightrope between stimulus and stability. The PBOC held rates, but there are growing calls for more aggressive easing as Q2 GDP missed expectations at 4.6%. Industrial production remained sluggish, and the property sector continues to drag down broader sentiment.
Xi Jinping chaired a Politburo meeting focused on “financial security,” fuelling speculation about potential regulatory crackdowns on shadow banking and fintech lending platforms. There was also a notable emphasis on “high-quality growth,” suggesting further moves toward innovation and tech self-sufficiency.
In international relations, Beijing hit back at EU sanctions, warning of “reciprocal countermeasures” and urging member states to “reconsider alignment with American interests.” Diplomatic language may be escalating, but actual trade flows remain largely stable – for now.
Gold & Copper
Precious metal prices were dented this week by improving risk appetite, as a U.S.-Japan trade deal and optimism over the potential for more agreements spurred buying into riskier instruments. Wall Street notched a series of record highs this week, following reports that Washington and Brussels were moving closer to a trade agreement. Reports suggest that the deal under discussion could include a baseline 15% US tariff on EU goods, with certain exemptions, largely matching the agreement with Japan signed earlier in the week.
Gold prices were trading lower this week, while spot platinum – which fell 0.5% to $1,433.30/oz on Friday– was down 1.5% this week. Silver outperformed and was headed for a weekly advance of just less than 2%, although spot silver slipped 0.2% to $39.130/oz on Friday. Precious metal prices were dented by improving risk appetite, as a U.S.-Japan trade deal and strong AI-linked corporate earnings spurred buying into equities.
Among industrial metals, benchmark copper futures on the London Metal Exchange fell 0.3% to $9,844.45 a ton, while COMEX copper futures rose 0.4% to $5.8240 a pound. U.S. copper futures were headed for a 4% weekly rise, as they remained underpinned by expectations of tighter domestic supplies due to Trump’s trade tariffs.
Oil
Oil prices were stable on Friday, as trade talk optimism supported the outlook for both the global economy and oil demand, balancing news of the potential for more oil supply from Venezuela.
Brent crude futures were up 38 cents, or 0.55%, at $69.56 a barrel at 0755 GMT. U.S. West Texas Intermediate crude futures were up 34 cents, or 0.51%, to $66.37. Brent was heading for a 0.4% weekly gain at that level, while WTI was down around 1.44% from where it closed last week.
Brent prices have been largely range-bound between $67 and $70 a barrel for the last month, since the sharp drop in prices in late June after de-escalation in the Iran-Israel conflict. Oil, along with stock markets, gained support from the prospect of more trade deals between the United States and trading partners ahead of an August 1 deadline for new tariffs on goods from an array of countries.
After the U.S. and Japan unveiled a trade deal on Wednesday, two European diplomats said the European Union was moving towards a deal involving a baseline U.S. tariff of 15% on EU imports, plus possible exemptions. “Trade talk optimism appears to be offsetting expectations for stronger Venezuelan supply,” ING analysts wrote in a client note on Friday.
The U.S. is preparing to allow partners of Venezuela’s state-run PDVSA, starting with U.S. oil major Chevron, to operate with limitations in the sanctioned nation, sources said on Thursday.
Venezuelan oil exports could consequently increase by a little more than 200,000 barrels per day, which would be welcome news for U.S. refiners, as it would ease tightness in the heavier crude market, ING analysts wrote.
The U.S.’s Venezuela move has drawn investors’ attention away from disruptions this week to Black Sea oil exports and Azeri BTC crude loading from the Turkish port of Ceyhan.
Key Takeaways
- Policy Watch: Central banks are inching closer to rate cuts – but timing is everything.
- Sanctions Bite: Europe’s latest measures against Russia are already rippling through energy markets.
- Asia in Flux: China’s stimulus dilemma deepens; India continues to outperform.
- Oil Politics: The market is being driven as much by geopolitics as by fundamentals right now.
