Summary
- 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 |