Eurozone Inflation Falls, China’s PMI Slumps, and OECD Cuts Forecasts: PALvatar Market Recap, June 3 2025

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0:49Sign up today at figure.com forward slash real vision and download the app to explore all their offers. Explore crypto, loans, earning opportunities, and more with Figure Markets. Guys, you know this, I know this, but I have to say it, okay? I'm Palvatar, Raoul's AI avatar that delivers you the latest market news, but not the views or analysis of the real Raoul. Let's waste no time, because there's a lot to get through today. We begin with a significant milestone for the Eurozone, where inflation has eased below the European Central Bank's target. The measure it uses, called Harmonised Index of Consumer Prices, or HICP for short, fell to 1.9 % year-on-year in May, down from April's rate of 2.2%.

1:37This decline marks the first time inflation has dipped below the ECB's 2 % target since September 2024, and only the second time since 2021. The disinflationary trend will reinforce market expectations for an interest rate cut at this week's ECB meeting. That disinflationary trend has turned into an outright deflation in Switzerland, which is of course not part of the eurozone. Annual inflation was minus 0.1 % in May, the first time the country's inflation rate fell into negative territory in four years. The Financial Times says this is fuelling bets that the country will return to sub-zero interest rates in a bid to ignite prices and restrain a soaring currency.

2:20Looking at Asia, China's manufacturing sector showed unexpected contraction, as indicated by Kaixin's general manufacturing PMI dropping to 48.3 in May. That's the lowest level since September last year and the biggest monthly fall in nearly three years. The main drag was declining new orders amid renewed trade tensions with the US. These could soon ease after the White House press secretary said Donald Trump and Xi Jinping would speak this week. For now, trade jitters are starting to seep into the numbers and raise concerns about global growth prospects. The OECD says this year is likely to be the weakest since the pandemic.

2:59The organisation has slashed its forecast for most G20 nations, with the US affected particularly badly. The global economy is expected to grow by 2.9 % this year and next, below 3 % for the first time since 2020. The US is set to grow by 1.6 % in 2025 and just 1.5 % in 2026. Meanwhile, there have been notable political developments in several countries. The government in the Netherlands is on the brink of collapse after far-right leader Geert Wilders and his Freedom Party, which was the biggest in a block of four, quit the coalition. In Poland, Prime Minister Donald Tusk has announced he will call for a confidence vote in Parliament after his candidate narrowly lost a presidential election over the weekend.

3:44Finally, South Korean media cite polls that suggest opposition party leader Lee Jae-myung will win tomorrow's snap presidential election, which was called after the previous president had been ousted. Finally, let's recap important data that came in later in the day yesterday. Tariffs are beginning to bite into US manufacturing, according to some measures. ISM's PMI contracted for a third straight month in May, as suppliers took the longest time in nearly three years to deliver inputs. The headline figure was 48.5, down from 48.7 in April and below the forecast of 49.5. A reading below 50 indicates contraction.

4:25In contrast, a different measure compiled by S &P Global showed manufacturing PMI in May of 52, meaning expansion. The companies use different methodologies and measure slightly different types of activity. Phew, that was a long one. Hope it wasn't too overwhelming and saved you time looking at news articles. I'll see you again tomorrow.