ECB boosts markets but holds back on further cuts

A substantially positive week ends for the main European stock markets, in which the ECB cut interest rates by 25 basis points. An expected move, while the words used by the president, Christine Lagarde, in the post-Governing Council press conference surprised the insiders. It was expected that the data-dependent approach would be reiterated and, meeting by meeting, in line with the statements that the central banks have released over the last year, instead a clear signal of a pause in the maneuver to reduce the cost of money arrived. "With the new cut just decided, we are currently well positioned to navigate the uncertainties of the coming months", said the number one of the Eurotower who warned: an escalation of duties could slow down growth in the euro area.

Eurozone economy grows, but remains close to stagnation

The eurozone economy barely managed to expand again in May, albeit with a further slowdown in growth. Economic activity was held back by the prolonged weakness in demand for goods and services, limiting employment growth and forcing companies to further reduce their backlog of orders. While confidence increased, it remained relatively muted. Eurozone inflation has weakened in the meantime, although this is largely due to falling costs and purchase prices in the manufacturing sector. Analyzing the PMI data, Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: The European Central Bank will certainly not be satisfied with the PMI price data. In the services sector, where inflation is closely monitored, the rate of increase in sales prices has slowed again. However, the situation has worsened somewhat in light of the increase in already relatively high costs. All this will probably not prevent a further reduction in key interest rates by the ECB at its next meeting on June 5, partly due to falling asset prices and at an accelerating rate.”

The other macroeconomic data of the week that caught investors' attention came from the US. Applications for unemployment benefits reached their highest level in eight months, and increased more than expected. This figure was added to the one released the day before on the report on private sector employment, which disappointed expectations. Also among the statistics released, it was learned that the trade deficit, on the other hand, recorded a more drastic drop than expected by analysts, after the record leap in March. The implementation of tariffs has significantly reduced imports. The key figure of the week, that on the US labor market , showed growth, in the month of May, of 139 thousand new jobs, above analysts' expectations, but a slight decrease compared to the previous month. "The labor market is starting to show some weakness, especially with the strong downward revisions of the previous months, increasing doubts about the actual strength of the last period. We believe that these data should not, however, change the Federal Reserve's choices in monetary policy at the next meeting in June, explains Filippo Diodovich, Senior Market Strategist at IG Italia". The stock markets reacted positively after the announcement of the data in the hope that the Fed can be convinced to cut rates at the July meeting.

Euro nears April high

Expectations of a pause in eurozone rate cuts by the ECB boosted the euro, with the euro/dollar exchange rate hitting a high of $1.1473, approaching its highest level since November 2021.

Oil prices partially recovered , pressured by press reports that Saudi Arabia intends to push to continue increasing OPEC+ production at a high pace in August and, potentially, September to regain market share.

Weekly stock market performance

The best performance of the week was recorded by the Frankfurt market which brought home a rise of 1.55%. Milan did well with a +1.5%, followed by London with a +1.39%. Madrid gained 0.93% while Paris limited the rise to 0.3%. The end looks to be on the rise for the Wall Street stock exchange.

The best and worst at Piazza Affari

At Piazza Affari, among the best stocks, STM soars by 11.1% driven by rumors regarding the possibility of a review of the corporate structure and the news of the cut of 5 thousand jobs in three years. Recordati is doing well +6.3% with assistance from analysts. Popolare di Sondrio is also up (+3.5%): Consob has approved the offer document relating to the voluntary public tender offer promoted by BPER Banca on all the ordinary shares (of Banca Popolare di Sondrio) including the own shares directly and indirectly held, from time to time, by BP Sondrio, deducting the BP Sondrio shares already held by BPER. Intesa Sanpaolo is buoyant (+3.48%). Among the worst stocks, Mediobanca which drops 4.4% and Stellantis which loses 4.3%. Luxury is also down, with Moncler and Cucinelli, down 1.9% and 3.2% respectively.