Introduction: Global Risk Sentiment Reignites After Multi-Day Sell-Off

Global equity markets staged a broad-based rebound on Monday, August 5, 2025, reversing six consecutive sessions of losses as investor sentiment turned positive following fresh expectations of monetary easing by major central banks. The rebound was led by growth-oriented technology stocks and domestic small-cap shares, with U.S. and Asian markets showing the strongest momentum.

Investors, while still wary of political interference in economic institutions, embraced risk assets on the belief that slowing global growth and weakening labor data will push central banks toward more accommodative stances.

MSCI All-Country Index Snaps Six-Day Losing Streak

The MSCI All-Country World Index, a broad measure of global equity performance, climbed nearly 0.7% after experiencing its longest losing streak in over five months. Gains were widespread, with tech-heavy benchmarks outperforming as markets priced in a higher probability of interest rate cuts in the United States and potentially other G7 economies.

The global rally was fueled in part by a sharp decline in U.S. Treasury yields, continued strength in corporate earnings, and stabilizing oil prices after several weeks of geopolitical turbulence.

United States: Wall Street Futures Drive Optimism

The U.S. equity market served as a catalyst for global momentum. Futures for the Nasdaq 100 surged by 0.8%, while S&P 500 futures added 0.6% and the Dow Jones Industrial Average futures rose by 0.5%.

Small-cap stocks, tracked by the Russell 2000, significantly outperformed, as traders sought exposure to domestically focused companies expected to benefit from lower borrowing costs in the event of imminent Federal Reserve policy shifts.

Treasury Yields Fall Sharply on Fed Bets

Bond markets further solidified the dovish outlook. The U.S. 10-year Treasury yield dropped to 4.03%, while the 2-year yield fell to 4.47%, reflecting aggressive pricing for Fed rate cuts. Futures markets now imply a 94% chance of a 25-basis-point rate cut in September, and a 65% chance of at least two cuts by year-end.

Traders are increasingly expecting that the Federal Reserve will act preemptively to prevent a deeper economic downturn amid signs of weakening labor demand and moderating inflation.

Political Risk: Interference Undermines Confidence

While markets surged on hopes of looser monetary policy, underlying concerns remain over political instability in the U.S. financial system. President Donald Trump’s abrupt firing of Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer and the resignation of Fed Governor Adriana Kugler have prompted speculation about the independence of key economic institutions.

The events raised questions over the credibility of economic data and the potential for political influence on monetary policy. Market participants fear that these developments could eventually lead to higher risk premiums for U.S. assets, particularly if central bank transparency is compromised.

Tech Stocks and Growth Shares Outperform

Technology and AI-linked equities once again led the rally. Notable pre-market movers included:

• Nvidia Corp., buoyed by strong semiconductor demand forecasts.

• Meta Platforms, which saw renewed investor interest following improved ad revenue metrics.

• Palantir Technologies, after it raised its full-year revenue outlook and announced new government contracts.

The shift in interest rate expectations has added fuel to growth names, which are typically sensitive to changes in borrowing costs and future earnings discount rates.

Global Market Performance Snapshot

• Europe: The STOXX 600 gained 0.5%, with tech and financials leading.

• Asia-Pacific: The MSCI Asia ex-Japan index rose 0.6%, with notable strength in South Korea and Taiwan.

• Japan’s Nikkei 225 closed 0.5% higher, helped by chipmakers and robotics stocks.

• China: The Shanghai Composite ended slightly positive, while the Hang Seng Index advanced over 1.2%, as sentiment rebounded after a week of negative headlines related to property-sector weakness.

Forex and Commodities Markets React

The U.S. dollar traded lower against most major peers as dovish Fed expectations dominated the forex narrative. The Japanese yen strengthened to 146.20 per USD, while the euro held steady around 1.1570.

In commodities:

• Gold rose above $2,030 per ounce, benefiting from both falling yields and political risk aversion.

• Oil stabilized as OPEC+ production plans were absorbed into markets.

• Copper prices climbed on expectations of Chinese stimulus in the manufacturing sector.

Forward Guidance: Economic Data to Drive Next Moves

Global investors are now turning their attention to a slate of critical upcoming data:

• U.S. ISM Services PMI (due August 6)

• Weekly Initial Jobless Claims (August 8)

• U.S. Consumer Price Index (CPI) (August 14)

• ECB Interest Rate Decision (August 8)

• Jackson Hole Symposium (August 22–24)

These events could provide further clarity on the trajectory of monetary policy across major economies, with central banks walking a fine line between inflation control and growth preservation.

Conclusion: Relief Rally or Policy Pivot?

While Monday’s rebound in global equity markets brings a welcome respite to investors, the sustainability of the rally will depend heavily on how central banks respond to deteriorating macro data and rising political risks. Tech and small-cap stocks may continue to outperform in the near term, but volatility remains elevated as global markets await firmer signals from policymakers.