Banxico: A deeper than expected cutting cycle

Where does China stand following the trade war truce?

The trade agreement signed between China and the US on May 12, 2025 marks a notable de-escalation in the ongoing bilateral trade tensions. While the deal has generally been interpreted as a turning point, it may be more accurately characterized as a truce, which was needed to mitigate the huge economic costs embedded in the high tariffs.Under the terms of the agreement, tariffs imposed by the US on Chinese goods were reduced from the additional 145% to 30% for a 90-day period, while China’s tari...

France, second highest public spendings in the euro area: where do the...

In 2024, France had the second largest public spending in the euro area (after Finland), at 57.1% of GDP, after 56.9% in 2023 and compared to 55.3% in 2019, before the measures taken during the pandemic. Between 2014 and 2023, France was at the top of the ranking. However, the gap with Germany and Italy has been narrowing over the past 10 years, although this tightening mainly reflects an increase in the share of public spending in the GDP of these countries. According to the latest data publ...

France, vice-championne des dépenses publiques en zone euro : d’où pro...

L a France affichait en 202 4 les deuxièmes dépenses publiques les plus élevées de la zone euro après la Finlande , à 57,1% du PIB , après 56,9 % en 202 3 et par rapport à 55 ,3% en 2019, avant les mesures prises durant la pandémie . Entre 2014 et 2023, la France se positionnait en tête du classement. Depuis 10 ans, l’ écart tend toutefois à se réduire avec l’Allemagne et l’Italie, même si ce resserrement traduit essentiellement une hausse de la part des dépenses publiques dans le ...

High interest rate levels to pose a test for equities

Orsted : Phase out of US tax credits for renewable energies: not as ba...

Renewable energy stocks continued their rebound on European stock exchanges yesterday after the republicans of the US House of Representatives proposed a slower-than-anticipated cut in tax credits for renewable energy projects . Vestas, Orsted and Nordex closed the session with gains of 10.2%, 6.5% and 4.3% respectively. According to the Republicans' draft, the investment and production tax credits for wind or solar power would disappear in 2032 vs. 2035 as planned today under the IRA (Inf...

Les actions bientôt à l’épreuve des taux

A “Mar-a-Lago Accord” for the Taiwan Dollar? The Economic and Geopolit...

The New Taiwan Dollar (TWD) tends to be a boring currency with limited volatility, but the sudden appreciation – if not revaluation – on 2nd and 5th May has surprised the world. The fact that it happens while Taiwan holds negotiation talks with the Trump administration is telling, although there is no official acknowledgement of the coincidence.Until the recent appreciation, the performance of the TWD was underwhelming versus Asian currencies. Taiwan is between a rock and a hard place economical...

Truce gets the markets’ hopes up

La trêve booste les marchés

U.S. Defence Companies: ignore at your own peril…

In recent months, equity investors have increasingly turned their attention to European defence companies, driven by shifting international relations and reduced U.S. support for conflicts like Ukraine, prompting Europe to bolster its own capabilities.However, overlooking U.S. defence companies would be a misstep, as firms like Lockheed Martin, RTX, and Northrop Grumman remain global leaders, underpinned by a massive U.S. budget, unmatched technological innovation, and critical partnerships arou...

Where is the value in bank debt’s structure ?

Further h opes of de-escalating trade war between US and China, as well as the US-UK tariff deal on Autos and metals last week pushed credit spreads tighter again. AT1s were one again the outperformers (-18bp), followed by €HY (12-bp) which outperformed their $ counterparts by 3bp despite suffering from net outflows (-€45mn from EPFR) while US HY funds benefited from another week of net inflows ($1.6bn from Lipper). There is still some catch-up to do for €HY vs the iTraxx X-Over (30bp l...

April Consumer Price Index Preview

We estimate that headline CPI rose 0. 25 % m/m (prev. - 0. 05 %) in April on a seasonally adjusted basis and that core CPI rose 0.2 6 % m/m (prev. 0. 06 %). From a year-on-year view, we forecast headline CPI slowing, rising 2. 36 % y/y (prev. 2. 39 %), and core CPI rising 2.80 % y/y (prev. 2. 79 %). While we forecast slightly below consensus price growth in April due to declines in seasonally adjusted airfares, lodging, and vehicle prices, we do expect to see the first tariff impacts ...

Financial markets on tenterhooks ahead of trade talks

US-UK trade deal mainly consists of reversing US tariffs

A US-UK trade deal, even if incomplete, is a welcome development for the UK, a country with a persistent trade deficit in goods. The United States is the UK's largest export market for goods, accounting for 16% of all UK goods exports. Specifically, the US is the top export destination for UK cars and the fourth largest for iron and steel. Therefore, the proposed reduction in US tariffs on cars to 10% and the elimination of tariffs on steel and aluminium are positive for the UK economy. Howeve...

How is China reacting to Trump’s trade war?

The escalating trade tensions between the US and China has led to a significant strain on the trade relationship between the two countries, both of which rely heavily on each other. Despite some exemptions to mitigate the costs, and the ongoing negotiations for a potential deal which are taking place in Geneva, the tariffs are signs of the deteriorating relationship.This paper assesses the impact of US tariffs on China’s employment and GDP. We consider two scenarios: one where only China's expor...

BoE approved a 25bp rate cut with a 5-4 vote; two members dissented, f...

As anticipated, the Bank of England (BoE) reduced the Bank Rate by 25 basis points to 4.25%, citing easing inflationary pressures. The BoE intends to maintain a "gradual and careful approach" to further monetary easing, given the unpredictable global economic environment. Within the Monetary Policy Committee (MPC), Swati Dhingra and Alan Taylor advocated for a larger 50 basis point cut, while Catherine Mann and Huw Pill voted to hold rates steady. The majority of MPC members who supported the 25...

Australia: The Labor Party remains and, with it, stimulative economic ...

At the federal election on May 3rd, Prime Minister Albanese was re-elected as Australia’s leader with the Labor Party wining a landslide victory. For sure, the President Trump has arguably helpedAlbanese, as Australian voters superimposed Trump’s strategies on the Coalition’s policies.  Beyond Trump, Albanese’s campaign has focused on alleviating the cost of living and improving housing affordability, which has surely helped towards his re-election.As announced at the March Budget (Chart 1), the...

FOMC のまとめ：事態の沈静化を待つ

FOMC Recap: Waiting for the Dust to Settle

In its May meeting, the Federal Open Markets Committee (FOMC) held rates steady at an upper bound of 4.5%, pausing for the third straight meeting after cutting 100bp since September. The official statement noted the increased uncertainty of the economic landscape and risks to both higher inflation and unemployment – an admission that stagflation is a concern . Given the questions about “the scale, scope, timing, and persistence of the tariffs” and their effect on the economy, the Fed will fee...