TRANSITORY?
Last week, global assets rallied as the Fed suggested a bias towards more easing in the event of growth risks being greater than the expected "transitory" tariff related risks around inflation.
This week, there are a number of economic data points that could be of note including today's global PMI data, US durable goods orders (Wednesday) as well as German sentiment surveys for business (Tuesday) and consumers (Friday).
The Fed left its key rate at the target range of 4.25-4.50% as expected at its meeting but lowered its growth forecasts and increased inflation projections due to the potential impact of tariffs and stated that “uncertainty around the economic outlook has increased”.
The Bundesrat, the upper house of the German parliament, approved the incoming government's plan to reform the "debt brake" limit thereby allowing the planned spending of some €1 trillion over the next decade to proceed.
ECB President Lagarde said the central bank's analysis indicated that US tariffs and retaliation from Europe would lower Eurozone growth by 0.5% in the first year of implementation and raise inflation by the same magnitude. She also said that the inflationary impact of Germany's fiscal package was "not that significant according to our calculation." This suggested that further rate reductions should be forthcoming this year.
Global equities rose last week after recent losses, with the S&P 500 up by 0.5% and the EuroStoxx 600 higher by 0.6%, supported by the potential for central-bank rate reductions and a lack of significant noise around tariffs.
Bond yields fell (bond prices rise as yields fall) as a potentially softer economic backdrop suggested policy rates would need to be lowered. Yields for the 10-year US Treasury were down by 7bps to 4.25% and that for the equivalent German bund declined by 12bps to 2.76%.
- Mon 24th Global PMIs
- Tue 25th US - Consumer confidence • Germany - IFO business survey
- Wed 26th US - Durable goods orders
- Thu 27th US - Initial jobless claims • Germany - Retail sales
- Fri 28th US - PCE inflation • Germany - GfK consumer confidence, labour market data
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.