Week ending 6th June 2025.

As you can see from the accompanying table it was broadly a positive week for global financial markets.

Major U.S. stock indexes closed higher for the second week in a row. At the sector level, information technology stocks outperformed, due in part to upbeat sentiment around artificial intelligence (AI)-related stocks in the wake of several positive corporate earnings reports. News that Facebook parent Meta Platforms is entering a 20-year contract with Constellation Energy to power its AI operations also appeared to help boost sentiment in the space.

U.S. labour market data released this week showed that job growth slowed in May but remained stronger than expected. The headline nonfarm payrolls report, released on Friday, was a key focus for investors. It indicated that while the labour market is continuing to cool, the pace of deceleration is milder than many had anticipated.

The U.S. economy added 139,000 jobs in May, down from April’s downwardly revised total of 147,000, but still comfortably ahead of expectations for a 130,000 gain. The unemployment rate held steady at 4.2%.

Stocks moved higher following the release, supported by signs of continued strength in the labour market. The data suggests that demand for workers has remained resilient, even amidst the Trump administration’s tariff uncertainty.

A public disagreement between Elon Musk and Donald Trump unfolded this week across X and Truth Social, drawing widespread attention but limited market impact. The row escalated after Musk criticized Trump’s proposed tax bill, which includes plans to phase out the $7,500 electric vehicle tax credit by the end of 2025. In response, Trump suggested the government should reconsider its contracts with Musk’s companies, including SpaceX. Tesla shares initially dropped sharply—wiping out $152 billion in market value—but later recouped some of those losses as the spat appeared to cool off. For now, markets seem largely indifferent to the political back-and-forth, suggesting investors are either tuning out the rhetoric or have grown accustomed to headline-driven volatility.

UK and European markets ended the week higher with investors reacting to stronger-than-expected US labour market data.

As expected, the European Central Bank lowered its deposit rate by 0.25 percentage points to 2%, marking the lowest level since 2022. The decision follows a decline in May’s headline inflation to 1.9%, slipping just below the ECB’s 2% target. President Christine Lagarde indicated the rate-cutting cycle—eight reductions since July 2024—may be nearing completion, stating the current stance is in a “good place” and emphasising that future moves would be guided by incoming economic data rather than a pre-set path. Policymakers need time to better assess the impact of recent global trade tensions—particularly tariffs introduced by the Trump administration—on growth and inflation. The cut provides some support to the region, which still faces structural challenges, slow GDP growth, cautious consumer spending, and modest producer price trends, indicating ongoing economic fragility.

Trade remained a key focus this week as tensions between the U.S. and China briefly re-escalated following comments from President Donald Trump. However, a phone call on Thursday between Trump and President Xi Jinping ended on a very positive note, with Trump describing the outcome as beneficial for both countries. This development helped lift investor sentiment and raised hopes for progress in resolving ongoing issues. Mainland Chinese stock markets advanced, buoyed by weaker-than-expected economic data that increased expectations for additional government stimulus measures.

Coming up next week data wise, Chinese inflation, balance of trade. UK labour market data, retail sales and GDP. Investors will be keeping a keen eye on US consumer and producer inflation for May. Earnings season next week with Apple kicking off the earnings on Monday.

Kate Mimnagh, Portfolio Economist