Eurozone Business Activity Stalls in June: Will the ECB Cut Again?

Economic

Summary:

Eurozone business activity stalled in June, with PMI data showing flat growth linked to weak services and manufacturing.

Private sector activity across the eurozone showed little sign of progress in June, with the latest Purchasing Managers’ Index (PMI) data highlighting stagnation in both services and manufacturing, casting a shadow over the region’s economic recovery.

The flash eurozone Composite PMI for June remained at 50.2 points, unchanged from May and narrowly above the 50-point threshold that separates expansion from contraction. The figure came in slightly below market expectations of 50.5.

The services PMI edged up as expected to 50 from 49.7, while the manufacturing PMI was unchanged at 49.4, missing forecasts of a rise to 49.8.

Weak momentum despite easing financial conditions

“The eurozone economy is struggling to gain momentum,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.

“For six months now, growth has been minimal, with activity in the service sector stagnating and manufacturing output rising only moderately.”

The subdued business activity persists despite a more accommodative monetary stance by the European Central Bank (ECB), which has again reduced its deposit facility rate by 25 basis points to 2.00%.

Regional disparities widen: Germany recovers, France falters

Regional disparities are becoming more pronounced.

Germany, the bloc’s largest economy, posted a marginal return to growth. The flash composite PMI rose to 50.4 in June from 48.5 in May, buoyed by demand in the manufacturing sector, which saw the fastest rise in new orders in over three years.

“There is a decent chance Germany could finally break out of the frustrating stop-start growth pattern it’s been stuck in for the past two years,” said de la Rubia, citing the positive trend in output and support from expansionary fiscal policies.

The German services PMI rose to 49.4 in June 2025 from 47.1 in May, surpassing market expectations of 47.5. The data signalled only a slight decline in activity, marking the mildest contraction since the current three-month downturn began.

Conversely, France continued its downward trajectory. The composite PMI dropped to 48.5 in June from 49.3 in May, marking the tenth consecutive monthly decline.

Both manufacturing and services contracted, with firms citing subdued domestic demand, intensifying international competition, and uncertainty surrounding global trade.

Overall sales fell for the thirteenth consecutive month in June, with the pace of decline quickening slightly from May. The sharper downturn was driven by the steepest drop in factory orders since February.

"The outlook is certainly clouded,” said Jonas Feldhusen, Junior Economist at HCOB.

"The question arises whether the decline in manufacturing output this month represents a mere temporary dip or already marks the end of the upward trend," he added.

Will the ECB move again in July?

The latest PMI figures present a mixed picture for the ECB.

While inflationary pressures in the goods sector continue to ease, persistent cost increases in services and renewed geopolitical tensions may discourage further monetary easing in the near term.

Markets widely expect the ECB to hold its benchmark interest rate steady at 2% during its next policy meeting on 23-24 July.

However, the broader economic landscape remains volatile as US strikes in Iran over the weekend have heightened fears of a protracted conflict in the Middle East. The unrest has the potential to trigger a renewed surge in oil prices — especially as nearly 20% of global crude shipments pass through the Strait of Hormuz.

Adding to the uncertainty, the 90-day reciprocal tariff truce initiated by former US President Donald Trump is set to expire on 9 July. With negotiations still ongoing, time is running out for Europe to secure a trade agreement and avoid another disruptive wave of transatlantic tariffs.

Source: Euronews

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Michelle

Economic

Forex

U.S. business activity slowed marginally in June, though prices increased further amid President Donald Trump's aggressive tariffs on imported goods, suggesting that an acceleration in inflation was likely in the second half of the year.

The survey from S&P Global on Monday showed measures of prices paid by factories for inputs and charged for finished products jumped to levels last seen in 2022. Nearly two-thirds of manufacturers reporting higher input costs attributed these to tariffs while just over half of respondents linked increased selling prices to tariffs, S&P Global said.

That supports economists' expectations that inflation would surge from June following mostly benign consumer and producer price readings in recent months. Economists have argued that inflation has been slow to respond to Trump's sweeping import duties because businesses were still selling stock accumulated before the tariffs came into effect.

S&P Global's flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, slipped to 52.8 this month from 53.0 in May. A reading above 50 indicates expansion in the private sector.

The survey's flash manufacturing PMI was unchanged at 52.0. Economists polled by Reuters had forecast the manufacturing PMI easing to 51.0. Its flash services PMI dipped to 53.1 from 53.7 in May. Economists had forecast the services PMI falling to 53.0. The survey was conducted in the June 12-20 period, before the U.S. joined in the conflict between Israel and Iran.

"The June flash PMI data indicated that the U.S. economy continued to grow at the end of the second quarter, but that the outlook remains uncertain while inflationary pressures have risen sharply in the past two months," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

So-called hard data on retail sales, housing and the labor market have painted a picture of an economy that was softening because of the uncertainty caused by the constantly shifting tariffs policy. The escalation in tensions in the Middle East added another layer of uncertainty.

INFLATION POISED TO ACCELERATE

The S&P Global survey's measure of new orders received by businesses declined to 52.3 from 53.0 in May. A measure of prices paid by businesses for inputs fell to 61.6 from 63.2 last month. But manufacturers faced higher input costs, with this price gauge jumping to 70.0 this month. That was the highest reading since July 2022 and followed 64.6 in May.

Prices paid for inputs by services businesses remained elevated, with tariffs, higher financing, wage and fuel costs cited. The pace of increase, however, slowed amid competition.

Source: Yahoo Finance

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Adam

Forex

Middle East Situation

The U.S. dollar surged in early trading on Monday, benefiting from its traditional safe-haven status after U.S. military strikes on Iran — but analysts are warning the gains may be short-lived.

The dollar index was up 0.45% at one point, indicating a gain against currencies such as the Japanese yen , the euro and the British pound, as well as the Canadian, Australian and New Zealand dollars. The greenback was last seen trading around 0.4% higher at 9.30 a.m. London time.

“The escalation of the Middle East crisis after the US attacks Iran during the weekend is expected to lead to some of the traditional safe haven effects in the market [such] as the oil price is rising, lower equity prices and a stronger dollar,” said Kirstine Kundby-Nielsen, fixed income and currency research at Danske Bank.

Despite the initial rally, a growing consensus among investment banks suggests the dollar’s strength may prove temporary.

Some analysts say the Middle East conflict is merely masking concerns over U.S. fiscal policy, trade wars, and weakening international demand for U.S. assets, which are likely to regain focus once the immediate crisis-driven demand fades. The dollar index is down more than 8% this year, reflecting the long-term concern.

The U.S. dollar’s immediate strength is tied to fears of how Iran might retaliate, with a closure of the Strait of Hormuz — a waterway vital to the transit of oil — at the top of those concerns.

Yet, RBC Capital Markets analysts caution that the situation is more complex, noting that Iran has asymmetric capabilities to “strike individual tankers and key ports.”

“Hence, we do not believe it is a ‘full closure or nothing’ scenario when it comes to the waterway, and Iran may deploy their asymmetric capabilities to raise the economic cost of the combined US/Israeli operations,” said RBC’s Halima Croft, a former CIA analyst, in a note to clients.

A global trade war is compounding these fiscal concerns.

With a July 9 deadline approaching until a reprieve on levies expires, the U.S. is threatening tariffs of up to 50% on most imports from the European Union.

“As far as the USD goes, we’d suspect that the USD would be sinking lower if it weren’t for the War, largely because the news pertaining to US import tariffs is not particularly good, and because data from outside the US, while weak, does not point to further deterioration relative to the US,” said Thierry Wizman and Gareth Berry, Macquarie’s currency and rates strategists, in a June 20 note to clients that preceded the U.S. strike on Iran.

FX strategists from Bank of America also point out that investors are betting heavily on the decline of the U.S. dollar, which adds momentum to any downward move for the currency.

According to the BofA global fund manager survey released on June 16, fund managers currently see short-U.S. dollar as the third most crowded trade — although the survey was carried out before to the United States’ involvement in the Middle East conflict.

Source: cnbc

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Warren Takunda

Economic

Middle East Situation

Global markets appeared to take the U.S. strike against nuclear targets in Iran in stride as investors watched Monday to see how Iran will react.

The price of oil initially jumped more than 2%, fell and then regained about half that much. U.S. stock futures edged lower and share benchmarks in Europe and Asia also were mostly lower.

The attacks on three Iranian sites raised the stakes in the war between Israel and Iran and left questions about what remains of Tehran’s nuclear program. It also increased the possibility that Iran might retaliate, potentially disrupting shipping through the narrow Strait of Hormuz, a waterway through which much of the world’s crude oil passes.

The big unknown is what Iran will do, analysts said.

The price of Brent crude oil, the international standard, was up 1.2% at $77.91 per barrel. U.S. benchmark crude climbed 1.3% to $74.79.

The future for the S&P 500 was little changed, while that for the Dow Jones Industrial Average was down 0.1%. Treasury yields were steady.

In Europe, Germany’s DAX lost 0.5% to 23,230.54 and the CAC 40 in Paris fell 0.6% to 7,541.25. Britain’s FTSE 100 shed 0.2% to 8,761.53.

Overall, there was no sign of panic.

“I believe what we are thinking is or the thinking is that it is going to be a short conflict. The one big hit by the Americans will be effective and then we’ll get back to sort of business as usual, in which case there is no need for an immediate, panicky type of reaction,” said Neil Newman, managing director of Atris Advisory Japan.

The conflict began with an Israeli attack against Iran on June 13 that sent oil prices yo-yoing and rattled other markets.

Closing off the Strait of Hormuz would be technically difficult but it could severely disrupt transit through it, sending insurance rates spiking and making shippers nervous to move without U.S. Navy escorts. As a major oil producer, Iran may be reluctant to close down the waterway, which is used to transport its own crude, mostly to China. Oil is a major revenue source for the regime.

“The situation remains highly fluid, and much hinges on whether Tehran opts for a restrained reaction or a more aggressive course of action,” Kristian Kerr, head of macro strategy at LPL Financial in Charlotte, North Carolina, said in a commentary.

Speaking to Fox News on Sunday, U.S. Secretary of State Marco Rubio said disrupting traffic through the strait would be “economic suicide” and would elicit a U.S. response.

“I would encourage the Chinese government in Beijing to call them about that because they heavily depend on the Strait of Hormuz for their oil,” Rubio said.

When asked about that at a routine briefing in Beijing, Chinese Foreign Ministry spokesperson Guo Jiakun told reporters in Beijing that “China is willing to strengthen communication with Iran and relevant parties to continue playing a constructive role in promoting de-escalation” of the conflict.

“The Persian Gulf and its adjacent waters are important international channels for cargo and energy trade. Maintaining security and stability in this region serves the common interests of the international community,” he said.

Tom Kloza, chief market analyst at Turner Mason & Co said he expects Iranian leaders to refrain from drastic measures and oil futures to ease back after the initial fears blow over.

Disrupting shipping would be " a scorched earth possibility, a Sherman-burning-Atlanta move,” Kloza said.

Writing in a report, Ed Yardeni, a long-time analyst, agreed that Tehran leaders would likely hold back.

“They aren’t crazy,” he wrote in a note to investors Sunday. “The price of oil should fall and stock markets around the world should climb higher.”

Other experts weren’t so sure.

Countries are not always rational actors and Tehran could lash out for political or emotional reasons, said Andy Lipow, a Houston analyst who has covered oil markets for 45 years.

“If the Strait of Hormuz was completely shut down, oil prices would rise to $120 to $130 a barrel,” Lipow said. That would translate to about $4.50 a gallon at the pump and hurt consumers in other ways, he said.

Much of East Asia depends on oil imported through the strait. Taiwan’s Taiex fell 1.4% while the Kospi in South Korea slipped 0.2%.

In Tokyo, the Nikkei 225 edged 0.1% lower, with gains for defense contractors, oil companies and miners helping to make up for broad losses.

“The U.S. strike on Iran certainly is very good for defense equipment,” Newman of Atris Advisory said, noting that both Japan and South Korea have sizable military manufacturing hubs.

Australia’s S&P/ASX fell 0.4%.

Hong Kong’s Hang Seng regained lost ground, climbing 0.7%, while the Shanghai Composite index picked up 0.7%.

In currency dealings, the U.S. dollar rose to 147.82 Japanese yen from 146.66 yen. The euro fell to $1.1464 from $1.1473.

Source: AP

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Glendon

Cryptocurrency

Fund Flows Keep Climbing

For the tenth straight week, digital asset funds inflows topped $1 billion, reaching $1.24 billion in fresh investments. This steady momentum has propelled the year-to-date total to a record-breaking $15.1 billion. Such consistent capital influx highlights growing confidence in institutional and retail adoption of crypto.

Bitcoin Takes the Lead

Bitcoin stands out as the main beneficiary, drawing approximately $1.1 billion of the weekly inflows. This dominance reinforces BTC’s status as the preferred reserve asset in the crypto world. Investors are flocking to Bitcoin funds, driven by optimism around regulatory progress, growing interest from major institutions, and its historical performance.

Rising Support for Ethereum

Ethereum-focused investment vehicles also saw robust inflows, totaling $124 million. This surge reflects renewed investor interest in ETH’s utility and upcoming network upgrades. With strong demand for decentralized applications (dApps) and decentralized finance (DeFi), Ethereum continues to draw significant attention alongside Bitcoin.

What’s Driving the Surge?

Institutional Confidence

Large-scale investors are increasingly treating crypto as part of their portfolios. With clearer regulatory frameworks and mainstream financial products, digital asset funds present a viable, secure entry point.

Crypto Market Resilience

Despite occasional volatility, Bitcoin and Ethereum have maintained upward trajectories in key metrics like network usage and institutional holdings. These signals encourage fresh capital deployment, especially from cautious investors seeking regulated exposure.

Product Innovation

New fund offerings, such as spot Bitcoin ETFs and enhanced diversification options, have expanded access. This innovation lowers entry barriers and attracts wider investor demographics, further fueling inflows.

Outlook: Is It Sustainable?

While these inflows reflect strong investor appetite, a few factors may influence the trend:

Market Corrections: Sharp price swings could affect sentiment and persistency of inflows.
Regulatory Developments: Favorable rulings may bolster investment, while adverse ones could curb demand.
Crypto Adoption: Continued growth in digital payments, NFTs, and DeFi supports long-term confidence.

In summary, the ongoing digital asset funds inflows streak underscores resilient investor interest in crypto. With $15.1 billion committed YTD, fueled by BTC and ETH strength, this trend suggests growing acceptance and maturity within global financial markets.

LATEST: Digital asset funds see 10th straight week of inflows, hitting $1.24B, pushing YTD total to a record $15.1B, led by $1.1B into $BTC and $124M into $ETH. pic.twitter.com/LDwptHCUBh

Outlook: Is It Sustainable?

While these inflows reflect strong investor appetite, a few factors may influence the trend:

Market Corrections: Sharp price swings could affect sentiment and persistency of inflows.
Regulatory Developments: Favorable rulings may bolster investment, while adverse ones could curb demand.
Crypto Adoption: Continued growth in digital payments, NFTs, and DeFi supports long-term confidence.

Source: CryptoSlate

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Michelle

Political

Iran's top security body must make the final decision on whether to close the Strait of Hormuz, Iranian TV said on Sunday, after parliament reportedly backed the measure in response to U.S. strikes on several of Tehran's nuclear sites.

Iran has in the past threatened to close the strait but has never followed through on the move, which would restrict trade and impact global oil prices.

Below are details about the strait:

WHAT IS THE STRAIT OF HORMUZ?

The strait lies between Oman and Iran and links the Gulf north of it with the Gulf of Oman to the south and the Arabian Sea beyond.

It is 21 miles (33 km) wide at its narrowest point, with the shipping lane just 2 miles (3 km) wide in either direction.

WHY DOES IT MATTER?

About a fifth of the world's total oil consumption passes through the strait. Between the start of 2022 and last month, somewhere between 17.8 million and 20.8 million barrels of crude, condensate and fuels flowed through the strait daily, data from analytics firm Vortexa showed.

OPEC members Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, mainly to Asia. The UAE and Saudi Arabia have sought to find other routes to bypass the strait.

About 2.6 million barrels per day (bpd) of unused capacity from existing UAE and Saudi pipelines could be available to bypass Hormuz, the U.S. Energy Information Administration said in June last year.

Qatar, among the world's biggest liquefied natural gas exporters, sends almost all of its LNG through the strait.

The U.S. Fifth Fleet, based in Bahrain, is tasked with protecting commercial shipping in the area.

HISTORY OF TENSIONS

In 1973, Arab producers led by Saudi Arabia slapped an oil embargo on Western supporters of Israel in its war with Egypt.

While Western countries were the main buyers of crude produced by the Arab countries at the time, nowadays Asia is the main buyer of OPEC's crude.

The U.S. more than doubled its oil liquids production in the last two decades and has turned from the world's biggest oil importer into one of the top exporters.

During the 1980-1988 Iran-Iraq War, the two sides sought to disrupt each other's exports in what was called the Tanker War.

In July 1988, a U.S. warship shot down an Iranian airliner, killing all 290 aboard, in what Washington said was an accident and Tehran said was a deliberate attack.

In January 2012, Iran threatened to block the strait in retaliation for U.S. and European sanctions. In May 2019, four vessels - including two Saudi oil tankers - were attacked off the UAE coast, outside the Strait of Hormuz.

Three vessels, two in 2023 and one in 2024, were seized by Iran near or in the Strait of Hormuz. Some of the seizures followed U.S. seizures of tankers related to Iran.

Source: Reuters

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Warren Takunda

Stocks

Middle East Situation

London stocks had popped into the black by midday on Monday as investors calmly awaited Iran's response to US strikes on Iranian nuclear sites over the weekend.

The FTSE 100 was up 0.1% at 8,779.89, reversing earlier losses.

Russ Mould, investment director at AJ Bell, said: "The markets are not yet reacting with any degree of panic to the US airstrike on Iran’s nuclear facilities as they await to see how Tehran responds.

"The promised two-week hiatus as the US weighed its decision didn’t materialise as the Trump administration acted on Saturday. After briefly spiking above $80 per barrel when the market opened in Asia on Monday, Brent pared those gains to trade modestly higher.

"If Iran decided to block the Strait of Hormuz, through which a large proportion of the world’s oil and liquefied natural gas passes, then energy prices could move substantially higher. That could hurt consumers and businesses around the world as it would push up the cost of energy, transport and raw materials.

"The double-digit energy price gains seen since Israel’s first missile strike on Iran 10 days ago will have already had some inflationary impact."

On home shores, provisional data showed the economy picked up in June as both the service and manufacturing sectors strengthened.

The S&P Global flash UK PMI composite output index was 50.7 in June, up on May’s 50.3 and staying above the 50.0 benchmark. It was also marginally ahead of consensus expectations of 50.5.

A reading below 50.0 suggests contraction, while one above it indicates growth.

Within that, the services PMI business activity index rose to a three-month high of 51.3.

Manufacturing remained in contraction. However, the output index increased to 47.1, while the flash PMI edged up to 47.7 from 46.4 in May, a five-month high.

Overall, new business volumes returned to growth - ending a six-month run of contraction - driven by the service economy. Inflationary pressures also eased.

However, manufacturers posted another export-led decline in order books, as Donald Trump’s trade war, mounting geopolitical tensions and global price competition continued to weigh on demand.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The UK economy remained in a sluggish state at the end of the second quarter.

"Although business conditions have continued to improve, quelling recession fears, growth of business activity remains disappointingly lacklustre, indicative of second quarter GDP rising at only 0.1% quarterly pace."

However, he added there had been a "marked" cooling in inflationary pressures, especially in the service sector. Persistent inflation in the sector has long been a concern of the Bank of England’s rate-setting Monetary Policy Committee.

"As such, the picture of near-stalled growth, falling employment and lower inflation opens the door for the BoE to cut rates again at its next policy meeting in August," Williamson said.

In equity markets, oil giants BP and Shell were among the gainers as oil prices rose.

Airlines took a hit from the prospect of higher fuel costs, however, with easyJet and BA and Iberia owner IAG both flying lower.

Elsewhere, Spectris surged as the supplier of precision instrumentation and controls said it has agreed to be taken over by private equity investor Advent in a £3.8bn deal.

KKR later put out a statement saying that it has been "engaging constructively" with Spectris' board since submitting its first proposal to buy the firm on 2 June. It said that while no revised proposal has been made, it is "actively engaged in the advanced stages of due diligence and arranging financing commitments".

Assura was little changed after the healthcare property firm accepted an increased £1.79bn bid from Primary Health Properties only days after recommending a £1.7bn final offer from private equity outfits KKR & Stonepeak.

Russ Mould said: "KKR needs to get its skates on if it serious about wanting to buy Spectris. Having been beaten by Primary Health Properties in the race to buy Assura, KKR won’t want to lose a second takeover battle in the same day.

"Advent has struck a deal to buy Spectris at a chunky premium to the market value before bid interest was revealed earlier this month. Spectris’ board has recommended the all-cash offer and it’s now up to shareholders to vote on it. KKR has already expressed interest in Spectris and will need to make a formal offer fast if it stands a chance of derailing the Advent bid.

"The fact we’ve got two bid battles in Spectris and Assura just goes to show how the UK stock market continues to be on sale. If investors don’t recognise the good value opportunities on offer, trade buyers or private equity firms will keep swooping on targets and pick them off one by one."