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Thursday, July 24, 2025
What’s happening: Japan’s stock markets rose sharply on Wednesday and extended gains this morning.
What happened: US President Donald Trump announced a trade agreement with Japan that considerably brings down the tariff rate.
Global market sentiment remained elevated by reports of the European Union and US nearing a trade deal.
Why it matters: Trump announced that Japan now faces a 15% tariff on its exports to the US, versus the 25% tariff that the US President had threatened to impose earlier during the month. Trump also announced that Japan will be investing $550 billion in the US.
Although Japanese public broadcaster NHK said the 15% tariff would be applicable to vehicles, it remains unclear whether the decreased rate will be extended to vehicle manufacturers from other nations.
Trump had previously declared a 25% tariff on all imported vehicles on March 26. Auto exports are critical to Japan’s economic growth, representing more than 28% of overall exports from the country in 2024.
On the economic data front, the S&P Japan composite PMI came in steady at 51.5 in July, unchanged from June’s final reading. This represented the fourth straight month of growth in the private sector and was the strongest pace since February.
Japan’s services PMI surged to 53.5 in July, from 51.7 in the previous month, also rising at the fastest pace since February. However, Japan’s manufacturing PMI unexpectedly fell to 48.8 in July, from June’s final reading of 50.1.
Japan’s Nikkei 225, which surged 3.51%, on Wednesday, added around 1.6% this morning. Japan’s TOPIX index also jumped 1.67% to 2,975.34 this morning.
The upturn in Japan’s equity market was driven by industrial and financial stocks, with shares of Mitsubishi Heavy, Mitsubishi UFJ, Mizuho Financial, and Sumitomo Mitsui recording sharp gains.
What to watch: Investors will continue monitoring trade-related announcements, which are expected to significantly impact Japan’s markets ahead.
Data on Tokyo core CPI (0330 UAE Time), coincident index (0900 UAE Time) and leading economic index (0900 UAE Time), scheduled for release on Friday, will remain in focus. Core consumer prices in Tokyo’s Ku-area, which surged by 3.1% year-over-year in June, are expected to rise by 3% in July.
Analysts expect Japan’s index of coincident economic indicators to edge lower to 115.9 in May from 116.0 in the previous month, while the leading economic index is projected to rise to 105.3 in May from 104.2 in April.
Context: The AUD/USD forex pair rose this morning to its strongest level since November 2024.
Details: The Australian dollar extended its five-day rally on Thursday, driven by optimism around the latest global trade developments.
The US and EU are reportedly close to a trade agreement, while Treasury Secretary Scott Bessent confirmed a meeting between US and Chinese officials in Stockholm next week for trade negotiations. The US also announced separate agreements with the Philippines and Indonesia.
Australia’s business activity grew at its fastest rate since April 2022, led by the first gain in the country’s manufacturing activity in three months and sharp growth in services activity. The S&P Global Australia composite PMI jumped to 53.6 in July, from 51.6 in the previous month, representing the 10th straight month of growth. Australia’s manufacturing PMI rose to 51.6, from 50.6 in June, while services PMI climbed to 53.8 in July from 51.8 in the previous month.
Weakness in the US dollar also lent support to the AUD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell about 0.1% to 97.16 this morning.
The AUD/USD pair gained around 0.2% to reach 0.6612 this morning. The S&P/ASX 200 index had slipped 0.05% to 8,732.80 on Thursday.
What to watch: Investors will monitor trade-related announcements from the US, as this may provide further direction to the AUD/USD forex pair ahead.
Data on Australia’s inflation rate, due to be released next week, will remain in focus. Analysts expect Australia’s annual inflation rate to ease to 2.2% in the second quarter, from 2.4% in the previous quarter.
Other Markets: European indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.42%, 0.83%, 1.37% and 1.08%, respectively.
A Russian negotiator said that there had been an agreement with Ukraine to swap prisoners of war amid fresh round of talks in Turkey. The news sent the safe-haven US dollar index lower in forex trading this morning.
Malaysia’s Prime Minister Anwar Ibrahim announced new relief measures to ease public concerns around higher living costs, lending some support to the MYR/USD forex pair.
South Korea’s economy expanded 0.6% in the second quarter, recovering from a 0.2% contraction in the previous quarter. The latest reading topping market estimates of 0.5% sent the KRW/USD pair higher in forex trading this morning.
Argentina’s retail sales grew by 45.1% year-over-year in May, slowing from the 66.9% growth recorded in the previous month, which exerted pressure on the ARS/USD forex pair.
The Eurozone’s consumer confidence indicator surged to a reading of -14.7 in July, from -15.3 in the previous month. The latest reading also topped market estimates of -15, sending the EUR/USD pair higher in forex trading this morning.
Eurozone’s HCOB composite PMI (1200 UAE Time), HCOB manufacturing PMI (1200 UAE Time), HCOB services PMI (1200 UAE Time) and European Central Bank’s interest rate decision (1615 UAE Time), UK’s S&P Global manufacturing PMI (1230 UAE Time), S&P Global services PMI (1230 UAE Time), S&P Global composite PMI (1230 UAE Time), CBI business optimism index (1400 UAE Time) and CBI industrial trends orders (1400 UAE Time), Italy’s 2-year BTP Short Term auction (1310 UAE Time) and 5-year BTP€i auction (1310 UAE Time), Türkiye’s interest rate decision (1500 UAE Time), Mexico’s mid-month core inflation rate (1600 UAE Time), Canada’s retail sales (1630 UAE Time), manufacturing sales (1630 UAE Time) and 10-year Bond auction (2000 UAE Time), US Chicago Fed national activity index (1630 UAE Time), initial jobless claims (1630 UAE Time), continuing jobless claims (1630 UAE Time), S&P Global composite PMI (1745 UAE Time), S&P Global manufacturing PMI (1745 UAE Time), S&P Global services PMI (1745 UAE Time), new home sales (1800 UAE Time), EIA natural gas stocks change (1830 UAE Time), Kansas Fed composite index (1900 UAE Time), Kansas Fed manufacturing index (1900 UAE Time), 4-week Bill auction (1930 UAE Time), 8-week Bill auction (1930 UAE Time), 15-year Mortgage Rate (2000 UAE Time), 30-year Mortgage Rate (2000 UAE Time) and 10-year TIPS auction (2100 UAE Time), as well as Argentina’s consumer confidence (1800 UAE Time).
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