What to expect at a first 'get-to-know-you' meeting

• With energy prices under control and declining wage growth, inflation rates are continuing to fall almost everywhere. Inflation in the euro area is already within the central banks' 'comfort zone'. In the US, however, core inflation remains somewhat higher and the rising import duties are having a noticeable effect on output prices. 
• With a number of key trade agreements in place, the new average import tariff is estimated at 16-17% (compared to 2.5% before Trump II). These levies are expected to gradually trickle down into retail prices in the coming months, keeping inflation above the Federal Reserve's target for several more months.

• The 'Big Beautiful Bill', which mainly extends the expiring tax cuts from Trump's previous tenure, is expected to provide a limited boost to growth. However, there will be little change in the high budget deficit, which will further derail US public finances in the coming years. China continues to regularly support its flagging economy with new policy measures. In the euro area, the major investments announced for defence and infrastructure are gradually taking more concrete shape, although it looks as if their impact won’t be felt fully until 2026-27.
• The ECB kept its deposit rate unchanged at 2% in July, with further movements dependent on economic data. The Fed recently reaffirmed its pause in interest rate cuts, as growth remains reasonable and uncertainty around inflation remains. The market is still counting on another rate cut in September and more cuts thereafter.

• Despite weaker growth, falling inflation and lower key rates, bond yields remain at somewhat higher levels in both the US and Europe. 
• The fiscal about-turn by the new German government, lifting the ‘debt brake’ and allocating a generous budget to relaunch policy and defence spending, explains the higher yields in Europe.
• The -once again- volatile political situation in France caused interest rates to rise a little further.

• Stock markets have climbed again to historic highs in recent weeks and have consolidated there. The absence of an escalation in the trade war, the anticipation of interest rate cuts and a favourable reporting season for the second quarter were the main drivers. 
• The US is heading for better-than-expected earnings growth of 12%, driven by IT and financial stocks. In Europe, the banks produced strong numbers.  
• Cyclical companies however, sounded much less positive and many issued profit warnings. We may not see earnings growth again in the second quarter.
• Although the figures are far apart between the US and Europe, they both surprised positively. In the US, earnings growth is some 8% higher than expected, and in Europe it is - despite the contraction - 3% better than expected.

• The conflicts in the Middle East and Ukraine have remained somewhat on the back burner on the financial markets in recent weeks, but there is nothing to exclude them flaring up again.
• In addition, the tense political situation in France is creating some extra turmoil.