The drop in Eurozone inflation to 1.9% strengthened expectations for further interest rate cuts in Europe and gave a boost to stock markets. Meanwhile, oil prices rose due to geopolitical and trade tensions and wildfires in Canada.
Last week, newly released data showed a reduction in Eurozone inflation, reinforcing market confidence that the European Central Bank (ECB) has more room to continue easing monetary policy.
The flash estimate published by Eurostat, the European Union’s statistics agency, revealed that the year-on-year inflation rate fell from 2.2% in April to 1.9% in May — below the ECB’s 2% target for the first time in over two years.
Core inflation — which excludes more volatile components such as energy and food — also beat expectations, falling from 2.7% to 2.3%. This improvement was largely driven by a slowdown in service prices, which saw the sharpest deceleration since the start of the current inflationary cycle, while energy and non-energy industrial goods prices remained stable.
These figures strengthened expectations of rate cuts by the ECB in upcoming meetings and suggested a monetary policy environment more favorable to risk assets. With lower interest rates, companies typically have greater capacity to invest, hire, and expand, which usually translates into positive stock performance.
In Europe, the main stock indices posted gains for the second consecutive week. The Euro Stoxx 600 rose 0.45%, closing at 551.15 points. Germany’s DAX climbed over 1%, while the UK’s FTSE 100 gained 0.40%.
In the United States, major indexes also had a positive week, especially driven by the technology sector. The Nasdaq rose 1.49%, while the S&P 500 advanced around 1%. However, risk appetite was partly curbed by U.S. protectionist rhetoric.
The U.S. president signed an executive order doubling tariffs on steel and aluminum imports — from 25% to 50% — arguing that previous tariffs were insufficient to revive the American steel industry. The United Kingdom was excluded from this measure, as a new trade agreement between the two countries is nearing completion.
Source: Expansão
