Key Points
- ECB expected to cut rates to 2%, its eighth cut in the current cycle. German industrial orders and tax relief boost European markets.
- U.S. bond yields fall after weak economic data, supporting gains in equity markets.
- Trade talks intensify as Trump imposes new tariffs; Japan and Germany engage.
- Gold and oil prices stabilize amid shifts in global economic and trade conditions.
European markets opened steadily on Thursday, with investors focused on the European Central Bank’s (ECB) expected interest rate cut and mixed signals from global economic data. The ECB is widely anticipated to reduce euro zone borrowing costs by 0.25 percentage points to 2%, marking what could be its eighth rate cut in the current cycle.
Investors are also eager to hear ECB President Christine Lagarde’s outlook following the decision, especially in light of a potential U.S. trade deal and resilient German economic data. Germany’s industrial orders rose unexpectedly in April, buoyed by strong domestic demand. Combined with the approval of a new tax relief package, this helped push the STOXX 600 index higher for a third consecutive day.
While bond markets and the euro remained calm ahead of the ECB move, traders are closely watching for signals on future rate decisions. Economist Oliver Rakau from Oxford Economics said the rate cut was “a done deal” but predicted Lagarde would maintain a cautious tone. He noted that recent German fiscal stimulus and trade developments could affect the ECB’s future decisions, possibly making this the final rate cut of the year.
In the U.S., Treasury yields fell after the release of weak job and services data. The 30-year bond yield dropped to 4.911%, while the 10-year yield declined to 4.385%. This shift fueled optimism on Wall Street, which is edging closer to bull market territory.
Meanwhile, trade tensions resurfaced as President Trump doubled tariffs on steel and aluminum, impacting Canada and Mexico. His administration is seeking “best offers” from trade partners to prevent further levies in July. Japan and Germany both sent key negotiators to Washington for talks.
In Asia, equity markets rallied. South Korea’s KOSPI hit an 11-month high, while Hong Kong’s Hang Seng rose 1%. The dollar index inched up 0.1% while oil and gold prices stabilized. Spot gold slightly dipped to $3,374 per ounce, and Brent crude rose 0.4% to just above $65 per barrel.
