The Davy Digest - 9th June 2025

US equities posted gains last week as incremental progress was made on the geopolitics front. President Trump and Chinese President Xi Jinping spoke over the phone on Thursday and agreed to more trade talks. The US Services PMI showed that the sector contracted for the first time in nearly a year in May. The US economy added 139k jobs in May, beating expectations but indicating that the labour market is weakening. The unemployment rate remained steady at 4.2%. In Europe, a preliminary measure of Eurozone inflation eased to 1.9% in May, below 2% forecast. On Thursday, the European Central Bank decided to cut interest rates by 25bps as expected, Lagarde's main message was that they are now in a "good position" despite high uncertainty due to the ongoing trade war. In the UK, the services sector returned to growth in May after shrinking in April for the first time in a year. The China Caixin Manufacturing PMI unexpectedly contracted to 48.3 in May vs 50.6 forecast while the Caixin Services PMI came in at 51.1 in May, in line with forecasts.

Last week's highlights

	ISM Manufacturing PMI (02/06) -  Fell to 48.5 in May from 48.7 in April.  ISM Services PMI (04/06) - Drops to 49.9, lowest since June 2024.  Nonfarm Payrolls and Unemployment (06/06) – US economy added 139k jobs in May, beating expectations. Unemployment rate remained steady at 4.2%.
	Eurozone Preliminary Inflation (03/06) – Eased to 1.9% in May, below 2% forecast.  ECB Meeting (05/06) -  Cut rates by 25bps as expected, ECB in a “good position” despite high uncertainty.
	S&P Manufacturing PMI (02/06) – Came in at 46.4, an increase from 45.4 in April.  S&P Services PMI (03/06) – UK services sector returned to growth in May after shrinking in April for the first time in a year.
	China Caixin Manufacturing PMI (03/06) -  Unexpectedly contracted to 48.3 in May vs 50.6 expected.  China Caixin Services PMI (05/06) – Came in at 51.1 in May, in line with forecasts.

This week, inflation data will be released in the US on Wednesday, the potential inflationary impact from tariffs remains to be seen. On Friday, the Michigan Consumer Sentiment survey will be released. US Consumer sentiment has been steadily improving as signs of trade war de-escalation have emerged. German inflation figures will also be released on Friday. In the UK, labour market data is due out on Tuesday. Finally, in China, inflation data was released earlier today, showing that Chinese consumer prices fell for a fourth consecutive month in May.

What's on the radar

	10-year & 30-year Treasury Auctions (11/06 & 12/06) US Inflation (CPI) (11/06) US Producer Price Inflation (12/06) Michigan Consumer Sentiment (13/06)
	Germany Inflation (HICP) (13/06)
	UK Unemployment Rate (10/06)
	China Inflation (CPI) (09/06)

Chart of the moment

A fleeting recovery?

Source: Bloomberg, Davy as of 04/06/2025. Description: Displays the estimated number of container vessels departing China for the United States, focusing on dry cargo ships. Aggregates data using a 15-day rolling average to reduce short-term volatility and provide a clearer view of broader trends in vessel activity.

• There are early signs that US/China trade is recovering after a trade truce was agreed in May where both sides agreed to significantly reduce tariffs. 
• The number of shipping containers leaving China for the US has started to increase, an early indication that trade is bouncing back. 
• Trade between the world's two largest economies plummeted during the recent tariff standoff, prompting container shipping companies to suspend regular routes or cancel individual voyages.