The Week Ahead
The main events this week include the BoJ rate decision (Tue), FOMC meeting (Tue-Wed), UK rate decision (Thu). Given the Israel-Iran conflict markets will closely monitor the impact on the energy market and potential for further escalation.
Later today we have the US empire manufacturing print, and we will hear from the ECB’s Nagel. Tuesday kicks-off with the BoJ rate decision, a hold at 0.5% is expected. We also have the Germany ZEW survey, and US retail sales, business inventories, import/export prices and industrial production figures. On Wednesday eurozone and UK CPI prints, US housing starts and initial jobless claims, and a raft of ECB speakers will garner market attention. As will the FOMC rate decision, where a hold at 4.25-4.50% is priced in. On Thursday we have the BoE rate decision, a likely hold, and US markets will be closed for the Juneteenth holiday. Eurozone consumer confidence, Japan CPI, UK retail sales, and the US Conf. Board leading Index and Phili. Fed services are due on Friday.
Renewed optimism over progress on the US-China trade talks supported improved risk sentiment earlier in the week. We also had Trump’s announcement of unilateral tariffs, World Bank growth forecasts and easing US inflation prints. Having started the week on a positive note the S&P Index closed ~0.40% lower. Meanwhile, the US Treasury curve benefited from concerns over tariffs and subsequent outlook on the US economy, the yield on the 10-year rallied 11bps to 4.40%. The dollar had a torrid week, with the DXY Index falling 1.01%. Brent crude gained 11.67%, closing at $74.23pb amid heightened geopolitical tensions.
US CPI data for May came in softer than expected, with both headline and core inflation rising just 0.1%mom versus forecasts of 0.2%mom and 0.3%mom, respectively. This marks the fourth consecutive month of downward CPI surprises, though businesses continue to warn of higher costs as tariff uncertainties remain unresolved. PPI readings also surprised to the downside, rising 2.6%yoy and 3.0%yoy, respectively. The Uni. of Michigan sentiment prints rose above expectations, while the inflation expectations eased: 1-year to 5.1% (exp.6.4%) and the 5-10 year at 4.1% (from 4.2%)
The World Bank slashed its 2025 global growth forecast to 2.3%, down 0.4%, due to rising trade tensions and uncertainty. The downgrade affected major economies, with the US forecast cut to 1.4%, and additional tariffs potentially reducing global growth by another 0.5%. The organisation expects global inflation at 2.9% in 2025, above pre-pandemic levels, while trade growth is expected to slow significantly to 1.8% this year, from 3.4% in 2024.
This morning’s China’s retail sales figures for May surprised to the upside (+6.40%yoy), growing at their fastest rates since late-2023 as government subsidies appeared to underpin consumption. Industrial profits marginally missed expectations, expanding at 5.8%yoy, while fixed-asset investment printed a 3.7%yoy gain, below market expectations, as property investment has fallen 10.7% in the first five months this year. Last week China's State Council upped its real estate support calling for "stronger efforts to stabilise and recover the real estate market," proposing to integrate high-quality housing development into urban renewal strategies with comprehensive policy measures. This shift aims to transform the sector by moving developer competition away from price wars toward quality-focused development, supported by coordinated urban planning, land supply, fiscal, and financial tools.
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