Market Report.
Your favourite financial report is back after a week off. Therefore, in this report, I will not only include the latest updates from the past 24 hours but also provide a summary of what happened last week.
But first of all, remember that this week three major central banks will decide on their interest rates, so volatility is guaranteed.
Starting with Monday, 9th June, and the inflation data from the United States. For months, we have been told that Trump’s policies would generate inflation due to his tariffs. However, the latest inflation data from the United States not only failed to show an increase but even revealed a decline compared to the expected inflation figures.
The U.S. Bureau of Labor Statistics released May 2025 CPI data, showing consumer prices rose 0.1% month-over-month, below the expected 0.2% increase. The annual inflation rate reached 2.4%, up from 2.3% in April. Core CPI, excluding food and energy, increased 0.1% monthly and 2.8% annually, both falling short of forecasts.
The weaker-than-expected inflation readings provided some relief to Federal Reserve policymakers who had expressed concerns about potential tariff-driven price pressures.
The FOMC entered its blackout period starting June 7, ahead of the June 18 rate decision. The combination of softer inflation data and signs of labor market cooling increased speculation about potential rate cuts, though the Fed was expected to maintain rates unchanged at the upcoming meeting.
With regard to the trade war between China and the US, the effects we predicted are beginning to manifest themselves. We are talking about deflationary risks for Europe as a result of China’s attempts to redirect trade surpluses not absorbed by Trump’s tariffs to other countries, saturating their supply.
China’s export growth slowed significantly to 4.8% year-over-year in May, down from 8.1% in April. This deceleration reflected the mounting pressure from U.S. tariffs, with exports to the United States plummeting by 34.5% year-over-year, marking the steepest decline since February 2020.
Despite the U.S. trade challenges, China’s exports to other regions showed resilience, with shipments to ASEAN countries (the Association of Southeast Asian Nations) increasing 14.8% and exports to the EU rising 12.0%. Imports contracted 3.4% year-over-year, reflecting continued weakness in domestic demand.
On the other hand, internal risks to the Chinese economy, such as weak domestic demand, remain.
China’s consumer price index fell 0.1% year-over-year for the fourth consecutive month, while producer prices declined 3.3% annually, marking the worst deflation in 22 months. The deepening producer deflation highlighted the impact of trade tensions and weak domestic demand on the world’s second-largest economy.
The World Bank released its China Economic Update on June 13, projecting growth to moderate to 4.5% in 2025 and 4.0% in 2026 as global trade restrictions weigh on exports and manufacturing investment. The report emphasized the need for stronger consumption to sustain growth amid external challenges.
If the previous week the ECB had shared its optimistic forecasts of lower inflation for 2024 and 2025 due to low fuel prices, the events that occurred on Friday sparked a war in the Middle East, which remains highly active and has rapidly driven up crude oil prices, completely distorting the Central Bank’s forecasts.
This could cause serious problems for Europe, which has cut its rates to the limit, assuming that there would be no inflationary shocks. Good luck.
The ECB projected annual average real GDP growth of 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. Trade tensions with the United States posed significant risks, with U.S. tariffs on EU goods increased to 10% and expected to remain throughout the projection horizon.
In the UK, the unemployment rate rose to 4.6% in February-April 2025, representing the highest level in almost four years. This increase of 0.2 percentage points both year-over-year and quarter-over-quarter indicated growing labor market stress
The Bank of Japan maintained its policy rate at 0.5% during its May meeting and was preparing for its next monetary policy meeting scheduled for this Wednesdaay.
Last week, Japan released Producer Price Index data for May, along with various financial flow statistics including foreign investment data.
Trump’s trade war shows no signs of letting up. Last week saw continued uncertainty in US-China trade relations despite a preliminary Geneva Agreement reached in April that temporarily reduced tariffs. Both sides accused each other of breaching the agreement, with new tensions emerging over semiconductor restrictions and student visa policies.
Geopolitics:
Let us now discuss the event that has dominated the media for the past three days. An open war has erupted between Iran and Israel—something many feared—and it could have global repercussions, as various nations are now positioning themselves and taking actions that could influence the outcome of the conflict.
Last Friday, Israel launched a massive military operation known as “Operation Rising Lion.” Netanyahu carried out a unilateral attack against Iran, according to U.S. sources, claiming it was to prevent a war that, ironically, he himself has initiated.
“Tonight, Israel took unilateral action against Iran. We are not involved in attacks against Iran, and our primary priority is to protect U.S. forces in the region,” said Marco Rubio, U.S. Secretary of State, on Friday.
Later, Netanyahu clarified that the Trump administration had been informed of the attack. Over the past few hours, Trump has stated that Israel refrained from killing the Iranian Ayatollah at the explicit request of the U.S. President.
The escalation of the conflict on a global scale seems to be accelerating. On the Western side, the United States has mobilised its military forces to help repel Iran’s counterattacks on Israel. Macron has expressed his support for Israel, and on Saturday, it went viral that a German military aircraft was refuelling Israeli planes in the region.
Meanwhile, China has condemned Israel’s attacks on Iran, calling them irresponsible, especially considering that Israel struck Iranian nuclear facilities, causing a radiation leak that has contaminated the area. At least one Chinese military cargo plane has been identified heading to Iran, leading to assumptions that China is offering support.
However, the most significant escalation in terms of government reactions has come from Pakistan. The Pakistani government has declared that if nuclear weapons are used against Iran, Pakistan—which possesses nuclear weapons—will destroy Israel.
Meanwhile, over the past two days, Netanyahu has desperately urged the United States to join the conflict, attempting to drag the U.S. into another war. Donald Trump has openly criticised U.S. foreign military campaigns, arguing that they result in unnecessary loss of American lives and skyrocketing national debt.
The United States has so far refused to join the conflict but has left the door open to future involvement as a deterrent. It has emphasised that a deal must be reached between Iran and Israel.
In recent hours, Netanyahu has appeared on U.S. media outlets such as Fox News, claiming that Iran hates Trump and could potentially assassinate him.
Philip Giraldi, a former CIA agent and counterterrorism expert with over 18 years of experience, told U.S. media: “If the US goes to war with Iran, it is not because Iran is actually threatening the USA … but because Israel succeeds in creating a casus belli to drag the USA into the war.” Giraldi recalled in his statements that Netanyahu once said that 9/11 had been good for Israel.
This statement has further fuelled speculation about a possible attack on American soil that could be immediately attributed to Iran to justify U.S. involvement in the conflict.
Market View:
American futures remain under significant pressure, but until Wall Street opens, the full impact of the conflict that erupted over the weekend will not be clear. The futures of the Mini S&P 500 are trading above 6,050 points, while the futures of the Mini Nasdaq 100 are hovering around the 22,000-point mark.
In Europe, futures are attempting to recover from last week’s losses. The DAX 40 futures fell by more than 4% last week and are currently trying to rebound above 23,500 points. Similarly, the Euro Stoxx 50 futures also experienced declines last week and are now attempting to recover, reaching 5,300 points.
The dollar has barely strengthened following the onset of the conflict. Traditionally, an increase in global uncertainty drives capital towards US assets, such as American bonds, thereby increasing demand for dollars. However, this does not appear to have occurred significantly this time. The Dollar Index, which had fallen below 98 points, rose above 98.50 points on Friday night but has since returned to 98.15.
Consequently, the EUR/USD pair, which had climbed above 1.1630, has now retreated and is currently around 1.1550.
The crude oil market surged by more than 10% as a consequence of the conflict between Israel and Iran, with Brent crude reaching $78.45 per barrel on Friday night before retreating to its current level of $74.25.
Gold futures also rose, reaching $3,475, but have since pulled back to $3,435.
Lastly, Bitcoin, which initially reacted to the conflict with fears and dropped to the $102,815 zone, has recovered over the weekend and is now rising towards $107,000.
