ECB - Is the end really near?
ECB lowered rates for the eighth time in one year as widely expected by markets
- Deposit rate was lowered by 25bp to 2.00% with President Lagarde signaling that the bank is nearing the end of its campaign of interest rate cuts
- Inflation was described currently at around 2.00% target – New quarterly projections show inflation going below target in 2026 at 1.6% with economy expanding at 1.1%
- Decision was influenced by uncertainty on trade and by the impact that higher military and infrastructure spending will have on the region
- Money markets trimmed wagers on additional cuts in 2025, with another 25bp move no longer seen as a certainty – before the decision economists were expecting another cut in September
US Payrolls – Gradual moderation
US job growth moderated in May with prior months revised lower – indicating some cautiousness by employers about growth prospects
- Non-farm payrolls increased by 139k in May, above analyst expectations of 126k but lower than the April number – a further revision to the prior two months of 95k took place
- Unemployment rate was unchanged at 4.2% with wage growth accelerating
- The advance in payrolls reflected strength at service providers (healthcare, social assistance, leisure and hospitality) – industries more exposed to tariffs such as manufacturing dropped 8’000 payrolls last month
US, China Officials Agree on Plan
US-China trade talks led to a tentative framework to revive trade in sensitive goods, pending approval by Presidents Trump and Xi
- China agreed to accelerate rare earth exports, while the US signaled it might ease export controls on high-tech goods — a major shift in its national security stance
- Despite progress, key issues like China’s trade surplus and alleged dumping remain unresolved, and market reactions were cautious
- The agreement reflects a move from confrontation to coordination, but remains fragile, with implementation challenges expected over the next 60 days
- Underlying tensions persist, especially around critical tech and raw materials, highlighting the strategic nature of modern trade warfare
Revolution in the Stock Market
Artificial intelligence trading tools are becoming available to retail investors, which could transform the entire stock market by giving them the ability to scan thousands of stocks and respond to real-time data
- The retail crowd owns roughly 25% of the US stock market directly and over 60% indirectly through individual retirement accounts, according to calculations by Barclays
- Retail traders are already changing their behavior, seeking opportunities in less crowded parts of the market, and AI-driven platforms could further democratize access to investment tools and strategies
- The spread of AI could make the stock market more efficient, reduce investors’ concentration in the largest tech stocks, and make the market less volatile
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