July 2025 Market Update: Earnings, Tariffs and Resilient Markets

Quilla Investment & Economic Snapshot

July was another strong month for equity markets, supported by robust company fundamentals and clearer direction on US tariffs. Commodities rallied on new tariff measures, while central banks held steady, awaiting more evidence on inflation trends.

July 2025 market update — summary

Global and domestic equity markets delivered strong performance in July, supported by resilient company fundamentals and improved investor sentiment amid greater clarity on US trade tariffs. Commodity prices rallied in response to newly announced tariff measures, while bond markets remained stable as central banks adopted a more cautious stance, awaiting clearer evidence on how tariffs may influence inflation before adjusting policy.

Selected market returns (%), July 2025

Key market and economic developments in July 2025

Financial markets

Global equity markets continued to deliver strong performance in July, with the MSCI World (USD) up 1.3%. The broad rally can be attributed to improved investor sentiment due to greater clarity on US tariffs, as well as company earnings continuing to support equity markets. US bond yields remained stable, grappling between a slower growth outlook and the potential for a resurgence in inflation.

Australian equities

The ASX 200 rose 2.9% in July, bringing the calendar year-to-date (YTD) return to 6.6%. Most sectors saw positive gains in July, led by Health Care at 6.9% with strong returns from the likes of CSL and Pro Medicus. The Energy, Utilities and Materials sectors were also strong contributors, delivering returns of 4.4%, 5.7%, and 9.2% respectively.

Consumer Staples and Financials underperformed, returning -1.9% and -3.4% respectively. Financials were weak following the Reserve Bank of Australia’s surprise decision to hold rates steady rather than cut as widely expected.

Global equities

Broad strength was seen across global equity markets, driven by robust corporate earnings and improved investor sentiment. In the US, the S&P 500 Index (USD), Nasdaq Composite (USD), and Russell 2000 Index (USD) rose 2.2%, 3.7% and 1.7% respectively in July, indicating a broad rally that benefitted larger and smaller companies. On a sector basis, the Technology sector led the rally, driven by a resurgence in the Artificial Intelligence (AI) trade, followed by Industrials, where defence stocks were boosted from higher federal defence spending.

European equity markets were a laggard, with the Euro 100 (EUR) rising 1.0% due to uncertainty around the outcome of tariff negotiations between the US and Europe. Conversely, the Nikkei (JPY) increased by 1.4% driven by the US and Japan reaching a trade deal and thus reducing uncertainty for investors. The Chinese market continued its rally, with the Hang Seng Index (HKD) returning 3.1%, driven by positive progress in trade talks between the US and China, as well as stimulative policies from the Chinese government.

Commodities

Gold saw muted performance in July, returning 0.4% due to markets being in a risk-on environment. Industrial metals such as steel and copper saw much stronger price action, with the former rising 6.5% driven by the US announcing 25 to 50% tariffs on steel imports. The latter saw an intra-month high of 14.7% before retreating to being down -12.9% for the month, as an initially touted 50% copper tariff was scaled back to just apply to copper pipes and wiring. West Texas Intermediate (WTI) Crude rose by 6.1% after Trump threatened to impose sanctions on Russian oil if Russia did not agree to a ceasefire with Ukraine by August 30^th.

Bond markets

US bond markets were flat, whilst yields rose slightly in Australia. The US 10-year government bond yield ended the month at 4.36% up 13 basis points. The increase in the US core Consumer Price Index (CPI) from 2.8% in May to 2.9% in June, and the US Federal Reserve’s (Fed) indication of no rate hikes in the short-term, left US yields rangebound.

The Australian 10-year government bond yield rose to 4.32% rising 11 basis points.

Expectations for an RBA rate cut did not transpire, resulting in a recalibration of market expectations and yields remaining elevated.

Economic developments

RBA paused in July, but an easing bias remains intact

The RBA left the cash rate unchanged at 3.85%, citing continued moderation of inflation as a positive. This was countered by heightened uncertainty driven by US tariffs and tight Australian labour market conditions, which culminated in a decision to leave rates unchanged.

The unemployment rate rose from 4.1% in May to 4.3% in June, coming in above expectations. Trimmed mean inflation, however, eased from 2.9% in Q1 to 2.7% in Q2, in line with expectations.

The RBA remains focused on economic data to inform its future policy decisions, and the trajectory of these key economic indicators is supportive of a rate cut in August. The market is currently pricing in two additional rate cuts over the remainder of 2025.

US continues to finalise trade deals

The US announced several important trade deals with various countries during the month. These included a 20% tariff on Vietnamese exports, a 15% tariff on Japanese, South Korean and European exports and a 25% tariff on Indian. The Trump administration continues to engage in trade talks with other major trade partners, including China and India. The effects of Trump’s tariff policies on the US economy are starting to be observed, such as the US goods trade deficit reducing 10% month-on-month to $86 billion in June, as well as core inflation rising from 2.8% in May to 2.9% in June.

On July 30^th, the Fed held rates steady at 4.25-4.50%, citing a strong labour market and inflation concerns remaining elevated. The Fed also reiterated its goal of returning inflation to its 2% objective. However, weak job numbers released on August 1^st caused market expectations to reset following the Fed’s rate decision, and the probability for three rate cuts by December 2025 increased to 52.8%. Trump continues to apply pressure on the Fed to cut rates, and it is notable that two members of the Federal Open Market Committee (FOMC) voted in favour of cutting rates.

Outlook

Markets remain supported by resilient company fundamentals and a softening inflation trajectory across key economies, yet policy uncertainty continues to cloud the global outlook. Investor sentiment has improved amid greater policy clarity, yet geopolitical tensions, evolving central bank stances, and uneven global growth remain key sources of potential market disruption. In this environment, a patient, flexible investment approach anchored in fundamentals remains essential.

Major market indicators

Closing thoughts

July’s market update shows how company strength and shifting tariff policies continue to influence markets. If you’d like to talk about what this July 2025 market update means in the context of your long-term plans, our team is here to help. Contact us today to learn more.

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