Titan Wealth International Weekly Financial Market Review

With inflation showing signs of moderation and the ECB cutting rates, markets responded positively across regions despite ongoing trade concerns and mixed economic signals.

Global Equities Rebound on Strong US Performance

Global equities posted modest gains last week, led by a strong performance in US markets, which rallied to their highest levels in three months. While still below record highs set earlier in the year, the advance reflected renewed investor confidence underpinned by solid earnings and resilient labour market data.

US Labour Market Shows Steady Gains Despite Sector Divergence

In the US, non-farm payrolls rose by 139,000 in May, with April’s figure revised down to 147,000. Job creation averaged 124,000 per month year-to-date, a marked slowdown from the 168,000 monthly pace seen in 2024.

The unemployment rate held steady at 4.2%, while average hourly earnings rose 0.4% on the month and 3.9% year-on-year. The healthcare sector led job growth with a 62,000 increase, followed by leisure and hospitality (+48,000).

However, manufacturing shed 8,000 jobs, and federal government employment declined by 22,000 — the steepest monthly fall since 2020, amid potential tariff-related drag.

Corporate Earnings Continue to Support Equity Valuations

Corporate earnings continued to provide a tailwind. S&P 500 firms posted 12.5% year-on-year earnings growth in Q1, marking the third quarter of double-digit profit expansion in the past four.

While 2025 earnings forecasts have been trimmed from 14% to 8.5%, projections for 2026 remain firm, suggesting potential for a reacceleration.

Notably, forward 12-month earnings estimates reached a new peak, offering fundamental support to rising equity valuations.

ECB Cuts Rates as It Nears End of Easing Cycle

In Europe, the European Central Bank cut its deposit rate by 25 basis points to 2%, its lowest level since 2022.

ECB President Christine Lagarde signalled that the central bank is nearing the end of its easing cycle, having now delivered eight rate reductions since July 2024.

Markets are pricing in one further cut, likely in September, as policymakers weigh the economic impact of rising trade tensions.

Markets Rise Globally as Economic Optimism Builds

Equity markets responded positively to macro economic developments. The S&P 500 rose approximately 1.5% on the week, with technology stocks gaining around 2%.

European markets edged higher by just under 1%, and UK equities added 0.75%. In Asia, Chinese equities rose 1% despite pressure on exporters from prospective US tariffs, while Japanese equities dipped 0.6%.

Oil Prices Rally Despite Output Increase

Elsewhere, oil markets rallied despite higher expected output. OPEC+ confirmed it will raise production by 411,000 barrels per day in July – the third monthly increase in succession – as it seeks to reclaim lost market share.

Despite the increase, US crude jumped over 6% on the week, hitting a six-week high. Oil prices, however, remain down 13% year-to-date.