Over in the US, the number of people filing new claims for unemployment support has jumped. There were 247,000 fresh initial claims for jobless benefits in the week ending May 31, up from 239,000 in the previous week. We’ll hear from ECB president Christine Lagarde in around 10 minutes,, when she will explain why the central bank cut eurozone interest rates today. In the meantime, here’s some snap reaction to today’s rate cut. Carsten Brzeski, global head of macro at ING: The ECB has cut interest rates once again, bringing the deposit rate to 2%, from 2.25%. As the risk of inflation undershooting target has clearly increased, today’s rate cut will not be the last. Dean Turner, chief eurozone & UK economist at UBS Global Wealth Management: “The 25 basis point cut by the ECB at its June meeting was widely anticipated and came as no surprise to the markets, which explains the muted reaction to the decision. Attention will now turn to the upcoming press conference, where investors will be looking for any clues about the future direction of policy. As highlighted in the statement accompanying today’s decision, we expect President Lagarde to keep the Governing Council’s options open, signalling a meeting-by-meeting approach. This stance is understandable given the multiple uncertainties facing policymakers with regards to trade in the coming months, as highlighted in the statement. However, with inflation pressures easing, we expect one final cut from the ECB at its July meeting, while continuing to flag the risk of further moves before the year is out. David Rea, chief economist EMEA at real estate firm JLL: This rate cut had been largely anticipated by markets. However, absent changes in US trade policy, the decision would have been far less clear cut. Eurozone inflation is low, but inflation pressures have not entirely left the system as we saw with the rise in core inflation in April. In normal times, this would most likely have led the ECB governing council to pause monetary easing. But we don’t live in normal times anymore. US tariff changes dominate the global economic narrative resulting in a highly dynamic and unpredictable situation. GDP growth forecasts have been steadily revised down for major European countries - and the US - since the start of the year, on expectations of the negative economic effects of tariffs. And whilst higher US import levies are likely to boost inflation on the other side of the Atlantic, they increase the downside risk to inflation in Europe. The ECB has also trimmed its forecast for growth across the eurozone next year. ECB economists now predict GDP will rise by 1.1% in 2026, slightly lower than the 1.2% growth forecast in March. However, it still expects growth of 0.9% this year, and 1.3% in 2027, unchanged from its last forecasts three months ago. The ECB says: The unrevised growth projection for 2025 reflects a stronger than expected first quarter combined with weaker prospects for the remainder of the year. While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term. Higher real incomes and a robust labour market will allow households to spend more. Together with more favourable financing conditions, this should make the economy more resilient to global shocks. As well as lowering interest rates, the European Central Bank has also lowered its inflation forecast for this year, and next. The ECB now predict headline inflation will average 2.0% in 2025, bang on its target, down from 2.3% forecast back in March. It has also cut its inflation forecat for 2026, down from 1.9% to 1.6%. Inflation is still forecast to average 2% in 2027. The ECB says: The downward revisions compared with the March projections, by 0.3 percentage points for both 2025 and 2026, mainly reflect lower assumptions for energy prices and a stronger euro. Staff expect inflation excluding energy and food to average 2.4% in 2025 and 1.9% in 2026 and 2027, broadly unchanged since March. Newsflash: The European Central Bank has cut interest rates across the eurozone, for the eighth time in the last year. The ECB has lowered its three key interest rates by a quarter of one percentage point, in line with market expectations, as it tries to support an economy that has been hurt by Donald Trump’s trade wars. It made the reduction after eurozone inflation fell below its 2% target last month, to 1.9%. Here’s the details: Deposit facility, paid when banks make overnight deposits with the Eurosystem, has been cut to 2%, from 2.25% Main refinancing operations, charged when banks can borrow funds from the ECB on a weekly basis, has been cut to 2.15%, from 2.4% Marginal lending facility, charged when banks seek overnight credit from the ECB, has been cut to 2.4%, from 2.65%. The ECB’s governing council says: In particular, the decision to lower the deposit facility rate – the rate through which the Governing Council steers the monetary policy stance – is based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. In the energy sector, the UK has struck a deal to import Norwegian gas for the next decade. Centrica, the owner of British Gas, has signed a £20bn agreement Equinor to buy 5 billion cubic meters of gas per year until 2035. The deal will begin when a previous agreement, signed during the energy crisis of 2022, ends. Centrica says the deal will provide important energy security for the UK. Germany’s main share index, the Dax, hit a fresh record high this morning as traders anticipated a cut to eurozone interest rates this afternoon. The Dax hit 24,399 points, before settling back to 24,336 points, up 60 points or 0.25% today. Stocks also benefitted from this morning’s surprise increase in German factory orders in April (see earlier post). It’s been a largely calm day on the London stock market so far. The FTSE 100 index of blue-chip shares has gained 17 points, or 0.2%, to 8818 points. Precious metals producer Fresnillo (+4%) is leading the risers, followed by mining giant Anglo American (+3.5%). Investors are awaiting a potential call between Donald Trump and Xi Jinping, reports Fawad Razaqzada, market analyst at City Index and FOREX.com: The markets remain largely in a risk-on mode, even though we’ve had some weaker-than-expected US economic data this week. Yesterday saw both the ADP private payrolls report and the ISM services PMI missed expectations, adding to the disappointing manufacturing PMIs we saw on Monday. The weakness in data has raised hopes for a sooner-than-expected rate cut by the Fed. But it is all about optimism about a potential call between leaders of the world’s two largest economy to resume trade negotiations. Newflash: Ireland’s economy grew by a frankly blistering 9.7% in the first quarter of this year, updated data shows. Ireland’s central statistics office has revised its estimate for Ireland’s GDP growth higher, from an initial estimate of 3.2%, due to a strong surge of exports such as pharmaceuticals as companies tried to front-run Donald Trump’s new tariffs. However, most of this growth was due to major international companies who have based themselves in Ireland; the domestic economy grew less strongly. The Republic’s multinational-dominated sectors grew by 12.4% in q1 2025 with domestic sectors increasing by just 0.7%. Modified Domestic Demand (MDD), a broad measure of underlying domestic activity that covers personal, government, and investment spending in Ireland, grew by 0.8% in Q1 2025. Assistant Director General with responsibility for National Accounts & Price Statistics, Chris Sibley, says: “In today’s results, Gross Domestic Product (GDP) is estimated to have grown by 9.7% in January, February, and March (Q1) 2025 driven by significant growth in exports of goods. The globalised Industry sector expanded by 17.1% in Q1 2025 compared with Q4 2024 while the Information & Communication sector posted an increase of 3.8% over the same period. Overall, the multinational-dominated sector rose by 12.4% in the quarter. There was continued growth in the domestic economy in Q1 2025 with Modified Domestic Demand (MDD) growing by 0.8% in the quarter. This was reflected in personal spending increasing by 0.6% and growth in wages of 0.9% over the same period.” Consumer goods giant Procter & Gamble has announced plans to cut 7,000 non-manufacturing jobs as part of an effort to improve productivity and fend off economic uncertainty. P&G says it plans to cut 15% of its current non-manufacturing workforce over the next two years, but is not yet revealing how the axe will fall across its sites. P&G’s brands include Pantene hair products, Pampers nappies, Ariel and Lenor washing products and Fairy liquid. Andre Schulten, P&G’s chief financial officer, and Shailesh Jejurikar, chief operating officer, revealed the plan at a Deutsche Bank conference. They said: Plans will be implemented over the next two fiscal years, allowing us appropriately sequence the delivery of important innovation and operational projects. As we do this, our top priority remains delivering balanced growth and value creation to delight consumers, customers, employees, society and shareowners alike. Here’s some reaction to this morning’s data showing that UK car sales rose in May, but Tesla registrations slumped by a third. Ian Plummer, commercial director at Auto Trader: “Despite recent geopolitical volatility, the fundamentals of the car market remain sound and the sharp rise in electric vehicle sales against last year demonstrates real momentum. Electric demand is being driven by new affordable models like the Renault 5 and the Hyundai Inster, along with fast growing Chinese brands like BYD and OMODA-JAECOO, which will be key to mass market adoption. Around one in four of all new cars viewed on our website is electric and we know that when the price is right, drivers are keen to make the switch.” John Cassidy, managing director of sales at Close Brothers Motor Finance: “A slight uptick in new registrations could provide manufacturers with some optimism following a tough 6 months. “Electric vehicle (EV) registrations continue to grow at a strong pace; though fleet registrations still skew the numbers, which still fall short of the Zero Emission Vehicle (ZEV) mandate targets. However, despite increased taxes and the removal of incentives, consumer appetite for EVs does appear to be increasing, boosted by an influx of new models coming to the market as Chinese manufacturers gain a larger market share. If the Government is to achieve its targets, it needs to ensure it doesn’t introduce any further measures which could deter potential EV buyers.” James Hosking, managing director of AA Cars: “The UK’s new car market delivered a solid performance in May, with registrations climbing as the industry begins to find its feet following a challenging start to the year. This growth suggests that buyers are slowly regaining confidence, aided by lower interest rates and attractive new car offers. “The May uplift likely reflects a combination of pent-up demand from earlier in the year, strong fleet appetite, and the pull of the new 25-plate registration. These factors often combine to lift sales around this time of year, particularly for company cars and business fleets looking to take advantage of tax efficiencies. “Private buyers remain more cautious, but the gradual improvement in borrowing conditions is helping to reduce monthly finance costs, making new models more accessible to a broader audience. It’s a fragile recovery, but a recovery nonetheless. Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA): “The impact of pressures such as Employers’ National Insurance, the extension of Vehicle Exercise Duty and the Expensive Car Supplement to electric vehicles will be closely monitored moving forward as well as the uncertainty regarding the blocking/unblocking of US tariffs. “Looking ahead, we are likely to see pressure on the new vehicle market, due to weak economic growth. We expect electric vehicles sales to continue to increase, however they still remain someway off the ZEV Mandate targets for 2025. Over many years franchised dealers have proven their resilience and this current period of economic turbulence is no difference. “NFDA is looking ahead to the Government’s Spending Review next week and it provides a prime opportunity to clarify its objectives to reach the ZEV Mandate and wider net zero targets.” Ouch. UK construction companies are cutting jobs at the fastest rate since the first Covid-19 lockdowns. Employment numbers across UK construction firms fell at the fastest pace since August 2020 last month, as builders shed workers following a slowdown in activity. The use of subcontractors fell by the most since May 2020. The latest S&P Global UK Construction PMI, just released, also shows that activity fell at a slower rate last month, as output and new orders both continued to decline. House building was the weakest-performing segment, indicating that the government’s efforts to drive a surge of new homes is struggling. The construction PMI has risen to 47.9 in May, up from 46.6 in April, showing that the sector shrank again, but at a slower rate (50 points signals stagnation). Tim Moore, economics director at S&P Global Market Intelligence, says: “The construction sector continued to adjust to weaker order books in May, which led to sustained reductions in output, staff hiring and purchasing. However, the worst phase of spending cutbacks may have passed as total new work fell at a much slower pace than the near five-year record in February. Housing activity was the weakest-performing segment in May as demand remained constrained by elevated borrowing costs and subdued confidence. Commercial work was close to stabilisation after a marked decline in April, suggesting that fears about domestic economic prospects have abated after the initial shock of US tariff announcements. UK trade secretary Jonathan Reynolds has also called for reforms of the WTO, including changes to the much criticised dispute resolutions system which can also take years to settle disputes between trading nations. Reynolds told the European Policy Centre security conference in Brussels: “We do recognise that reforming and repositioning the WTO so that it can respond more effectively to the challenges of today is the only way to safeguard long term stability and growth tomorrow. “Our eyes are fixed on greater flexibility in decision making, greater openness in the east of plurilaterals and building a fully functioning dispute settlement system,” “Whilst the world has changed, it is changing, and it’s going to change more quickly in future, and that climate is uncertain and volatile.” Arguing stronger ties with the EU and other allies were now more vital than ever, Reynolds added: “the trees that survive the storms aren’t the tallest. They’re the ones whose roots are intertwined with their lives. The EU’s trade commissioner Maroš Šefčovič has called for deep reform of World Trade Organisation rules in the face of the continuing assault on the global rules based system by Donald Trump. Just days after a series of meetings with the US, India, Australia and others, he said many developed economies were agreed that it was long overdue, my colleague Lisa O’Carroll reports from Brussels. While the US trashes the rules based system, the rest of the world is pushing ahead with strengthening, but changing trade rules, was his message. Šefčovič says: “Just in the past two days, during the OECD trade ministerial [summit] the message was clear and unequivocal – deep reform of the World Trade Organisation is long overdue and urgently needed to match today’s realities.” Speaking at the European Police Centre conference in Brussels, Šefčovič said the EU was “doubling down on the rules-based approach to trade” rather than joining Trump’s attack on decades old trading systems. While the US seeks to coerce trading partners into deals, the EU was keeping an orderly position with the aim to improving prosperity, Šefčovič insisted, saying “We are here to improve the system, not to bend it to the point of breaking and certainly not to abandon it.” He added the EU’s approach was this: “We negotiate. We do not isolate. We do not leave the table… trade agreements are more than transactions. They are upgrades that empower our partners, helping them grow with us and creating a cycle of shared prosperity.” He also warned that “China’s impressive rise must not come at the expense of the European economy” and that the EU was “rebalancing this relationship and establishing a level playing field in trade and investment, with symmetrical market opening.” Earlier this week, Bank of England governor Andrew Bailey warned MPs that “the rules-based system is sort of dead”, which would have very serious consequences for the global economy unless policymakers can rebuild it. The UK car market has returned to growth, new data shows, but sales of Teslas have fallen by a third. Overall car registrations rose by 1.6% in May, to 150,070 units, according to the Society of Motor Manufacturers and Traders (SMMT). That’s the strongest May for new car sales since 2021, but 18% below pre-Covid levels. The SMMT points out that this is only the second month of growth this year, “reflecting brittle consumer confidence and economic turbulence”. May was another difficult month for Tesla. Registrations fell by 36% year-on-year, the SMMT reports, with just 2,016 cars sold, down from 3,152 in May 2024. That’s despite rising demand for battery-powered cars, with BEV registrations up by a quarter year-on-year, to 32,738, up from 26,031 in May 2024. Chinese electric carmaker BYD grew its UK registrations by 400% year-on-year, up from 596 last May to 3,025 this year. Tesla has faced a consumer backlash this year due to Elon Musk’s support for Donald Trump – although Musk has been savaging Trump’s tax and spending bill this week – and for Germany’s far-right Alternative für Deutschland (AfD) party. But demand for Teslas has also weakened ahead of a refresh of its popular Model Y car. A Tesla spokesman told The Times yesterday that demand for the new version of the Model Y, which was Europe’s bestselling car as recently as 2023, would boost sales in June when UK deliveries start. Outsourcing group Mitie Group has launched a £366m takeover bid for smaller rival Marlowe. Mitie, which provides security, cleaning and engineering services to public sector clients and private companies, has agreed a cash and share deal with Marlowe, which produces business-critical services and software. Marlowe was co-founded by former Conservative Party deputy chairman Lord Ashcroft, and Alex Dacre, son of former Daily Mail editor Paul Dacre. The deal values Marlowe’s shares at 466p. They’ve jumped by 8% this morning to 439p, having already surged yesterday following reports that the two companies were in talks. Phil Bentley, chief executive officer of Mitie, says the deal will help Mitie transform into a “Facilities Compliance provider”: With growing legislation around Fire, Security and Water & Air Quality, our clients need a partner who can also offer a broad range of Facilities Compliance capabilities. In a growing Testing, Inspection and Certification (TIC) market valued at £7.6 billion per annum, Marlowe stands out as a leader in Fire & Security and Water & Air and Asbestos compliance. Adding Marlowe’s c.3,000 highly respected colleagues to Mitie’s capabilities and providing access to Mitie’s clients will generate significant revenue growth opportunities as well as immediate cost efficiencies. Marlowe shareholders will get 1.1 New Mitie Shares and 290p in cash once the deal goes through. Mitie’s shares have fallen by 10% this morning, which will erode the value of the deal. Lord A owns 19.5% of Marlowe’s shares, so he should receive around £44m in cash plus shares in Mitie worth roughly £25m. The UK’s Office for National Statistics has admitted that UK inflation was overstated in April, due to an error in car tax data provided by the British government. The consumer price inflation rate was overstated by 0.1 percentage points for the year to April, the ONS reports, because of an error in the Vehicle Excise Duty (VED) data provided by the Department for Transport, which is used to calculate consumer prices inflation. The incorrect data overstates the number of vehicles subject to Vehicle Excise Duty (VED) rates applicable in the first year of registration. This helped to push UK CPI inflation up to 3.5% in April, higher than expected. The error could be expensive, as it also added 0.1 percentage points to the retail price index, which is used to set payments on index-linked UK government bonds. The ONS does not plan to revise its inflation data, but will use the correctly weighted data now on, meaning no further statistics will be affected. Budget airline Wizz Air has reported a plunge in profits, after almost a fiifth of its fleet were grounded last year due to engine problems. Wizz Air’s shares have dropped by 24% this morning, after it reported that operating profits fell by 61% to €167.5m in the last financial year. Wizz says it was “a year of significant challenges”, as an average of 44 aircraft were parked during the year, owing to issues with Pratt & Whitney’s Geared Turbofan (GTF) engines, which power many of its Airbus A320NEO planes. József Váradi, Wizz Air’s CEO, says: “I describe our fiscal year F25 with two words: resilience and transformation. In an environment where rare challenges have become recurrent, Wizz Air has evolved structurally, embedding increased flexibility into our standard operating model. While often dismissed as ‘easier said than done,’ the past year’s events tested both our company and management. We emerged stronger, wiser, and better prepared.” May was the busiest month for UK house sales since March 2022, new data from Rightmove this morning shows. Across Great Britain, the number of sales agreed is now 6% ahead of the same period last year, Rightmove reports. But London is lagging, with sales just 1% higher than a year ago. May is typically a busy month in the year for agreed sales, and last month’s was the busiest May since 2021. Rightmove argues that May’s data suggests market conditions have improved, as home-movers carry on following the stamp duty increase at the start of April. UK fintech Wise has joined the ranks of companies looking to migrate to the US stock markets. Wise, which floated in London less than four years ago, told shareholders this morning that it plans to switch its primary listing to New York, the latest blow to the London market. Wise’s CEO, Kristo Käärmann, told the City: As part of our next step on that journey, today we are announcing our intention to dual list our shares in the US and UK. We believe the addition of a primary US listing would help us accelerate our mission and bring substantial strategic and capital market benefits to Wise and our Owners. These include helping us drive greater awareness of Wise in the US, the biggest market opportunity in the world for our products today, and enabling better access to the world’s deepest and most liquid capital market. Wise was formerly known as TransferWise, which became the largest tech listing in the UK when it was valued at nearly £9bn after its 2021 stock market debut. Käärmann adds that Wise plans to maintain a secondary listing on the London stock exchange, saying: “A dual listing would also enable us to continue serving our UK-based Owners effectively, as part of our ongoing commitment to the UK. The UK is home to some of the best talent in the world in financial services and technology, and we will continue to invest in our presence here to fuel our UK and global growth.” Several other UK-listed companies have recently shifted their listing to New York, including construction rental company Ashtead Group, and gambling giant Flutter. German factory orders have jumped unexpectedly, defying forecasts that they would fall as Donald Trump’s tariffs disrupted trade. Orders at German manufacturers rose by 0.6% in April, official data this morning shows, beating forecasts of a 1% fall. Statistics body Destatis also reported that foreign orders declined by 0.3%, despite a 0.5% rise in orders from within the eurozone. Domestic orders increased by 2.2%. Demand for data processing equipment, electronic, and optical products increased, while there was also a rise in new orders for transport equipment, and for metal products. Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. Interest rates across the eurozone are likely to be cut today, as the European Central Bank attempts to support the euro economy as it reels from the damage caused by Donald Trump’s trade wars. The ECB is widely expected to cut its key interest rates by a quarter of one percentage point. That would lower its deposit facility rate to 2%, and would be the eighth cut in a year. A cut looks nailed on, after inflation across the eurozone fell to 1.9% last month, below the ECB’s 2% target for the first time since last September. Markets are pricing almost a 100% probability of a quarter-point cut, reports Ronald Temple, chief market strategist at Lazard Asset Management, adding: With ongoing declines in inflation and consistently dovish language from ECB members, a rate cut appears to be a done deal. The ECB has previously described 1.75%–2.25% as the range that would be considered neutral monetary policy. Any signals of a change in this view would be surprising. I continue to expect rates to be reduced to 1.5% by year end given a more aggressive US trade posture against the European Union. Markets suggest a slightly less dovish outlook with rates ending the year just below 1.6%.” Today, investors will also be interested to hear the ECB’s latest forecasts – economists expect cuts to its growth and inflation projections for next year. The ECB may also signal that it could pause its rate cutting cycle over the summer, before reassessing the situation in September. Christine Lagarde can also expect questions about her claim last month that the euro could take on a more global role, as the dollar loses influence amid the current trade turmoil. Lagarde’s future could also come up, following claims that she has discussed cutting short her term as European Central Bank president to become chair of the World Economic Forum. The agenda 7am: German factory orders for April 9am BST: UK new car sales report for May 9.30am BST: UK construction PMI report 1.15pm BST: European Central Bank interest rate decision 1.30pm BST: US trade data for April 1.30pm BST: US weekly jobless claims data 1.45pm BST: European Central Bank press conference
Author: Graeme Wearden