Gold Prices Ease From Two-Week High As Dollar Edges Higher

Republicans in the U.S. House of Representatives came together early Thursday to pass President Donald Trump's "big, beautiful" tax bill out of the chamber on a narrow, party line vote.

The passage was a major victory for Republican leaders, who spent the past two months crafting the bill and the past two days making last-minute changes to it.

The more than 1,000 pages of legislation and 42 pages of amendments are a case study in how to win over both moderates and hardline conservatives.

The House Rules Committee convened for 21 straight hours of debate and amendments in order to meet Speaker Mike Johnson's self-imposed Memorial Day deadline for passing the bill.

The package, comprised of tax cuts paired with cuts to the social safety net, still faces a complicated path through the Senate.

The upper chamber will consider the legislation under a set of rules called budget reconciliation, which requires only a simple majority to pass instead of the typical 60 votes required to move bills through the Senate.

"To our friends in the Senate, I would just say, the president is waiting with his pen," Johnson said from the House floor ahead of the vote.

He re-iterated that he aims to get the package delivered to President Donald Trump's desk by July 4. "Today proves that we can do that and we will do that," he said.

Nonetheless, several Republican senators have already said they will require significant changes to the bill before agreeing to vote for it.

The final version of the bill that passed Thurdsday contained a scores of amendments, designed to give each of the competing factions within the party a win.

For example, a timeline for imposing work requirements for Medicaid recipients was moved up by two years, to the end of 2026 — a victory for conservatives.

But the amendments also contained a four-fold increase in the so-called SALT deduction cap, from a current maximum of $10,000 in allowable deductions for state and local taxes paid, up to $40,000, for taxpayers reporting less than $500,000 in income.

The broader bill seeks to deliver on Trump's key campaign promises, and includes provisions to make permanent Trump's 2017 tax cuts and eliminate taxes on tips.

Yet a new analysis from the nonpartisan Congressional Budget Office estimates that under the bill, "in general, resources would decrease for households in the lowest decile (tenth) of the income distribution, whereas resources would increase for households in the highest decile."

Markets tumbled Wednesday on concerns that Trump's spending bill will lead to exploding federal deficits and weaker long-term fiscal health for the nation. The yield on the 30-year Treasury bond yield hit 5.09%.

Source: CNBC

2025 Growth Slashed Amid Persistent Challenges

Exports to the U.S. at Risk Under New Tariff Climate

Hope on the Horizon: Fiscal Reform and Infrastructure Investment

Source: Reuters

Japan: Export Slowdown Sparks Recession Fears

South Korea: Tariffs and Political Uncertainty Shake Core Industries

Source: IBIS

A downturn for British firms eased in May despite a darkening picture for manufacturers who cut jobs at one of the fastest rates since the global financial crisis almost 20 years ago, according to a survey published on Thursday.

The S&P Global UK Composite Purchasing Managers' Index (PMI), a gauge of the private sector economy, rose to 49.4 from 48.5 in April, roughly as expected by economists polled by Reuters and moving closer to the 50 threshold for growth.

The services sector which dominates Britain's economy edged back into growth territory, in contrast to factories where the biggest contraction in jobs since May 2020 dragged the manufacturing index down.

Official data published earlier this month showed Britain's economy expanded strongly in the first quarter of 2025.

However, the Bank of England believes the underlying pace of growth is far weaker and Wednesday's PMI chimed with that view, with survey compiler S&P Global warning of the possibility of an economic contraction in the second quarter.

Businesses grew a little cheerier about the outlook, with fewer worries about the impact of higher U.S. trade tariffs. Earlier this month Britain and the United States signed an accord to reduce tariffs and trade barriers in key areas.

U.S. President Donald Trump has also suspended the heaviest of his tariff increases for other countries, easing some of the concerns about their impact on the global economy.

"Although brighter news on tariffs and trade appears to have helped restore some confidence among businesses, sentiment about prospects in the year ahead is still subdued," said Chris Williamson, S&P Global Market Intelligence's chief business economist.

Thursday's survey showed business price pressures weakened noticeably in May which may reassure BoE officials after data on Wednesday showed consumer price inflation jumped last month by more than expected.

The PMI for the services sector rose in May to 50.2 from 49.0, although new orders contracted at the fastest rate since late 2022 - a bad omen for future months.

The manufacturing PMI fell to 45.1 from 45.4 and the jobs index for the sector sank to its lowest level since the onset of the COVID-19 pandemic. Outside of that, it was the lowest since the 2008-09 recession.

April's PMI showed British manufacturers suffered a greater fall in export orders than in any of the 28 countries measured by S&P Global. That index improved in May, but stayed deep in contraction territory.

Source: TradingView

German businesses remain cautiously optimistic. After the back-and-forth on US tariffs, German businesses seem to be focusin on the bright side of what could happen under the new German government, rather than fearing the downsides from ongoing uncertainty and trade tensions. This is, at least, the message that the just-released Ifo index seems to convey. Germany's most prominent leading indicator improved again and came in at 87.3 in May, from 86.9 in April. While the current assessment component weakend to 86.1, from 86.4 in April, expecations improved significantly to 88.9, from 87.4, the highest in a year.

Between nearer term risks and longer term opportunities

Taking a step back from high frequency data (and noise), the German economy remains in the middle of two seismic activities: a new government, which seems to lack strong ambition for structural reforms but will have access to unprecedented fiscal space for infrastructure and defence investments, and fundamental shifts in trade and geopolitics, including US tariffs. We think that, at least in the shorter run, the negatives will outweigh the positives. Not that we enjoy negative news but we're currently witnessing several official forecasts for German growth this year converging with our long-held view of yet another year of stagnation. Yesterday’s forecasts from the Germany council of economic advisors was just another example.

Still, not everything is bad. The German economy acutally grew in the first quarter, probably as a result of export frontloading, and industrial data pointed to some cyclical rebound at least before 'Liberation Day'. The tariff extravaganza since the beginning of April, however, will leave clear marks on the German economy. There is the direct impact, as even with the current 90-days-pause, tariffs are still higher than at the start of the year, but also the indirect impact via confidence and still high uncertainty. In the longer term, the announced fiscal stimulus will boost growth in Germany. Implemented in the right way, investment in infrastructure should lead to a cyclical upswing, at least. The caveat, however, remains that the fiscal measures alone – impressive as they might be – will do very little to improve the economy’s competitiveness. Modern infrastructure is essential for one of the world's largest economies, but it doesn't inherently drive innovation, sector transformation, or new growth opportunities. In this regard, we still expect tensions within the government about potential expenditure cuts and some structural reforms as the intended additional spending plans, other than infrastructure and defence, are hard to reconcile with the European fiscal rules.

The frustrating observation, however, is that the analysis of a stagnating economy with the need for investment and structural change is not new. While the discussion has been going on for years now, actual action to change the situation has been limited. In fact, due to the tensions within the last government, the elections and the new government just off the starting blocks, another year of economic policy standstill has passed. Last week, Chancellor Friedrich Merz announced that Germans should feel some positive changes by this summer. We agree that a quick implementation of policy and quick results will be needed but remain sceptical that the summer will bring significant change given the long implementation lags of public investment. Rather than seeing tangible improvements, Germans may find themselves noticing little more than old fax machines still lingering on the streets of Berlin. Public investment and structural changes simply take time.

All in all, today’s Ifo index comes as a positive surprise. Still, we caution against overly hasty optimism. There are currently more unknowns than knowns for the German economy, and we continue to expect another year of stagnation – which would mark the first time ever for Germany to go through three consecutive years without growth.

Source: ING

Euro zone business activity unexpectedly slipped back into contraction this month as the bloc's dominant services industry suffered a deeper downturn in demand, although manufacturing showed further signs of stabilisation, a survey showed.

HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global and seen as a good guide to growth, dropped to 49.5 this month from April's 50.4.

May marks its first time below the 50 mark separating growth from contraction this year and confounded expectations in a Reuters poll for a rise to 50.7.

"The euro zone economy just cannot seem to find its footing. Since January, the overall PMI has shown only the slightest hint of growth and in May, the private sector actually slipped into contraction," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The services PMI dropped to 48.9 from 50.1, its lowest reading since January 2024 and far short of the poll estimate for a rise to 50.3.

As demand fell again optimism among service firms about the year ahead waned further. The business expectations index sank to 54.0 from 55.1, its lowest reading in approaching three years.

But factories showed more signs of recovery with the manufacturing PMI rising to a near three-year high of 49.4 from 49.0, slightly ahead of the 49.3 poll forecast. An index measuring output, which feeds into the composite PMI held steady at April's 51.5.

Some of the improvement in the headline number may have come from factories cutting their prices to support demand. The output prices index fell to a five-month low of 49.0 from 51.3.

"The recovery in manufacturing is broad-based, with encouraging signs coming out of both Germany and France. Further interest rate cuts could provide a boost, and lower oil prices compared to last year are also helping," de la Rubia said.

The European Central Bank cut interest rates for the seventh time in a year last month and markets are currently pricing in another 25 basis point reduction to its deposit rate to 2.00% on June 5.

Source: Reuters