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Good evening,
Bonds rallied, the $ fell, and stocks ended mixed to little changed today, driven by weak US economic data and Trump’s pressure on the Fed to cut interest rates. Trump criticized the Fed for being too slow to act and urged Jerome Powell to cut interest rates as the latest data raises concerns and highlighted the fact that the ECB has already eased rates several times.
The weak economic updates were a low ADP employment report with only 37k jobs created, well below estimates, and the lowest in more than two years; and the ISM Services PMI which also came in much lower than expectations, and reflected a small contraction in activity, adding to worries about the US economic outlook.
A relevant headline today was the Congressional Budget Office, the non-partisan fiscal watchdog, warning that Trump’s ‘big and beautiful’ tax bill will add $2.4tn to the US national debt by 2034, despite the administration insisting it will reduce the deficit. This news comes a day after Elon Musk described the tax bill as a ‘disgusting abomination’, after abandoning his government duties.
Regarding tariffs, Trump stated that making a deal with China’s president ‘was extremely hard’. In geopolitical updates, the Ukraine – Russia war escalated after Moscow anticipated it plans to retaliate the recent drone attack on planes by Kyiv.
In central bank action, the Bank of Canada kept rates steady at 2.75% as anticipated as the economy softens and inflation accelerates but the governor signalled the bank could ease rates if the tariffs situation worsens.
In corporate deals, US industrials Chart Industries (mcap $6.8bn) and Flowserve Corp (mcap $6.2bn) agreed to an all-stock merger of equals for an enterprise value of $19bn to create a major provider of products and services for liquid and gases transport in the LNG, nuclear energy and data centres. Shares fell 6 and 8% today. (WSJ)
In IPOs, Glencore-backed metal investment company, Cobalt Holdings, cancelled its planned $230mn share offering in London without making its reasons public. (Reuters)
On the earnings front, discount retailer Dollar Tree (mcap $18bn) missed top and bottom estimates and warned that profits could halve in the current quarter due to tariffs. and the stock plunged 8%.
The ECB holds its policy meeting tomorrow with markets anticipating a 25bp rate cut to 2% for the deposit rate and 2.15% for the refinancing rate.
See you tomorrow.
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