Deutsche Boerse rally shows a European re-rating is underway

Stocks

Economic

Summary:

Deutsche Boerse’s rally signals a broader European stock re-rating, narrowing its valuation gap with Wall Street. Fiscal stimulus, stronger earnings momentum, and policy clarity are driving renewed investor confidence in Europe.

A rally in Deutsche Boerse (DB1Gn.DE), opens new tab shares illustrates how Europe is bridging a value gap with its Wall Street peers, as fiscal stimulus and a shift in global capital flows help drive a broad re-rating from depressed levels.

Following a near 30% rally so far this year, the German exchange operator hit a record valuation of 25 times expected earnings, briefly surpassing all four of its major U.S. competitors by a thin margin for only the second time on record.

This is a significant milestone in a region that over the past decade has displayed a substantial discount to the United States due to slower earnings growth and shallower capital markets.

A year ago, the Frankfurt group traded at a 12-19% discount to U.S. exchanges ICE (ICE.N) , opens new tab, Nasdaq (NDAQ.O), opens new tab, CME (CME.O), opens new tab and CBOE (CBOE.Z), opens new tab. Now they all trade in a band of 23-25 times forward earnings. Euronext (ENX.PA), opens new tab is catching up fast too, at 20 times, while LSEG (LSEG.L) , opens new tab trades at 27 times forward earnings.

After hitting a record 41% discount to Wall Street in November, Europe's valuation gap has shrunk by around 10 percentage points, LSEG data based on a forward price-to-earnings metric shows, a still sizeable difference.

"It doesn't take a lot to start thinking maybe it's time for a re-rating," said Markus Hansen, a portfolio manager at Swiss investment manager Vontobel. "The valuations elastic band was so stretched that there is still more to give on this."

U.S. tariff risks have not deterred investors from raising allocations to Europe this year, marking a reversal from years of outflows driven by American "exceptionalism".

Europe's broad STOXX 600 index has gained 8.5% so far this year, the S&P 500 (.SPX) , opens new tab is up less than 1%.

Anthilia fund manager Giuseppe Sersale said the re-rating also reflects renewed earnings momentum after a long stagnation and he expects the European discount to narrow further.

European earnings growth is expected to accelerate to above 11% next year, but the American benchmark is still forecast to show superior growth until 2027, per LSEG data, suggesting profit forecasts alone do not explain this year's rare STOXX outperformance.

A willingness by investors to pay more for European equities is helped by improving visibility over economic policy versus a less predictable Washington, German fiscal stimulus and a Europe-wide military spending boom that has boosted the perception of closer integration.

High-flying defence stocks like Rheinmetall (RHMG.DE) , opens new tab have overshot Wall Street counterparts. However, banks (.SX7P), opens new tab - heavy contributors to Madrid (.IBEX), opens new tab and Milan's indexes (.FTMIB) , opens new tab - have only partly re-rated to U.S. peers, with Vontobel's Hansen saying there is further to go.

LIKE THE 90S

Some investors are drawing parallels with the period between 1992 and 1999 when a cohesive European policy backdrop supported stock valuations and Europe traded at an average discount of just 2.7% to Wall Street, widening to only around 8.5% in the first half of the 2000s.

Analysts said further gains in the present day could be driven by the creation of a European savings and investment (SIU) union aimed at mobilising $37 trillion in household savings and deepening European capital markets.

Under a "Blue Sky" scenario of major reforms around the saving union materialising, Morgan Stanley strategist Marina Zavolock sees European stocks potentially re-rating above 20 times forward earnings in the long-term.

The MSCI USA index (.dMIUS00000PUS) , opens new tab trades at 21.5 times expected earnings and the MSCI Europe (.dMIEU00000NEU) , opens new tab at 14.7 times, up from a 2022 low of 10.6 times, LSEG data shows.

Europe's exchange stocks should also benefit as greater volatility (.V2TX) , opens new tab, (.VIX) , opens new tab lifts trading volumes, analysts said.

Tom Mills at Jefferies said Deutsche Boerse, which operates Germany's DAX index (.GDAXI) , opens new tab, should gain from the SIU.

His top pick though is Euronext (ENX.PA) , opens new tab, which runs Paris and Milan, where luxury stocks LVMH (LVMH.PA), opens new tab and Ferrari (RACE.MI), opens new tab are listed, along with many other bourses in Europe.

Source: reuters

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Warren Takunda

Economic

Filings for U.S. jobless aid jumped last week but American workers broadly remain secure in their jobs despite economic uncertainty over global trade.

Jobless benefits applications rose by 14,000 to 240,000 for the week ending May 24, the Labor Department said Thursday. Analysts had forecast 226,000 new applications.

Weekly applications for jobless benefits are seen as representative of U.S. layoffs and have mostly settled in a historically healthy range between 200,000 and 250,000 since COVID-19 throttled the economy in the spring of 2020, wiping out millions of jobs.

A sense of relief swept over financial markets early Thursday after a federal court blocked President Donald Trump from imposing sweeping tariffs on imports under an emergency-powers law. Wednesday’s decision threw into doubt Trump’s signature economic policy that has rattled global financial markets, frustrated trade partners and raised fears about inflation intensifying and the economy slumping.

The Trump administration quickly filed notice of appeal and the Supreme Court will almost certainly be called upon to decide the issue. It remains unclear whether the White House will respond to the ruling by pausing all of its emergency power tariffs in the interim.

Trump had already paused or dialed down many of his tariff threats, but concerns lingered about a global economic slowdown upending a robust U.S. labor market.

In early May, the Federal Reserve held its benchmark lending rate at 4.3% for the third straight meeting after cutting it three times at the end of last year.

Fed chair Jerome Powell said the potential for both higher unemployment and inflation are elevated, an unusual combination that complicates the central bank’s dual mandate of controlling prices and keeping unemployment low. Powell said that tariffs have dampened consumer and business sentiment.

The government reported Thursday that the U.S. economy shrank at a 0.2% annual pace in the first quarter of 2025, a slight upgrade from its first estimate. Growth was slowed by a surge in imports as companies in the U.S. tried to bring in foreign goods before Trump’s massive tariffs went into effect.

Trump is attempting to reshape the global economy by dramatically increasing import taxes to rejuvenate the U.S. manufacturing sector.

Trump has also tried to drastically downsize the federal government workforce, but many of those cuts are being challenged in the courts and Congress.

Despite showing traces of weakness during the past year, the labor market remains robust, with plentiful jobs and relatively few layoffs.

The government reported that U.S. employers added a surprisingly strong 177,000 jobs in April and the unemployment rate held at a healthy 4.2%.

Companies that have announced job cuts this year include Workday, Dow, CNN, Starbucks, Southwest Airlines, Microsoft and Facebook parent company Meta.

Labor reported Thursday that the four-week average of jobless claims, which evens out some of the week-to-week ups and downs during more volatile stretches, ticked down by 250 to 230,750.

The total number of Americans receiving unemployment benefits for the week of May 17 increased by 26,000 to 1.92 million, the most since November of 2021.

Source: AP

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Adam

Forex

Dollar initially surged after the US Court of International Trade ruled against President Donald Trump’s sweeping reciprocal tariff orders. Market participants initially interpreted the ruling as a potential turning point in the US trade policy, fueling a rally in the greenback and risk assets.

However, the greenback’s rally proved short-lived. As the US session opened, the greenback reversed course and turned broadly lower. Traders began to reassess the practical implications of the ruling, with many suspecting that the Trump administration could still find legal or procedural workarounds to reinstate the tariffs.

In that context, the ruling may have increased legal complexity but done little to reduce the overarching geopolitical uncertainty. Traders are clearly skeptical that the legal setback will lead to a meaningful shift in trade tensions.

Indeed, skepticism is evident across financial markets. DOW futures, which had gained more than 500 points earlier in the day, gave back almost all of those gains. NASDAQ remained resilient, supported by tech sector optimism, but broader risk appetite appeared to fade. Gold, meanwhile, rebounded above the 3300 level as safe-haven demand returned, signaling that markets are still hedging against unresolved geopolitical and policy risks.

In currency markets, the shift in sentiment was clear. Dollar is now the weakest performer of the day, followed by Sterling and then Yen. Aussie emerged as the top gainer, while Euro and Kiwi also firmed. Swiss Franc and Canadian dollar are trading in the middle of the pack.

Technically, intraday bias in Gold is turned neutral first with current recovery. On the upside, break of 3365.92 resistance will revive the case that correction from 3499.79 has completed with three waves down to 3120.34, and bring retest of 349.79 high. Nevertheless, below 3245.23 will extend the corrective pattern with another falling leg.

Dollar Reverses as Markets Doubt Lasting Impact of US Tariff Ruling_1

In Europe, at the time of writing, FTSE is flat. DAX is up 0.23%. CAC is up 0.63%. UK 10-year yield is down -0.006 at 4.726. GErmany 10-year yield is down -0.005 at 2.551. Earlier in Asia, Nikkei rose 1.88%. Hong Kong HSI rose 1.35%. China Shanghai SSE rose 0.70%. Singapore Strait times rose 0.13%. Japan 10-year JGB yield rose 0.003 to 1.520.

US initial jobless claims rise to 240k vs exp 230k

US initial jobless claims rose 14k to 240k in the week ending May 24, above expectation of 230k. Four-week moving average of initial claims fell -250k to 231k.

Continuing claims rose 26k to 1919k in the week ending May 17, highest since November 13, 2021. Four-week moving average of continuing claims rose 3k to 1890k, highest since November 27, 2021.

RBNZ’s Hawkesby: OCR in neutral zone, July cut not a done deal

RBNZ Governor Christian Hawkesby told Bloomberg TV today that another rate cut at the July meeting is “not a done deal” and “not something that’s programmed.”

With the OCR at 3.25% after this week’s reduction, it’s now sitting within the estimated neutral range of 2.5% to 3.5%. Hawkesby emphasized the central bank has entered a phase of “considered steps,” guided closely by incoming data rather than a preset easing path.

He acknowledged rising uncertainty, noting that near-term growth headwinds have intensified and both demand and inflation pressures are weaker than they were back in February. He also highlighted the uncertainty surrounding global trade policy, particularly tariff developments, which could play out in various ways.

NZ ANZ business confidence falls to 36.6, supporting case for further RBNZ easing

New Zealand’s ANZ Business Confidence index dropped sharply in May, falling from 49.3 to 36.6. Own Activity Outlook, a key indicator of firms’ expectations for their own performance, declined to 34.8 from 47.7.

Profit expectations also plunged to 11.1, indicating mounting pressure on margins. Although cost and wage expectations eased slightly, they remain elevated, while inflation expectations edged up from 2.65% to 2.71%.

According to ANZ, the survey paints a mixed picture: the economy is in recovery mode, but businesses continue to face tough operating conditions, particularly in passing on cost increases. The data reinforces the view that RBNZ can afford to support growth through further rate cuts, barring any major inflation or data surprises.

ANZ expects the OCR to eventually fall to 2.5%, as global headwinds and domestic fragilities persist.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3440; (P) 1.3481; (R1) 1.3512; More…

Intraday bias in GBP/USD remains neutral for the moment. With 1.3389 support intact, further rally is expected. On the upside, firm break of 1.3592 will resume larger rally for 100% projection of 1.2706 to 1.3442 from 1.3138 at 1.3874. However, decisive break of 1.3389 will confirm short term topping, and turn bias back to the downside for 1.3138 support instead.

Dollar Reverses as Markets Doubt Lasting Impact of US Tariff Ruling_2

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2870) holds, even in case of deep pullback.

Dollar Reverses as Markets Doubt Lasting Impact of US Tariff Ruling_3

source : actionforex

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Michelle

Economic

Political

A top economic advisor to President Donald Trump expressed confidence Thursday that court rulings throwing out aggressive tariffs will be overturned on appeal.

Kevin Hassett, director of the National Economic Council, said in an interview that he fully believes the administration's efforts to use tariffs to ensure fair trade are perfectly legal and will resume soon.

"We're right that America has been mishandled by other governments," Hassett said during a Fox Business interview. "This trade negotiation season has been really, really effective for the American people."

The comments follow a ruling from judges on the Court of International Trade who said that Trump exceeded his authority on tariffs, which are aimed both at combating barriers against American goods abroad and stemming the flow of fentanyl across the U.S. border.

While the Centers for Disease Control has said that fentanyl is the primary driver in domestic overdose deaths, the judges ruled that related tariffs "fail because they do not deal with the threats set forth in those orders."

Hassett bristled at the ruling and said the administration will continue its anti-fentanyl efforts.

"These activist judges are trying to slow down something right in the middle of really important negotiations," he said. "The idea that the fentanyl crisis in America is not an emergency is so appalling to me that I am sure that when we appeal, this decision will be overturned."

The administration has multiple options to get around the judges' ruling, including other sections of trade laws it can utilize. However, Hassett said that's not the plan at the moment.

"The fact is that there are measures that we can take with different numbers that we can start right now. There are different approaches that would take a couple of months to put these in place," he said. "We're not planning to pursue those right now, because we're very very confident that this ruling is incorrect."

Source: CNBC

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Adam

Economic

Central Bank

RBNZ's Hawkesby sees weaker growth, lower inflation

A day after the Reserve Bank of New Zealand lowered interest rates, Governor Christian Hawkesby testified before a parliamentary committee on Thursday. Hawkesby said the central bank could hold rates in July and that rate decisions would be data-dependent. The Governor said he expected slower global growth would dampen New Zealand's recovery and there was uncertainty around the impact of the US tariffs.

The RBNZ has been aggressive, chopping 225 basis points in the current easing cycle, which has brought the cash rate down to 3.25%, its lowest level in almost three years. At yesterday's meeting, the RBNZ said that the cash rate was currently in a neutral zone, where it neither stimulates nor curbs economic growth.

FOMC minutes: Increasing uncertainly could mean "difficult tradeoffs"

In the FOMC minutes of the May 7 meeting, members expressed concern about the government's fiscal and trade policy. Members said that "uncertainty about the economic outlook had increased further", making it appropriate to remain cautious until these policies became clearer. Members warned that if inflation remained high and growth and employment weakened, the Fed might have to make "difficult tradeoffs".

There was another twist to the Trump tariffs saga, as the US Court of International Trade declared the tariffs illegal. The Court ruled that Trump had exceeded his authority by imposing wide-sweeping tariffs against US trading partners. The decision puts a hold on the tariffs, but that may not last long as the US Justice Department has filed an appeal.

NZD/USD Technical

NZD/USD has pushed below support at 0.5954 and 0.5937. Below, there is support at 0.5914

There is resistance at 0.5977 and 0.5994

New Zealand central bank sees less growth, FOMC says it will remain cautious, Trump tariffs upended_1

NZDUSD 4-Hour Chart, May 29, 2025

Source: marketpulse

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Risk Warnings and Disclaimers

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Adam

Commodity

Gold prices are posting slight gains in early U.S. trading Thursday, while silver prices are moderately up. Trader and investor risk appetites are upbeat late this week, evidenced by the U.S. stock indexes hitting three-month highs overnight. That is limiting buying interest in the safe-haven metals. August gold was last up $3.50 at $3,325.90. July silver prices were last up $0.315 at $33.475.

The marketplace is mulling over the news that a three-judge panel from the U.S. Court of International Trade in New York on Wednesday ruled against President Trump’s sweeping “Liberation Day” tariffs. The federal court has nationwide jurisdiction over tariff and trade disputes. The ruling found that Trump exceeded his authority under the International Emergency Economic Powers Act by imposing the tariffs without congressional approval. The Trump administration filed a notice of appeal. Bottom line: A sustained loss for Trump could scramble much of his trade agenda and impact how other countries negotiate with the U.S. Traders and investors will watch this development closely and it will likely remain very fluid.

Asian and European stock markets were mixed in overnight trading. U.S. stock indexes are pointed to solidly higher openings today in New York. Risk appetite is upbeat in the general marketplace today.

The FOMC minutes from Wednesday afternoon contained no major surprises but the Wall Street Journal reported the minutes “strongly suggest the Fed isn’t close to lowering rates anytime soon.” The FOMC minutes indicated higher concerns about stagflation—slower economic growth and higher inflation.

The key outside markets today see the U.S. dollar index slightly higher. Nymex crude oil futures prices are slightly firmer and trading around $62.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.55%.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the second estimate for second-quarter GDP, pending home sales and the weekly DOE liquid energy stocks report. Several Federal Reserve officials are also scheduled to speak today.

Gold price up just a bit amid U.S. trade tariff uncertainty_1

Technically, August gold futures bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $3,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $3,200.00. First resistance is seen at Wednesday’s high of $3,352.00 and then at $3,375.00. First support is seen at $3,300.00 and then at the overnight low of $3,269.10. Wyckoff's Market Rating: 6.5.

Gold price up just a bit amid U.S. trade tariff uncertainty_2

July silver futures bulls have the slight overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $34.015. The next downside price objective for the bears is closing prices below solid support at the May low of $31.78. First resistance is seen at $33.75 and then at $34.015. Next support is seen at $33.00 and then at $32.74. Wyckoff's Market Rating: 5.5.

Source: kitco

Risk Warnings and Disclaimers

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Adam

Economic

The number of Americans filing new applications for unemployment benefits increased more than expected last week, while the jobless rate appeared to have picked up in May as labor market conditions continue to ease.

Initial claims for state unemployment benefits rose 14,000 to a seasonally adjusted 240,000 for the week ended May 24, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.

Worker hoarding by employers following difficulties finding labor during and after the COVID-19 pandemic is underpinning the jobs market. Nonetheless there has been an uptick in layoffs because of economic uncertainty as President Donald Trump pursues an aggressive trade policy, which economists say is making it challenging for businesses to plan ahead.

A U.S. trade court on Wednesday blocked most of Trump's tariffs from going into effect in a sweeping ruling that the president overstepped his authority. Economists said the ruling, while it offered some relief, had added another layer of uncertainty over the economy.

A report from the Bank of America Institute noted a sharp rise in higher-income households receiving unemployment benefits between February and April compared to the same period last year. Its analysis of Bank of America deposit accounts also showed notable rises among lower-income as well as middle-income households in April from the same period a year ago.

Economists expect claims in June to break above their 205,000-243,000 range for this year, mostly driven by difficulties adjusting the data for seasonal fluctuations, following a similar pattern in recent years. That would not suggest a material shift in labor market conditions

Minutes of the Federal Reserve's May 6-7 policy meeting published on Wednesday showed while policymakers continued to view labor market conditions as broadly in balance, they "assessed that there was a risk that the labor market would weaken in coming months."

They noted that there was "considerable uncertainty" over the job market's outlook, adding "outcomes would depend importantly on the evolution of trade policy as well as other government policies."

The U.S. central bank has kept its benchmark overnight interest rate in the 4.25%-4.50% range since December as officials struggle to estimate the impact of Trump's tariffs, which have raised the prospect of higher inflation and slower economic growth this year.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 26,000 to a seasonally adjusted 1.919 million during the week ending May 17, the claims report showed. The elevated so-called continuing claims reflect companies' hesitance to increase headcount because of the economic uncertainty.

Continuing claims covered the period during which the government surveyed households for May's unemployment rate. The jobless rate was at 4.2% in April.

Many people who have lost their jobs are experiencing long spells of unemployment. The median duration of unemployment jumped to 10.4 weeks in April from 9.8 weeks in March.