09/07/2025
Markets Steady Amid Trade Uncertainty and Fed Patience as Tariff Deadline Extends to August
Global financial markets are navigating a complex landscape shaped by evolving U.S. trade policy, investor sentiment, and monetary policy expectations. Recent extensions of reciprocal tariff deadlines to August 1 have tempered immediate concerns over protectionist measures, although the uncertainty surrounding trade policy remains a headwind for businesses and central banks. While President Trump has reiterated that no further extensions will follow, market participants remain skeptical, viewing the administration’s stance as potentially flexible depending on the progress of bilateral negotiations. This perception has fostered a more measured market reaction compared to earlier trade threats, with investors factoring in the possibility of continued delays.
Despite the postponement, President Trump has escalated rhetoric by proposing a 50% tariff on copper imports and hinting at levies up to 200% on pharmaceutical imports. Copper futures responded with heightened volatility, sliding as much as 2.6% in New York after a sharp rally earlier in the week. The threat of higher tariffs and a tighter trade regime has also reinforced inflation concerns for the fall, as protectionist policies may raise input costs across sectors.
U.S. equities reflected the cautious optimism, with futures for the S&P 500, Nasdaq 100, and Dow each up approximately 0.25%, and the benchmark index showing limited movement in the previous session. European stocks outperformed, rising 0.8% to reach near one-month highs, supported by sectoral gains in banks and corporate developments such as Meta’s minority investment in EssilorLuxottica. Verona Pharma shares jumped over 20% following Merck’s $10 billion acquisition agreement, adding to M&A-driven sentiment.
In fixed-income markets, Treasury yields have stabilized following a recent uptrend. The 10-year U.S. Treasury yield hovered around 4.41–4.42%, while the 2-year yield remained near 3.91%. Investor attention is turning to upcoming Treasury auctions and the release of the Federal Reserve’s June meeting minutes later on today, July 9, which are expected to offer insights into the central bank’s policy trajectory. Market pricing currently reflects a high likelihood of two 25-basis-point rate cuts by year-end, with a roughly 65% chance of the first cut occurring in September.
Economic data remain mixed. While inflation measures such as PCE have ticked up slightly, other indicators—including jobless claims and revised GDP figures—point to a more subdued growth outlook. The Federal Reserve continues to adopt a patient stance, with policymakers awaiting clearer signals before adjusting interest rates. The interplay between delayed tariffs and macroeconomic uncertainty supports this wait-and-see approach, even as markets remain sensitive to further developments in trade negotiations and inflation dynamics.
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