Bassanese Bites: Wet lettuce – June 30 2025
Global week in review
Global stocks bounced back last week due to a Middle East ceasefire and lingering hopes of US rate cuts later this year. Most notably, the S&P 500 touched a new record high, fully unwinding the tariff-related slump earlier this year.
Iran’s limited response
The key highlight last week was Iran’s relatively limited response to US strikes on its nuclear facilities. It struck one US base in neighbouring Qatar, and seemed to give the US and Israel ample warning to limit any damage.
Trump called it a “weak response” and markets agreed that Iran seemed to want to end hostilities quickly rather than escalate them. Former Prime Minister Paul Keating might have likened it to being hit with a wet lettuce.
Either way, there’s now a shaky ceasefire holding between all parties with some talks set to begin. Oil prices dropped 12% last week as a result. Nothing to see here: let’s move on.
Powell testifies to Congress
Another highlight was US Fed Chair Jerome Powell’s testimony before Congress. As expected, Powell played a straight bat – suggesting the Fed would wait to see the impact of tariffs on inflation before contemplating a rate cut. With economic activity still holding up and core inflation still above 2%, that’s fair enough, despite Trump’s protestations! That would seem to rule out a July rate cut, although keeps September in play.
In terms of economic data, a downward revision to Q1 US GDP (the economy is contracting at a -0.5% annualised rate versus the previous read of -0.2%) perversely boosted stocks on the view it increased the chance of Fed rate cuts. Markets also weren’t fazed on Friday by a slightly higher than expected 0.2% gain in the May core consumption price deflator, which lifted the annual rate to 2.7% from 2.6%.
On the policy front, the US agreed to remove extra taxes on G7 companies operating stateside (under section 899 of the Big Beautiful Bill) in exchange for US firms being exempted from the minimum global tax previously agreed by developed countries. Seems fair right?
Trump also cut off trade talks with Canada, complaining about the latter’s plans to impose a revenue tax on digital companies.
All up, the trade/tariff saga continues to simmer in the background. Markets are drawing hope from Treasury Secretary Scott Bessent’s regular calming announcements and, ultimately, a view that “Trump always chickens out“.
Global week ahead
There’s a smattering of key US data this week, with the highlight being US payrolls on Friday. All are expected to show that the US labour force has downshifted a little but is still holding up reasonably well.
