European Central Bank Head: Frequent Shocks to Economy Make Inflation More Unpredictable

Economic

Summary:

ECB President Christine Lagarde warned that inflation is becoming more volatile due to global shocks like the pandemic and the Ukraine war, urging policymakers to factor in extreme scenarios

The head of the European Central Bank said inflation has become more unpredictable due to shocks like the COVID-19 pandemic and Russia’s invasion of Ukraine — and that policymakers need to take the possibility of such extreme scenarios into account and communicate them to the public as well.

“The world ahead is more uncertain, and that uncertainty is likely to make inflation more volatile,” ECB President Christine Lagarde said Monday in a speech opening the central bank’s annual conference in Sintra, Portugal. “It’s pretty basic but that’s the reality.”

One reason, she said, was that increasingly regular supply disruptions were leading companies to change their prices more frequently, a habit that goes beyond the recent burst of inflation in the U.S. and Europe and “reflects a structural shift in how firms operate under conditions of permanently higher uncertainty.”

The bank’s assessment of the economy needs to rely on taking extreme possible scenarios into account as well as the more likely baseline predictions, and it should let the public in on those possible outcomes as well, she said. Lagarde in particular cited the inflation spike that followed Russia’s invasion of Ukraine, where a baseline scenario based on higher energy prices suggest inflation for 2022 of 5.5% - but a worst-case scenario indicated more than 7% inflation, much closer to the final figure of 8%.

Another example was the pandemic, where spending by homebound consumers shifted from services like restaurants to goods such as home exercise equipment.

“Scenario analysis could have helped in illustrating that the range of possible inflation outcomes was unusually wide – and would have reduced the risk of projecting false certainty to the public,” Lagarde said.

The bank’s strategy review announced Monday reaffirmed its target of 2% for inflation, a goal it has met for the time being as annual price increases were 1.9% in May. The drop in inflation has let the bank cut its benchmark interest rate from a peak of 4% to 2%.

Threats of higher tariffs from U.S. President Donald Trump have added to uncertainty about the outlook for growth and inflation. The European Commission and US negotiators are trying to reach agreement on a trade deal ahead of a July 9 deadline.

The conference in Sintra is the ECB’s equivalent of the U.S. Federal Reserve gathering in Jackson Hole, Wyoming, and gathers top central bankers and economists from around the world. Fed Chair Jerome Powell is to take part in a panel on Tuesday with Lagarde, Bank of England Government Andrew Bailey, Bank of Korea Governor Chang Yong Rhee and Kazuo Ueda, the governor of the Bank of Japan.

Source: AP

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Glendon

Economic

Forex

The European Union is demanding immediate relief from tariffs in some key sectors as part of a trade deal with the United States, Reuters has reported.

However, citing EU diplomats, the news agency said Brussels still anticipates potential unfavorable imbalances in an agreement with Washington.

Tuesday’s report comes as negotiators are facing the looming expiration to a pause to U.S. President Donald Trump’s sweeping "reciprocal" tariffs on July 9. It remains unclear what how Trump will approach the end of the delay to the punishing levies, with White House officials saying that any extensions to the deadline would only be decided by the president.

Against this backdrop, the European Commission, which is negotiating on behalf of the EU, is reportedly set to put forward a range of demands during meetings with the Trump administration this week.

Along with specifically lower tariffs on items like alcohol and medical technology, which currently face a 10% U.S. tariff, the EU is also looking for a deal to cover commercial aircraft, pharmaceuticals and semiconductors, Reuters said. The U.S. has launched a probe into these industries, but has yet to place additional tariffs on them.

Meanwhile, the EU is aiming for U.S. concessions on 25% tariffs slapped on autos and auto parts, as well as a cut to duties on steel and aluminum, Reuters reported. The car levies, in particular, are a "red line" for EU negotiators, the report said.

Finally, the EU would reportedly like to see tariff relief once an initial agreement is reached, rather than having to wait for weeks or months before a final deal is signed.

For its part, the Trump administration has presented a list of their own demands to the EU, but did not include any concessions of its own, Reuters reported, adding that both camps are working to first achieve an agreement in principle and will then clarify the details later.

The EU has become a major target of Trump’s trade-related ire since his return to power earlier this year, with the president arguing that it has ripped off the U.S. through perceived unfair trade practices. Brussels has rebuffed the claims, and vowed to react "firmly" to "unjustified barriers to free and fair trade."

Source: Reuters

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Warren Takunda

Stocks

London stocks had reversed earlier gains to trade lower by midday on Tuesday as investors eyed US trade talks, with housebuilders in the red after disappointing data from Nationwide.

The FTSE 100 was down 0.3% at 8,735.08.

Kathleen Brooks, research director at XTB, said: "There is a mild risk off tone to markets on Tuesday as the focus swings back to trade deals as we get close to the July 9th deadline to forge trade agreements with the US. Fears are mounting that the UK and China are the only countries with agreements in place.

"The rally in US, Asian and some European indices in the past three months has been driven by hopes that Trump would perform his usual ‘TACO’ and cave in at the last minute. If he doesn’t do this or if he doesn’t kick the can down the road, then the stock market rally could come to an abrupt halt."

On home shores, a survey showed the downturn in manufacturing eased slightly in June as rates of decline in output, new orders and employment all slowed, while business optimism rose.

The S&P Global manufacturing purchasing managers' index increased to 47.7 last month, in line with the flash reading released a week earlier and the highest print in five months.

This was the third straight improvement in the headline PMI since it reached a one-and-a-half-year low of 44.9 in March, but the eight consecutive month of contraction - indicated by any figure below 50.0.

Four out of the five PMI components - output, new orders, employment and stocks of purchases - continued to fall but at a slower rate than the previous month, while vendor lead times lengthened at their lowest rate since March. Meanwhile, business optimism increased to a four-month high.

S&P Global said that manufacturing production was lower for the eighth straight month, as companies scaled back output in response to "weak market conditions, clients offsetting higher costs through reduced demand and uncertainty surrounding government policy, tariffs and the general economic/geopolitical situation".

Nevertheless, Rob Dobson, director at S&P Global Market Intelligence, the PMI survey "provides signs of conditions stabilising".

"The orders-to-inventory ratio, a reliable bellwether of future production trends, also climbed sharply to its highest since August 2024. Inflation of both input costs and selling prices meanwhile nudged lower to hint at a softening inflation trend," he said.

Investors were also mulling the latest British Retail Consortium-NIQ Shop Price Index, which showed that prices returned to inflation in June on the back of a big jump in food prices, fuelled by high wholesale prices and rising wage bills.

In equity markets, housebuilders Barratt, Taylor Wimpey and Persimmon were under the cosh after data from Nationwide showed that house prices unexpectedly fell on the month in June, by 0.8%, following 0.4% growth in May. Analysts were expecting a 0.2% jump.

On the year, house price growth slowed to 2.1% last month from 3.5% in May.

The average price of a home stood at £271,619 in June, versus £273,427 a month earlier.

Nationwide chief economist Robert Gardner said: "The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April. Nevertheless, we still expect activity to pick up as the summer progresses, despite ongoing economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive.

"The unemployment rate remains low, earnings are rising at a healthy pace in real terms (i.e. after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we and most other analysts expect."

Standard Chartered lost ground amid news the bank is facing a $2.7bn lawsuit as liquidators allege it helped to enable the laundering of billions of dollars misappropriated from Malaysian sovereign wealth fund 1MDB.

Supermarket chain Sainsbury’s reversed earlier gains even as it backed its full-year profit guidance and reported a sharp jump in first-quarter like-for-like sales as consumers tucked into its new range of ‘Taste the Difference’ products including Spanish Jamón Croquetas.

On the upside, heavily-weighted mining stocks were the biggest gainers, with Antofagasta, Glencore and Anglo American all up.

National Grid and SSE were both higher after Ofgem said it has given the provisional green light to an initial £24bn investment programme to enhance energy security "while enabling the transmission of more clean energy from renewable sources".

An initial £8.9bn in funding has been approved for the electricity transmission sector to upgrade grid, with National Grid set to receive £4.2bn and £3.1bn for SSE.

Source: Sharecast

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Gerik

Economic

DOGE Targets Wall Street Regulations

In a bold move toward financial deregulation, President Trump’s Department of Government Efficiency has set its sights on the SEC, urging the agency to relax rules on Special Purpose Acquisition Companies (SPACs) and private investment fund disclosures. According to insiders, DOGE officials are lobbying for changes that would undo key policies enacted under the Biden administration, particularly those aimed at protecting retail investors and increasing systemic risk oversight.

The proposed shift aligns with the Trump administration’s wider deregulatory agenda, championed as a means of boosting economic growth and investment. In a February 2025 executive order, Trump instructed DOGE to root out any regulation perceived as overly burdensome to business operations.

Pushback Within the SEC

However, the involvement of DOGE in shaping regulatory policy has sparked discomfort among career SEC staffers and financial reform advocates. Traditionally considered an independent agency, the SEC has long operated with limited political interference from the White House. Critics argue that DOGE’s active role in SEC policy discussions violates both precedent and the spirit of independent financial regulation.

Amanda Fischer, COO of Better Markets and former chief of staff to ex-SEC Chair Gary Gensler, described DOGE’s influence as “outrageous,” warning of conflicts of interest and the undermining of staff expertise.

SPAC Regulation in Focus

SPACs, once a booming financial tool used by companies like Lucid Motors and Trump's own media venture, came under scrutiny during the Biden administration. New rules sought to rein in misleading financial forecasts and increase sponsor accountability. However, Republican SEC Commissioners Mark Uyeda and Hester Peirce opposed these rules, viewing them as unnecessary and restrictive.

With the Trump administration’s backing, efforts are now underway to reverse or soften these regulations. The SEC is reportedly in dialogue with major exchanges about easing some SPAC requirements, signaling a potential resurgence of the once-flagging SPAC market.

Private Fund Transparency Also in Crosshairs

Another major target is the Form PF rule, which expanded disclosure requirements for private investment funds to help regulators assess systemic risk. While these rules were seen as necessary safeguards post-2008, Republican commissioners have argued they are excessive and could burden innovation.

Earlier this month, the SEC delayed compliance with the new Form PF requirements—a move interpreted by analysts as an early victory for the DOGE-led deregulatory push.

The Return of Political Oversight?

The intensifying involvement of the Trump administration in SEC operations represents a significant departure from long-standing norms. Under Trump’s leadership, the White House has increasingly asserted direct influence over independent regulatory bodies, including through dismissals of officials who challenge presidential authority.

Yet not all experts view the shift negatively. Adam Pritchard of the University of Michigan noted that a White House “kick in the pants” could motivate long-overdue regulatory pruning. While acknowledging the unorthodox approach, Pritchard suggested that some inefficiencies in the SEC might warrant external pressure.

Implications for Investors and Markets

While deregulation may reduce compliance costs for Wall Street firms and potentially revitalize SPAC activity, it also risks weakening protections for retail investors and obscuring financial risks. Without robust oversight, critics fear a repeat of past crises driven by opaque financial products and unchecked speculation.

The battle over SEC rulemaking is likely to continue in the months ahead, as DOGE pushes its agenda and market participants wait to see how much the agency’s independence will be preserved—or redefined—under Trump's second term.

DOGE’s growing involvement in SEC policy reflects a broader political shift toward centralized executive control over financial regulation. The outcome will significantly shape the investment landscape, with key consequences for transparency, investor protection, and systemic stability.

Source: Reuters

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Michelle

Economic

Stocks

The BlackRock Investment Institute (BII) said on Tuesday that growing uncertainty around traditionally stable, long-term economic trends is pushing it toward shorter-term strategies amid an increasingly unclear global economic outlook.

For decades, markets have relied on core principles such as inflation stability, government fiscal discipline, central bank independence, and the safe-haven status of U.S. assets like the dollar and Treasuries. But investor confidence in these foundations has been shaken this year by U.S. tariffs, concerns over the future political independence of the Federal Reserve, and a broad re-evaluation of exposure to U.S. assets as U.S. President Donald Trump moves to reshape global trade dynamics.

"Longer term, with macro anchors lost, no one knows where the global economy is ultimately headed," BII, a division of U.S.-based BlackRock focused on investment research, said in a mid-year 2025 global investment outlook note.

"That’s why, for now, we invest in the here and now – and lean more on our tactical six- to 12-month horizon," it said.

The institute's investment outlooks are based on views from senior portfolio managers and investment executives at BlackRock, which is the world's largest asset manager.

BII said it has turned more optimistic on government bonds in the euro area over the next six to 12 months. In equities, it continues to favor U.S. stocks over their European counterparts.

Higher government spending in Europe could support the aerospace, defense, and financial sectors. But U.S. stocks are expected to outperform, driven by the artificial intelligence boom and demand for technology, even if tariffs will be a drag on the economy, it said.

Tariffs and slowing U.S. immigration are expected to maintain upward pressure on inflation, limiting the Federal Reserve's ability to cut interest rates, BII said.

The institute kept a bearish stance on long-dated U.S. Treasuries and shifted from an "underweight" to a "neutral" view on emerging market local currency debt after the dollar lost about 10% this year against major currencies.

"The potential for a further U.S. dollar retreat and brighter emerging market (EM) growth outlook make local currency EM bonds more attractive in a whole portfolio context," it said.

Source: Yahoo Finance

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Gerik

Economic

Stocks

Post-Rally Pause: Futures Dip as Caution Sets In

Following a powerful first-half rally led by the S&P 500 and Nasdaq Composite—both closing at record highs on Monday—U.S. equity futures opened Tuesday in negative territory. The S&P 500 e-minis dipped 0.26%, Nasdaq 100 futures dropped 0.34%, and Dow futures fell 0.12% as of 5:51 a.m. ET. These declines reflect cautious sentiment after a robust quarter driven by artificial intelligence enthusiasm and resilient earnings.

At the heart of current market anxiety is the Senate’s ongoing voting marathon over President Donald Trump’s sweeping tax and spending bill. The proposed legislation—set to increase the national debt by $3.3 trillion—has triggered investor fears about long-term fiscal sustainability. Amendments are still being debated, adding to market volatility.

Adding fuel to the fire, a public clash between Trump and Tesla CEO Elon Musk over the tax bill further pressured Tesla stock, which fell nearly 4.7% in premarket trading. Musk’s companies, which have benefited from government subsidies, are now under scrutiny from a Trump-backed government efficiency review. Tesla’s weakening demand in Europe—reporting its sixth consecutive month of declining sales in Sweden and Denmark—exacerbated the stock’s drop.

Trade Tensions Cloud Market Sentiment

Compounding investor worries are signs of strain in U.S. trade negotiations. Trump voiced frustration with the slow pace of talks with Japan, while Treasury Secretary Scott Bessent warned that several nations may soon face significantly higher tariffs if deals aren’t struck before a July 9 deadline. These threats rekindle memories of previous disruptions caused by Trump’s erratic trade policies and could pressure multinational firms.

Markets are also eyeing key macroeconomic indicators and Federal Reserve communication. Investors await the June manufacturing surveys from S&P Global and ISM, May job openings data, and comments from Fed Chair Jerome Powell at an ECB forum later today. These signals could influence expectations for monetary policy amid rising bets on interest rate cuts.

Despite political and fiscal noise, traders are still pricing in a dovish tilt from the Fed, partly due to weak recent data and speculation that Trump may appoint a more accommodative central bank head. LSEG data shows markets anticipating 68 basis points of rate cuts by year-end and 135 basis points by October 2026.

IPO and Crypto-Linked Stocks Stay Active

Outside the political spotlight, Circle, a major stablecoin firm, rose 2.1% after announcing plans to establish a national trust bank in the U.S.—a move that would place the company under federal oversight and potentially boost its institutional legitimacy.

While Tuesday’s dip in futures reflects investor wariness amid political and economic crosscurrents, the underlying bullish sentiment remains intact following the market’s best quarterly performance in over a year. Much now hinges on clarity over the tax bill, upcoming economic data, and the trajectory of U.S. monetary policy. If markets digest these risks constructively, the current hesitation may prove to be a brief pause in an ongoing uptrend.

Source: Reuters

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Gerik

Economic

Stocks

Nasdaq Leverages Tech Momentum and SPAC Revival to Outpace NYSE

In the first half of 2025, Nasdaq extended its leadership in the IPO arena by capturing a significantly larger share of U.S. stock market listings compared to the NYSE. According to Dealogic data, Nasdaq listings—including special purpose acquisition companies (SPACs)—raised approximately $21.3 billion, more than doubling the $8.7 billion raised on the NYSE. Even when SPACs are excluded, Nasdaq still led, with $9 billion raised across 79 traditional IPOs, outpacing NYSE’s $7.8 billion from just 15 deals.

This surge was powered by blockbuster listings such as CoreWeave’s $1.5 billion IPO and Chime’s offering, as well as renewed investor appetite following a volatile spring. Notably, Nasdaq has now led IPO rankings for six consecutive years, a reflection of its consistent appeal to high-growth, tech-forward companies.

Volatility Fades, IPO Pipeline Reignites

Market turbulence earlier this year—driven by policy instability and geopolitical shocks—had momentarily stalled IPO activity. However, a strong market rebound in May reignited listing momentum. Nasdaq President Nelson Griggs confirmed that companies are now “back having those discussions,” hinting at a busy fall season if early IPOs perform well.

The Nasdaq Composite and S&P 500 both closed June at record highs, signaling robust investor confidence and setting a fertile stage for upcoming listings. Highly anticipated IPOs from companies like Medline and Figma are expected to hit the market later in the year, potentially increasing the competitiveness between the exchanges.

Exchange Switches Signal Broader Appeal for Nasdaq

Adding to Nasdaq’s advantage was a wave of high-profile company transfers from the NYSE. Ten firms, including Kimberly-Clark and Thomson Reuters, switched their listings to Nasdaq in 2025, representing a combined market capitalization of $271.4 billion. This is the strongest first-half performance for Nasdaq in attracting switches since 2006.

One factor drawing companies to Nasdaq is the visibility and prestige associated with inclusion in the Nasdaq-100 index, which features heavyweights like Apple and Nvidia. The Nasdaq-100 has returned nearly 8% year-to-date, outperforming the S&P 500’s 5.5% gain, making it an attractive benchmark for growth-oriented firms.

NYSE, for its part, has retained relevance through major IPOs like Venture Global’s $1.75 billion listing—the largest of the year—and has seen several companies, including Virtu and CSW Industrials, transfer from Nasdaq. NYSE’s Global Head of Capital Markets, Michael Harris, projected continued strength in listings for the rest of 2025, emphasizing the diversity and depth of the exchange’s pipeline.

Capital Market Dynamics: U.S. Leads in Dual-Exchange Competition

The competition between Nasdaq and NYSE has played a pivotal role in reinforcing the appeal of U.S. capital markets over single-venue international rivals like Hong Kong or London. With each exchange tailoring its appeal to different industry sectors—Nasdaq for tech and innovation, NYSE for industrials and legacy brands—the dual-platform environment promotes innovation and investor engagement.

This competitive dynamic has helped the U.S. maintain its global leadership in capital formation. As companies increasingly weigh the benefits of index inclusion, sector alignment, and investor exposure, the second half of 2025 may bring further strategic listings—and possibly, a more balanced scoreboard between the exchanges.

Nasdaq’s first-half victory in 2025 highlights the continuing strength of technology companies in public markets and investor preference for growth-oriented listings. While volatility remains a risk, the rebound in IPOs and strategic exchange switches underscores the resilience of U.S. capital markets. If upcoming listings perform well and geopolitical risks remain contained, Nasdaq and NYSE could both see a vibrant second half, but Nasdaq currently holds the lead with a winning formula of innovation, index visibility, and investor trust.