We have a relatively quiet week for data ahead. With the Fed in its blackout period, markets will keep a close eye on US–China trade talks (Monday) and the US CPI and PPI releases (Wednesday). US wholesale inventories are due later today. On Tuesday, UK employment data and comments from ECB officials – Galhau, Holzmann and Rehn – will be in focus. Japan’s PPI figures kick off Wednesday, followed later by the UK government’s spending review, US CPI, and the federal budget balance. On Thursday we have UK industrial production and trade data, and the US PPI and jobless claims readings. The 30-year US Treasury auction will also be closely watched as a gauge of market demand. Additionally, ECB speakers Schnabel and Guindos are scheduled to speak. On Friday, markets will be watching Eurozone industrial production, CPI data from France and Germany, and the Uni. of Michigan’s consumer sentiment readings.
A further mixed week for asset classes as tariff rhetoric intensified with Trump doubling tariffs on steel and aluminium to 50% (on all countries except the UK), coupled with geopolitical tensions, and signs of moderating US growth. The Fed’s Beige Book reinforced this narrative, describing a “slight” decline in economic activity. Furthermore, the OECD downgraded global growth forecasts, with the US seeing the most significant downward revision. The report cited tariffs, policy uncertainty, and lower immigration levels as key headwinds. The week ended with resilient US employment data: non farm payrolls increased by 139k in May, however, the figures were revised markedly lower in April; unemployment remained at 4.2%; the participation rate eased to 62.4%; and average hourly earnings rose to 0.4%mom and 3.9%mom.
US Treasury yields rose following the employment report, the 10-year was up 11bps, closing the week at 4.51%. Meanwhile, the S&P Index rallied 1.50%, through the 6,000 threshold. The dollar was marginally lower, and Brent crude enjoyed a 4.02% bounce, to $66.47pb. Elsewhere, China’s economy continues to struggle with deflation as consumer prices fell for the fourth straight month in May, dropping 0.1%yoy, while factory-gate prices plunged 3.3%yoy; the steepest decline since July 2023. The persistent weakness reflects subdued domestic consumption despite Beijing’s stimulus efforts, exacerbated by price wars in the automotive sector and falling property prices. Furthermore, economic challenges intensified in May as trade tensions with the US severely impacted both external and domestic indicators, with exports to the US plummeting 34.5%yoy the steepest decline since February 2020, while overall export growth slowed to 4.8%yoy (from 8.1%yoy), and imports declined 3.4%yoy. Although China maintained a trade surplus of $103.22 billion, up from the previous month’s $96.18 billion, the underlying weakness was evident across key commodities as imports of crude oil, coal, and iron ore all decreased, reflecting fragile domestic demand amid ongoing property sector struggles and the persistent impact of US tariffs on the world’s second-largest economy.
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