Tariff‑Fueled U.S. Inflation Surprises, China Shows Industrial Strength Amid Weak Consumption- 16.07.2025

This global inflation update and market reaction covers U.S. CPI-driven yield spikes, UK inflation surprises, China’s slowing growth, and mixed performance in commodities and crypto.

Global Inflation Update and Market Reaction: United States CPI

Sources: Reuters Jul 16 – “Fed’s inflation fears…”; Reuters Jul 16 – “Morning Bid…”
Yesterday’s Macro Recap:

• June CPI rose +0.3 % MoM / +2.7 % YoY, driven by tariff-sensitive goods (e.g., audio, furnishings), prompting a surge in 10‑year U.S. Treasury yields above 4.5 %, even touching 5 % on the long end .
• Core CPI at +2.9 % YoY, exerting pressure on markets to trim Fed rate‑cut expectations for 2025 .
• Markets now see only ~0.43 % of Fed cuts this year; Fed presidents emphasized caution .
• Dollar rallied to ~15‑week highs against the yen; bond markets reacted sharply .

Markets & Key Indicators:

• Stocks: Mixed trends—Nasdaq led on tech strength; banks underperformed amid inflation worries .
• Treasuries: 10‑year yield ~4.5 – 4.48 %, 30‑year ~5 % .
• FX: Dollar index 98.5–98.6; dollar surged 0.5 % on rupee .

Global Inflation Update and Market Reaction: Eurozone and UK

Sources: Reuters Jul 16 – “Morning Bid…”

• UK June CPI hit 3.6 % YoY, the highest in over a year, complicating Bank of England’s rate‑cut path .
• Gilt yields reached 1‑month highs; pound was steady against dollar, slightly weaker vs euro .
• No major Eurozone data; discussions centered on rising defence budgets boosting GDP if R&D‑driven .

China Q2 GDP and Domestic Demand Trends

Sources: Reuters Jul 15 – GDP view; Reuters Jul 15 – China slows; Reuters Jul 15 – Instant view Q2
Key Data (Q2, June):

• Q2 GDP +5.2 % YoY / +1.1 % QoQ, slightly above forecasts yet slower than +5.4 % in Q1 .
• June industrial output +6.8 % YoY, the strongest since March; exports remain resilient .
• Retail sales +4.8 % YoY, underperforming expectations .
• Fixed investment +2.8 % YoY; property investment –11.2 % YoY .

Analysis:
Industrial strength masks weak domestic demand. Export frontloading ahead of U.S. tariffs is fading; deflationary pressure persists. Authorities likely to deploy modest H2 stimulus post-tariff truce .

Japan Market Sentiment and Yield Moves

Sources: Reuters Jul 16 – Morning Bid Asia markets

• Asian equities fell amid U.S. inflation worries; Nikkei flat, weak yen offered support.
• JGB yields mirrored global bond stress, though with some relief after tight fiscal concerns .

EMEA and Emerging Market Currency Pressure

Sources: Reuters Jul 16 – Tariff-tinged inflation boosts dollar

• Indian rupee weakened toward 86/USD following U.S. CPI data; dollar strength and yields hurt EM sentiment .
• European bonds sold off amid contagion from higher U.S. yields; France/Germany yields eased later .
• Middle East & Türkiye: No major data; regional oil supply (Iraq/Kurdistan) under watch.

Commodities and Crypto Performance

Sources: Reuters Jul 16 – Asia wrap; Reuters Jul 16 – Morning Bid Asia

• Oil: Brent ~$68.9, WTI down modestly on tariff/inflation concerns.
• Gold: Up ~0.5% amid risk-off tone .
• Bitcoin: Recovered ~1% after recent dip; crypto markets remain sensitive to U.S. policy shifts .

Summary

• U.S. inflation surprised on the upside, led by tariffs passing through consumer goods.
• Fed trimming expected rate cuts; Treasury yields climbed globally.
• UK inflation surprise complicates BoE rate outlook.
• China shows balanced yet fragile growth—strong industry, weak consumption/property.
• EM currencies and bonds pressured amid rising U.S. yields.
• Commodities mixed; gold and Bitcoin benefited from risk-off.