USA
The U.S. economy showed mixed but generally resilient signals during the week of August 18–22, 2025. The S&P Global Flash Composite PMI rose to 55.4, the highest in eight months, indicating robust expansion in both manufacturing and services. However, firms reported the fastest rise in output prices in three years due to tariff-driven cost pressures, raising concerns about inflation persistence. Labor data painted a cooler picture: initial jobless claims rose to 235,000, and continuing claims reached the highest since 2021, suggesting gradual labor market softening. Meanwhile, existing-home sales climbed 2.0% month-on-month in July to a 4.01 million annual pace, with inventories building to 4.6 months’ supply. At the Jackson Hole symposium, Fed Chair Jerome Powell signaled that a September rate cut was on the table should labor risks intensify. Equity markets reacted positively to the dovish tilt but displayed divergence: the Dow gained 1.5%, the S&P 500 edged up 0.3%, while the Nasdaq fell 0.6%, with cyclicals and small caps outperforming mega-cap tech.
Europe
In Europe, economic sentiment improved as the Eurozone flash PMI climbed to a 15-month high, showing strengthening momentum in services and stabilization in manufacturing. Pricing indicators suggested inflationary pressures were easing, supporting expectations for a gradual disinflation path. The UK’s July CPI moderated to 2.9% year-on-year, with core inflation at 3.5%, reinforcing market bets on a Bank of England rate cut later this year. However, Germany confirmed a 0.3% quarter-on-quarter GDP contraction in Q2, highlighting persistent weakness in Europe’s largest economy. Equity performance reflected cautious optimism: the STOXX Europe 600 posted a third consecutive weekly gain, the FTSE 100 advanced nearly 2% led by banks and energy, while the CAC 40 rose 0.6% and the IBEX 35 approached its pre-crisis record high. The DAX 40, however, was flat, reflecting Germany’s growth headwinds.
Japan
Japan’s latest data confirmed that inflation remains sticky, with July CPI at 3.1% year-on-year, keeping the Bank of Japan on its slow path toward policy normalization. While PMI data was mixed, business sentiment suggested moderate expansion, though softer than earlier in the year. After a strong rally that pushed Japanese equities to record highs, profit-taking set in during the week. The Nikkei 225 fell 1.7% to close at 42,630, while the TOPIX slipped 0.2% to 3,100. Investors remain attentive to the BoJ’s next moves, as persistent inflation pressures increase the likelihood of further normalization steps in the coming months. The correction in equities reflected both valuation concerns after the strong rally and global investor rotation into more attractively valued cyclical markets.
China
China’s monetary stance remained cautious, with the PBoC holding Loan Prime Rates unchanged on August 20, favoring targeted measures over broad-based easing. This decision underscored policymakers’ balancing act between supporting growth and containing financial risks. Equity markets, however, rallied strongly, supported by global easing expectations and improving domestic sentiment. The Shanghai Composite rose to 3,825.8, its highest level since 2015, while the Hang Seng gained 0.3% to 25,339. Momentum was driven by strong gains in financials and consumer-related sectors, although property concerns remained a structural headwind. Investors interpreted the PBoC’s restraint as confidence in underlying growth stabilization, which, combined with Fed cut expectations, fueled a bullish tone in Chinese equities.