Markets Today: Euro Area Inflation Drops, OECD Downgrades Growth and Trump-Xi Meeting

[Redator]

Asian Session Market Wrap

Markets failed to hold onto late US session gains as markets were hoping for positive news regarding a potential Trump-Xi meeting.

US Equity Futures are down in the Asian session with the S&P 500 down around approximately 0.6%. In Asia, a key measure of regional stocks went up by 0.1%, breaking a three-day losing streak. Chinese stocks in Hong Kong rose as investors hoped for more government support after factory activity unexpectedly dropped in May.

The US Dollar is on the up this morning, with the greenback gaining against the majority of its G10 counterparts.

Power Currency Balance

/media/images/2025-06-03_10_52_28-Currency_Power_Balance___.width-1400.png

Source: OANDA Labs

The European Open

It has been a busy start to the European Session this morning.

European shares fell on Tuesday, dragged down by banks and mining companies, which are sensitive to economic changes, as investors waited for news on the trade war affecting global growth. The pan-European STOXX 600 index lost 0.5% after an earlier rise, adding to Monday's losses. Banks dropped 1.4%, and mining stocks fell 2.3%.

OECD Downgrades Global Growth Forecast

According to the Organisation for Economic Cooperation and Development (OECD) the global economy is expected to grow more slowly this year, with growth predicted to be 2.9% in both 2025 and 2026, compared to 3.3% last year.

The OECD cited growing uncertainty on the back of US trade policies under the Trump administration as a major cause. If there is one thing that has always been clear, it is that market participants hate uncertainty.

The report warns that more trade barriers could hurt growth, lower incomes, and slow job creation. The U.S. economy is expected to grow only 1.6% this year, down from 3.3% in 2024, due to tariffs, less immigration, and government job cuts.

The OECD noted that higher trade costs, especially in countries raising tariffs, will increase inflation, though weaker commodity prices will help offset this. While inflation is slowing in many areas, service prices remain high, and rising government spending, especially on defense, needs careful management.

These developments will only serve to reinforce the belief that a global slowdown may be on the way and could weigh further on the already fragile market sentiment we have seen at the start of the week.

Potential trade deal announcements are sorely needed to allay the fears of market participants as anticipation and anxiety continue to build.

Euro Area Inflation Drops Below ECB Target, ECB Rate Meeting Next

Inflation in the euro zone dropped below the European Central Bank's target last month, according to data on Tuesday. This supports expectations for another interest rate cut this week, even as global trade tensions create long-term price pressures.

Consumer inflation in the 20 euro-using countries fell to 1.9% in May, down from 2.2% in April, due to lower energy prices and a big drop in services inflation.

Core inflation, which excludes fuel and food prices, also slowed to 2.3% from 2.7%, mainly because services price growth dropped to 3.2% from 4.0%, according to Eurostat, the EU's statistics agency.

Markets were already expecting a rate cut from the ECB on Thursday. The question following today's inflation release is whether or not ECB President Lagarde will adopt a more dovish tone regarding the ECB outlook moving forward. Will market participants begin to price in more aggressive rate cuts from the ECB for the rest of 2025?

ECB Interest Rate Probabilities

/media/images/2025-06-03_10_58_39-Interest_Rate_Probabiliti.width-1400.png

Source: LSEG

Economic Data Releases and Final Thoughts

Looking at the economic calendar, the rest of the day sees focus shift to US data.

The US session will bring JOLTS job openings and US Factory Orders which will give more insight into the US economy from a demand perspective. The question will be whether these numbers may be skewed as consumers rush to purchase ahead of impending tariffs on imported goods and raw materials.

We will also hear comments from a host of Federal Reserve Policymakers and the Chair of the SEC who testifies today before the House Appropriations Committee today. His testimony is part of the House Appropriations Committee's oversight of the SEC and its budget.

/media/images/2025-06-03_10_40_59-Window.width-1400.png

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Day - DAX Index

From a technical standpoint, the Dax had printed a fresh high last week around the 24387 but continues to struggle to hold convincingly above the 24000 handle.

The index is down around 0.4% at the time of writing with the 20-day MA currently providing support at the 23786 handle. This is similar to yesterday where the index bounced of the 20-day MA but failed to build on a daily candle close above the 24000 handle. Is today the day we get a sustainable move?

I would like to believe it is but given all the dynamics at play the move faces significant resistance.

Immediate support rests at 23830, 23500 and the 50 day MA around 22740.

A move beyond 24000 needs to break yesterdays highs at 24090 before a move beyond toward the 24300 and 24500 handles which could provide some resistance to bulls.

DAX Index Daily Chart, June 3, 2025

/media/images/DE30EUR_2025-06-03_10-58-31.width-1400.png

Source: TradingView.com (click to enlarge)

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© {CURRENT_YEAR} OANDA Business Information & Services Inc.