Markets Eye Rate Cuts as Tech Momentum and Trade Tensions Collide

• Rate Cut Hopes: Weak U.S. jobs data fuels September cut expectations.

• Tech Rally: AI earnings drive NASDAQ to fresh highs.

• Gold Up, Oil Down: Tariffs boost gold; oil falls on supply hopes.

• Key Data Ahead: UK, Eurozone, and U.S. releases may sway markets.

Over the past two weeks, markets have been riding a wave of optimism, supported by strong corporate earnings, easing inflation signals and growing expectations of a U.S. Federal Reserve rate cut. The Fed kept interest rates unchanged at 4.25%–4.5% in its July meeting, citing concerns over tariff-driven inflation. However, weaker jobs data, just 73,000 new positions added versus forecasts of over 150,000, has fuelled speculation that a September cut is increasingly likely. Investors took the softer employment picture as a sign that monetary policy could soon loosen, sparking a broad rally in equities.

Technology stocks once again led the charge. Strong Q2 results from AI-focused giants helped the NASDAQ climb nearly 3.9%, while the S&P 500 and Dow gained 2.4% and 1.4% respectively. The bullish sentiment was echoed by BlackRock’s CIO, who called this “the most bullish investing environment ever,” pointing to record buybacks, strong technicals and trillions in cash sitting on the sidelines.

In commodities, gold prices briefly hit record highs after the U.S. announced new tariffs on Swiss gold imports, part of a broader round of trade measures targeting metals and semiconductors. While gold surged on inflation concerns, oil prices moved in the opposite direction, falling more than 5% on expectations that sanctions on Russia could ease, boosting supply. These moves highlight the volatility in commodities as markets attempt to interpret shifting trade and geopolitical dynamics.

Economic data also painted a mixed picture. The latest ISM services survey suggested stagnation alongside persistent price pressures a “stagflation-lite” scenario that complicates policymaker decisions. Adding to the debate, U.S. Treasury Secretary Scott Bessent called for an aggressive half-point rate cut in September, suggesting that additional easing may follow to support growth. Markets welcomed the comment, pushing both equities and sterling higher.

Looking ahead, the next two weeks will be data-heavy. The UK will release Q2 GDP, industrial production and trade balance figures, all of which will be closely watched for signs of resilience in the face of higher rates. In the Eurozone, flash GDP and industrial production numbers are due, while in the U.S., Producer Price Index (PPI) data could sway expectations for September’s Fed decision. Although these releases are the main drivers to watch, non-economic factors, such as the UK’s ongoing heatwave (which i'm currently enjoying in Cornwall) could also influence sentiment by disrupting business operations and consumer activity.

In summary, markets are entering the second half of August with a blend of optimism and caution. Rate cut hopes, strong earnings and AI-driven momentum continue to provide support but volatile trade policies, fragile global growth and key upcoming data releases could quickly change the narrative. Investors will need to keep one eye on the economic calendar and the other on shifting geopolitical and trade developments.

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