• As expected, the ECB reduced its policy rates for the first time in the last five years.
  • Slowing inflation allowed the central bank to take this step, but the ECB is likely to be vigilant on price pressures.
  • Given that the ECB acted before the Fed, this temporary divergence may create opportunities in European bonds.

Actionable Ideas

  • European bonds
    Quality bonds of companies with strong business models may perform well in an environment of slowing inflation and rate cuts by the ECB.
     
  • European and UK equities
    A marginally improving global economic outlook is beneficial for Europe, a region more reliant on international trade. Companies with robust margins and differentiated products etc. are preferred.

Key Dates

10 June

Japan GDP

 

12 June

Fed policy; CPI – US, China, India

 

14 June

Bank of Japan policy, EZ trade balance

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