Market Update

Global equities faced a turbulent week as escalating trade tensions dampened investor sentiment.
China's hint at using rare earth metals, crucial components in various applications, as a trade war weapon intensified concerns. To add to the unease, President Trump announced a 5% tariff on all Mexican goods, rising to 25% by October 1, 2019, tying the move to immigration issues. While these tariffs could hamper global economic growth, there's a chance Trump might ease them, especially if US equity markets suffer, as he often links his presidency to stock market performance. Additionally, these proposals might encounter resistance in Congress.
On a brighter note, this trade tension is likely to push the Fed towards cutting US interest rates, providing a silver lining in the storm.
Economic data releases were limited, with a slight downward revision of US Q1 GDP to 3.1% from 3.2%. The Fed's preferred inflation measure, the core PCE for April, stood at 1.6%, below the 2% target, suggesting that US interest rates might decrease soon.
In the UK, the pound weakened as the European election results were digested. Despite ongoing Brexit uncertainty, the outcome indicates a higher likelihood of Tory MPs accepting a no-deal Brexit than a general election. This suggests a possible downward move in UK interest rates, despite BoE Governor Mark Carney signaling rate increases just a month ago after raising growth forecasts.
Looking ahead, the economic calendar for the upcoming week remains relatively quiet. The key event is Friday's (June 7, 2019) US employment data, featuring non-farm payrolls, unemployment rate, participation rate, and average earnings. Additionally, Eurozone CPI and Q1 GDP data, along with an ECB monetary policy meeting, will be closely monitored.