Stock markets remain close to record highs amid RBA rate cut and US-China tariff truce

​​​US markets dip on Monday ahead of Tuesday’s CPI print

​On Monday, US markets pulled back slightly amid growing inflation concerns, a controversial chip‑revenue sharing mandate, and President Trump’s deployment of the National Guard in Washington.

​The Dow Jones Industrial Average closed down around 200 points (-0.5%), while the S&P 500 fell about 0.3%, and the Nasdaq Composite slipped 0.3%.

​Markets were weighed down by fears over renewed tariff pressures and inflation ahead of Tuesday’s key consumer price index (CPI) report.

​Semiconductor stocks came under pressure after it emerged that Nvidia and Advanced Micro Devices (AMD) agreed to hand over 15% of their China‑related chip revenue to the US government in exchange for export licenses - a highly unusual “pay‑to‑play” arrangement met with scepticism.

​At the same time, Trump escalated domestic tensions by placing Washington, D.C.’s Metropolitan Police under federal control and deploying the National Guard to the capital.

​On the positive side, the Nasdaq 100 posted a record closing high, lifted by ongoing strong tech demand.

​Asian markets remain perky as RBA cuts rates

​Asian stocks advanced on Tuesday, with Japanese equities reaching a record high, as the extension of the tariff truce between the United States and China buoyed sentiment across the region. The agreement to prolong negotiations by a further 90 days delays the imposition of triple-digit tariffs on each other’s goods, removing some uncertainty from markets, although the move had been widely anticipated.

​In Australia, shares remained neared record highs after the Reserve Bank of Australia (RBA) cut its main cash rate by 25 basis points to 3.60%, the lowest level in two years. The Australian dollar was choppy following the widely expected decision, as traders assessed its implications for the economy.

​FTSE 100 nears record high

​The FTSE 100 rose by 0.37% on Monday, while most of its European peers ended the day in the red, driven by strength in the healthcare and consumer sectors - GlaxoSmithKline (GSK) climbed 0.8% following US Food and Drug Administration's (FDA) acceptance of its priority review for a gonorrhoea treatment, and AstraZeneca added 1.5%. Consumer names like British American Tobacco (BATS) and Diageo gained over 1%, while Marks & Spencer surged 2.4% thanks to the resumption of online clothing orders after a cyberattack.

​On Tuesday morning the FTSE 100 continued to trade on a positive footing as UK labour market data showed wage growth easing to 4.6%, slightly below the 4.7% forecast and down from 5% previously. At the same time, hiring intentions have fallen to their lowest level since the COVID-19 pandemic, while starting salaries are rising at the slowest pace in more than four years, pointing to a loss of momentum in the jobs market.

​Is another BoE rate cut by year-end in the pipeline?

​The Bank of England (BoE) remains split on interest rates, with four of its nine policymakers opposing last week’s quarter-point cut to 4%. Despite market expectations for another 25 basis point rate cut in 2025, the British pound steadied, but the currency faces headwinds from a soft economic outlook and increasingly bearish speculative positioning. Weekly US Commodity Futures Trading Commission data shows net short positions on the pound have climbed to $2.78 billion, marking a sharp reversal from the bullish stance held since February.

All eyes on US inflation report

​Later in the day, the US inflation report will take centre stage at 1.30pm BST. Investors will parse the data to gauge the impact of President Trump’s tariffs and the potential implications for the Federal Reserve’s (Fed) interest rate trajectory.​​