Markets worldwide breathed a sigh of relief this week as new U.S. inflation data showed a lower-than-forecast annual rate of 2.8%, down from 3.1% last month. This dip has raised expectations that the Federal Reserve may pause further interest rate hikes, fueling bullish sentiment across major stock exchanges. Wall Street responded swiftly, with the S&P 500 hitting a new record high on Thursday, driven largely by surging tech stocks.
In a shorter but sharp response, Nasdaq soared 3.4% as investors doubled down on artificial intelligence firms. Nvidia, Alphabet, and Microsoft all posted strong gains, extending their 2025 rally. Analysts say the AI sector’s resilience and profitability are creating a buffer for market volatility, making it a safe haven for investors seeking growth amid macroeconomic uncertainty.
Europe followed suit, with the FTSE 100 and DAX both closing up over 1.5%. Meanwhile, in Asia, the Nikkei rebounded after weeks of stagnation, and Shanghai’s Composite Index saw modest gains despite ongoing property sector woes. Markets in emerging economies like Brazil and India also saw positive movement as currency pressures eased.
Another brief but notable signal came from the bond market, where U.S. Treasury yields fell for the third consecutive day. The 10-year yield dropped to 3.72%, its lowest since March, suggesting growing confidence that inflation is cooling and monetary tightening may soon end. This reassured both institutional and retail investors.
Oil prices also stabilized, dropping slightly to $81 per barrel after an initial spike caused by geopolitical tensions. Analysts suggest that market optimism and stable demand projections are offsetting supply concerns, at least in the short term. Gold, on the other hand, remained flat as risk appetite grew.
Economists caution, however, that structural risks remain. A potential U.S. government shutdown in September, coupled with uncertain Chinese recovery metrics, could derail current momentum. Still, the broader consensus is that this week’s data and reactions signal renewed investor confidence heading into Q3.
As global markets look to the second half of 2025, the convergence of cooling inflation, resilient tech performance, and cautious optimism is painting a hopeful, if tentative, picture of economic recovery.
