Policy data is intensively released, and the global market will enter a super 72 hours

Author: Ye Zhen, Wall Street Insight

The trade negotiations between China and the United States have released positive signals, but global markets cannot afford to be complacent. Starting this Wednesday, global markets will enter a crucial 72-hour period.

According to reports from Xinhua News Agency and CCTV News, on July 28-29 local time, the Chinese lead negotiator for China-U.S. economic and trade talks, Vice Premier He Lifeng, met with U.S. lead negotiators, Treasury Secretary Janet Yellen and Trade Representative Katherine Tai, in Stockholm, Sweden.

The two sides engaged in candid, in-depth, and constructive discussions on economic and trade issues of mutual concern, reviewing and affirming the consensus reached during the Geneva economic and trade talks and the implementation of the London framework.

According to the consensus reached in the talks, both sides will continue to push for the extension of the U.S. counterpart tariffs of 24% and China's countermeasures, which have been suspended, for an additional 90 days.

Next, a series of dense U.S. economic data, earnings reports from tech giants, and key trade policy milestones will unfold in succession. The combination of these events may set the tone for market trends for the remainder of the year.

The market test will kick off on Wednesday when the U.S. will release its second-quarter GDP data, followed a few hours later by the Federal Reserve's interest rate decision. Subsequently, tech giants such as Microsoft, Meta, Apple, and Amazon will release their earnings reports after the market closes on Wednesday and Thursday, while the highly anticipated U.S. non-farm payroll report for July will be released on Friday.

Any one of these events could trigger market turbulence.

Against the backdrop of a significant rebound in U.S. stocks since the low in April and already high valuations, this "super week" is seen by the market as a severe test.

Mike O'Rourke, an analyst at Jones Trading, stated that this week "could prove to be the most critical week of the year," and its outcome will test Wall Street's resolve.

Meanwhile, the market's attention is also turning eastward, as the upcoming meeting of the Political Bureau is drawing near, and investors are closely watching for new economic policy signals from China.

01 U.S. Economic Data to Be Released

In the latter half of this week, a series of significant economic data will provide key clues for assessing the health of the U.S. economy. According to the Atlanta Fed's forecast, the annualized GDP growth rate for the second quarter is expected to be around 2.9%, primarily reflecting a decline in imports. In the first quarter, a surge in inventory-related imports had previously dragged down GDP.

In terms of monetary policy, although President Trump insists that interest rates should be significantly lowered, the market generally expects the Federal Reserve to maintain the interest rate range of 4.25% to 4.5% at Wednesday's meeting.

Investors will focus on whether there is an expanding divergence between Federal Reserve Chairman Powell and other decision-makers—one side wants to further assess the impact of tariffs on inflation before cutting rates, while the other side hopes to act quickly.

Finally, Friday's employment report is expected to show that the U.S. added 115,000 jobs in July, a slowdown from the previous month's 147,000.

According to a FactSet survey, any unexpected data in either direction could trigger cross-market volatility. Charlie McElligott, a derivatives strategist at Nomura, pointed out that the "absolutely crowded data schedule" means there is "huge event risk" at the end of the month.

Earnings Reports from Tech Giants Test Market Strength

As data is released, the earnings season for U.S. stocks is also reaching its peak. Microsoft and Meta are scheduled to announce their earnings after the market closes on Wednesday, followed by Apple and Amazon on Thursday. The combined market capitalization of these four tech giants exceeds $11 trillion, and their stock performance has a significant impact on Wall Street.

In recent weeks, optimism about the economy's resilience and the strong growth prospects driven by artificial intelligence have boosted the U.S. stock market to new historical highs.

However, the rapid rise in the market has also made some analysts and investors uneasy. The S&P 500 index has risen 8.3% this year, with a forward price-to-earnings ratio of 22 times.

Against this backdrop, the performance and outlook of tech giants will directly test whether the current high market valuations are justified.

Deadline for Trump's Tariffs Approaches

Uncertainty also arises from the trade sector. The deadline for the Trump administration to impose "reciprocal" tariffs on countries with which it has not reached trade agreements is 12:01 AM Washington time on August 1.

In recent months, investor sentiment has eased due to the U.S. reaching trade agreements with major partners such as the EU, Japan, and the UK, and extending the suspension of tariffs with China for 90 days. Wall Street banks have also lowered their forecasts for the probability of a potential recession. Investors generally bet that Trump will avoid implementing tariffs that could trigger excessive market volatility or postpone them until after agreements are reached.

However, risks remain. Matt King, a global market strategist at Satori Insights, stated: "After all, Trump is Trump, and the risks and uncertainties related to tariffs still exist."

Attention Turns to China's Policy Direction

In China, the upcoming Political Bureau meeting has become another focal point for the market.

Huatai Research Analysis believes that based on the resilience shown in the economic data for the first half of the year and the expectation of a certain level of certainty and marginal improvement in China-U.S. relations before October, the focus of the Political Bureau meeting may be on:

1. The assessment of the economic situation; after recent weaknesses in high-frequency data such as real estate, consumption, and exports, will the policy tone for stabilizing the real estate market and boosting consumption be further strengthened?

2. Will there be a further strengthening of the judgment on "stopping the decline and stabilizing" in real estate, and can subsequent policy measures be clarified?

3. The goals, task breakdown, and implementation paths for "anti-involution" and capacity reduction policies;

4. Fiscal and monetary policies may continue the tone set since April, with low market expectations.

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