Weekly house view | Trump-Musk break-up
The week in review
President Trump’s “bromance” with Elon Musk, the world’s richest man, broke up last week as Musk attacked Trump’s Big Beautiful Bill as an abomination. The Congressional Budget Office (CBO) estimated the Bill would increase primary budget deficits by USD 2.4 trillion over the next 10 years. Trump believes the Bill will stimulate the economy. US jobs growth slowed in May, but the readout was slightly above consensus, suggesting some resilience in the economy. Services data pointed to a contraction in that sector, however.
Across the Atlantic, the European Central Bank (ECB) cut rates by 25 basis points to 2%, as expected, marking the eighth rate cut since the previous summer. Stocks rose last week – by 1.5% in the US and 1.2% in Europe – as Trump, after complaining Chinese President Xi was “hard to make a deal with”, later reported a “very good” call with him, buoying hopes for progress in trade talks between the two economic powers.
In Asia, Chinese equities rose by 2.9% while the Korean market celebrated the election of a new, pro-market president by rising by 5%. The 10-year US Treasury yield ended the week at 4.5% while 30-year yields remained close to 5%.
Quote of the week
“I think we are getting to the end of a monetary policy cycle,” President Lagarde said after the ECB cut policy rates.
Key data
US nonfarm payrolls in May came in slightly above consensus, growing 139,000 vs 126,000 expected. The trend is moderating but far from collapsing. The services sector contracted in May, with the ISM services index falling to 49.9, below the 50 threshold that separates expansion from contraction. In Europe, euro area headline inflation slowed to 1.9% y-o-y in May from 2.2% the prior month, marking the first dip below 2% since June 2021. Swiss headline inflation turned negative in May, declining to -0.1% year-on-year. In China, the official manufacturing PMI picked up in May, with a strong rebound in new export orders.