Ahead of the game: 14 July 2025

US markets mixed as Australia 200 dips amid tariff threats

United States (US) stock markets are set to end the week mixed as tariff threats from President Donald Trump escalated. The Trump administration has sent letters to over 20 countries, outlining new tariff rates if trade deals aren’t reached by the 1 August deadline. A 50% tariff on copper imports was also announced, effective 1 August, for national security reasons.

Locally, the Australia 200 (ASX 200) is poised to end the week lower after the Reserve Bank of Australia (RBA) surprised the market by keeping interest rates on hold, while President Trump's hawkish tariff threats weighed on the local market.

The week that was: highlights

• In the US, initial jobless claims fell by 5000 from the previous week to 227,000, below market expectations of a 2000 increase to 235,000
• In contrast, continuing unemployment claims rose by 10,000 to 1,965,000 - its highest since 2021
• In the European Area (EA), retail sales for May fell by 0.7%, better than the 1% fall expected
• In China (CN), the consumer price index (CPI) rose by 0.1% year-on-year (YoY) in June, reversing a 0.1% drop in the previous three months and beating market expectations of a flat reading
• CN producer price index (PPI) fell by 3.6% YoY in June for a 33rd consecutive month of producer deflation, marking the steepest fall since July 2023
• In Australia (AU), the RBA surprised the market by keeping interest rates on hold at 3.85%
• In New Zealand (NZ), the Reserve Bank of New Zealand (RBNZ) kept rates on hold at 3.25% as widely expected
• Crude oil fell 0.19% this week to $66.87
• Gold fell 0.25% this week to $3328
• Bitcoin gained 6.14% this week to $115,939 after hitting a fresh record high of $117,000
• Wall Street's gauge of fear, the volatility index (VIX), eased to 15.77 this week from 16.37 in the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU Westpac consumer confidence: Tuesday, 15 July at 10.30am AEST
• AU labour force report: Thursday, 17 July at 11.30am AEST

China & Japan

• CN second quarter (Q2) gross domestic product (GDP), industrial production (IP) and retail sales: Tuesday, 15 July at 12.00pm AEST
• Japan (JP) CPI: Friday, 18 July at 9.30am AEST

United States

• CPI: Tuesday, 15 July at 10.30pm AEST
• PPI: Wednesday, 16 July at 10.30pm AEST
• Initial jobless claims and retail sales: Thursday, 17 July at 10.30pm AEST
• Housing starts and building permits: Friday, 18 July at 10.30pm AEST
• Michigan consumer sentiment: Saturday, 19 July at 12am AEST

Europe & United Kingdom

• United Kingdom (UK) CPI: Wednesday, 16 July at 4.00pm AEST
• UK unemployment: Thursday, 17 July at 4.00pm AEST

Key events for the week ahead

CN: Q2 GDP

Date: Tuesday, 15 July at 12.00pm AEST

For the first quarter (Q1) 2025, China's GDP grew by 5.4% YoY, beating market expectations of 5.1%. Growth was driven by: 

• Strong exports (up 6.9%)
• Robust high-tech industrial output (up 9.7%)
• A consumer goods trade-in program boosting retail sales (up 5.9% in March).

Industrial production rose 7.7%, and fixed-asset investment increased 4.2%. However, challenges included a 6% drop in imports, reflecting weak domestic demand, and a 9.9% decline in property investment.

For Q2 2025, GDP is expected to moderate to around 5.2% YoY due to subdued domestic demand and the impact of elevated US tariffs during the quarter.

The 5.2% forecast is significantly above the approximately 4.5% forecasts predicted in the aftermath of President Trump’s Liberation Day tariffs, which saw tariffs on Chinese imports rise to 145% before easing back to 55%, where they currently stand.

CN GDP chart

US: CPI

Date: Tuesday, 15 July at 10.30pm AEST

For May, the headline inflation rate rose 0.1% month-on-month (MoM), seeing the annual rate of headline inflation rise for the first time in four months to 2.4% from 2.3%. Meanwhile, core inflation also rose 0.1% MoM, keeping the annual rate at 2.8% YoY for a third straight month, below forecasts looking for a rise to 2.9%.

The Federal Open Market Committee (FOMC) meeting minutes for the June meeting were released this week. The minutes reaffirmed the belief that interest rates are 'well positioned to wait for more clarity'. Participants noted that increased tariffs would likely exert upward pressure on prices, with 'a few' participants indicating that tariffs would cause a one-time price increase, but 'most' flagged the risk of tariffs having more lasting effects on inflation. 'Most' participants felt a rate cut this year would be appropriate, with 'a couple' open to rate cuts as soon as the next meeting. However, 'some' participants saw no rate cuts this year, citing 'meaningful' upside risks to inflation.

This month, the preliminary expectation is for headline inflation to rise by 0.2% MoM and for the annual rate to rise to 2.5%. The core inflation rate is expected to rise by 0.3% MoM and for the annual rate to tick higher to 2.9%.

The US rates market is pricing in 18 basis points (bp) of Federal Reserve (Fed) rate cuts for the September FOMC meeting and a cumulative 52 bp of cuts priced between now and the end of the year.

US core inflation rate chart

AU: Labour force report

Date: Thursday, 17 July at 11.30am AEST

For May, employment in Australia fell by 2500 jobs, well below the 22,500 gain the market had expected. The unemployment rate remained at 4.1% as the participation rate eased to 67% from 67.1%.

Sean Crick, head of labour statistics at the Australian Bureau of Statistics (ABS), said: 'Despite employment falling by 2000 people this month, it’s up 2.3 percent compared to May 2024, which is stronger than the pre-pandemic, 10-year average annual growth of 1.7 percent.'

The fall in employment in May followed a robust rise of 87,600 in April, suggesting some payback took place in May. With the participation rate easing marginally, it allowed the unemployment rate to remain unchanged at 4.1% for a fifth straight month.

While there has been some mild cooling in the labour market this year, conditions remain tight as highlighted in the RBA’s statement this week.

'At the same time, various indicators suggest that labour market conditions remain tight. Measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers. Looking through quarterly volatility, wages growth has softened from its peak but productivity growth has not picked up and growth in unit labour costs remains high.'

A tight labour market along with easing downside risks to the global economy and the need for more confirmation that inflation has been tamed were the key drivers of the RBA’s 'on hold' rates decision this week.

The preliminary expectation for June is that the Australian economy will add 25,000 jobs and the unemployment rate will remain at 4.1%. Assuming the actual numbers are in line or softer than expected, we expect the RBA to cut interest rates by 25 bp to 3.60% at its next meeting on 12 August.

AU unemployment rate chart

US: Q2 2025 earnings season

The Q2 2025 earnings season picks up pace next week with big banks including JP Morgan and Goldman Sachs scheduled to report results.