Eurozone Inflation in Focus as ECB Rate Cut Looms

Eurozone flash CPI for May is due today, with markets expecting inflation to slow to 2.0% from April’s 2.2%, ahead of the European Central Bank’s widely anticipated rate cut on Thursday. Traders believe the ECB will pause after this cut as economic conditions remain firmer than expected, despite lingering inflation concerns. Meanwhile, US dollar weakness continues as markets react to ongoing trade tension and the possibility of further disruption from Trump’s tariff policies.

Equities

The FTSE 100 ended flat on Monday, closing at 8,774.26 points. Losses in consumer staples and healthcare shares offset gains in the energy sector. BP and Shell both rose by nearly 1%, lifted by a 3% increase in crude oil prices after OPEC+ confirmed it would hold output steady in July. Babcock International jumped 8.2%, supported by investor optimism ahead of the UK’s Strategic Defence Review. BAE Systems also edged up 1%. Aberdeen Group gained 4.2% after Goldman Sachs upgraded the stock to “buy”, citing improved fundamentals. On the downside, AstraZeneca and Unilever pulled the index lower, as both stocks came under pressure from a stronger pound, which rose 0.6% against the dollar. Homebuilders fell 1.2% after UK mortgage approvals dropped to their lowest level since February 2024.

In the US, the S&P 500 rose 0.4% to 5,935.94, supported by optimism around ongoing trade negotiations, despite President Trump’s announcement that tariffs on imported steel and aluminium will double to 50% from Wednesday. The Nasdaq gained 0.7% to 19,242.61, while the Dow Jones was flat, up just 0.08%.

Cleveland-Cliffs led the US steel sector higher, jumping 23%, with Nucor and Steel Dynamics also making gains. These rises came after Trump’s tariff threat, which markets interpreted as a push to speed up trade talks. In contrast, Ford and General Motors both fell by around 3.9%, as higher metal prices could raise costs for automakers. Tesla dropped 1.1% after reporting lower May sales in several European markets, including Portugal, Denmark, and Sweden.

Among tech stocks, Nvidia added 1.7%, contributing to the Nasdaq’s gains, while Meta rose 3.6%. Nvidia continues to benefit from strong demand for its AI chips. In energy, US-listed stocks moved higher as oil prices strengthened.

Forex & Commodities

The US dollar held near a six-week low on Tuesday after Monday’s 0.8% drop, following weaker-than-expected manufacturing data. The ISM manufacturing index for May came in at 48.5, showing a third consecutive month of contraction and suggesting further strain from President Trump’s tariff increases. The dollar index edged back up 0.3% to 98.58 after touching its lowest since late April. Against the yen, the greenback rose 0.3% to 143.21. The euro briefly reached a six-week high at $1.1454 before slipping 0.2% as investors awaited the European Central Bank’s rate decision later this week.

The New Zealand dollar climbed to $0.6054, its highest level this year, before retreating 0.4%. The Australian dollar also gained earlier in the session, supported by the weaker US dollar. The pound firmed 0.6% on Monday, weighing on large UK exporters such as AstraZeneca and Unilever.

Gold pulled back 0.4% to $3,365.22 an ounce in early trading on Tuesday after gaining 2.7% the previous day—its strongest daily move in more than three weeks. US gold futures slipped 0.2% to $3,390.10. A slight recovery in the dollar capped gold’s rally, although the metal remains supported by uncertainty around US-China trade talks and tariffs. Spot silver dropped 1.7% to $34.20 an ounce, while platinum rose 0.3% to $1,066.63 and palladium added 0.1% to $990.25.

Brent crude was up 0.2% at $64.75 a barrel, while WTI crude gained 0.3% to $62.72. Monday’s 3% rise was driven by OPEC+ confirming a 411,000 bpd output increase for July—less than feared—and ongoing tensions with Iran. Canada’s wildfires also disrupted around 344,000 bpd of oil sands output.