Weekly house view | German reform package agreed
The week in review
Germany’s ruling coalition presented a package of reforms including tax relief for lower-income families, a gradual rise in the retirement age and more flexibility in labour laws, which is key for start-ups. The package, aimed at promoting growth in Europe’s largest economy, includes an investmentbased element under which state pension funds will invest up to EUR 80 billion annually into private capital markets.
In the corporate world, news that Meta is developing plans for a cloud infrastructure business to compete with Amazon Web Services, Microsoft Azure and Google Cloud may show potential short-term overinvestment in AI. The SOX semiconductor index suffered the biggest two-day decline in the last five years.
The S&P 5001 rose 1.8%.
OpenAI proposed handing a 5% stake in its business to the Trump administration as political concern grows over AI’s impact on jobs and cyber security.
On the policy front, the Trump administration opted against a longterm renewal of its 2020 trade deal with Canada and Mexico. Instead, the US committed to rolling talks, which may add uncertainty to the North American trading relationship. In positive news for the Federal Reserve’s independence, the US Supreme Court blocked President Donald Trump from firing Fed governor Lisa Cook even as it expanded the president’s powers to remove top officials in other branches of the federal government.
Quote of the week
“America is a nation of winners,” Trump said in an address marking the country’s 250th anniversary. “Nobody can be like us.”
Key data
US nonfarm payrolls rose by 57,000 jobs in June, lower than expected, with a 61,000 drop in leisure and hospitality payrolls. The unemployment rate fell to 4.2% in June from 4.3% in May.
In Asia, Japan’s Tankan headline index measuring big manufacturers' business sentiment improved to +22 in June from +17 in March, stronger than the market expectation of 16. South Korea’s monthly exports surpassed USD 100 billion for the first time in June.
In the euro zone, inflation slowed to 2.8% in June from 3.2% in May, coming in below expectations for 3.0%. But European Central Bank President Christine Lagarde did not rule out another interest rate hike.
