Cuts coming: The European Central Bank will cut rates today – the question is the extent to which it signals more to come. Tuesday’s soft inflation reading means there is less pressure on the ECB to take things slow – another cut by July is likely and the market will be looking for a strong signal on this front. Further easing by the ECB is a tailwind for European equities. Therefore the risk is that the ECB remains in data-dependent, wait-and-see mode, which could see risk come off given the ongoing macro uncertainty.

US economic data is starting to stutter: US equities ended mixed as the S&P 500 closed flat, the Nasdaq rose 0.3%, and the Dow dipped 0.2%, breaking a four-day winning streak, on some softer economic data.There seems to be a major slowing in private sector job creation in the US with ADP numbers very weak. Payrolls increased just 37,000 for the month, below the downwardly revised 60,000 in April and the Dow Jones forecast for 110,000. It was the lowest monthly job total from the ADP count since March 2023.

The report comes two days before the key nonfarm payrolls from the Bureau of Labor Statistics, which is expected to show a gain of 125,000 and the unemployment rate steady at 4.2%. We could see a number closer to 50k than 150k, however.

Furthermore, the ISM Services Index contracted for the first time since June 2024 at 49.9 vs estimate 52. The prices index jumped to 68.7, the highest level since Nov 2022.  US weekly unemployment claims is the main data event on today’s calendar but I don’t expect it to move the needle that much with the NFP tomorrow the main focus.

And if you fancy some more worries about the US - Donald Trump’s Big, Beautiful Tax Bill will add $2.4 trillion to the US debt over the next ten years, according to the nonpartisan Congressional Budget Office.  Anyway bear in mind this – the real impact of tariffs is only starting to be felt and the tax bill is unnerving investors...are we just too complacent? FT is out with a report today showing institutional investors are shifting out of the US.

By contrast, the mood is picking up in the UK with the services PMI rising from April’s 27-month low of 49.0 to 50.9 - back in positive territory...however we should note the exceptional circumstances of the tariff U-turns by Trump and the fact this is a diffusion index that simply asks if things are better or worse than last time. But, it does look like we’re maybe past the worst of it...cue Rachel Reeves’ multi-year spending review and implications for tax hikes later this year to upset things once more.

The FTSE 100 rose 0.16% to 8,801, marking its fourth-highest close, as the UK was exempted from US steel and aluminum tariff hikes and we see a general improvement in the mood and business activity...favourable tailwinds for stocks? The FTSE 100 has a lot of US and US dollar exposure. The market opened flat to marginally higher Thursday along with the rest of main European indices ahead of the ECB decision. Airlines were a bit of drag on the main market this morning with a shocker from Wizz Air. WPP shares were off 4% and Vodafone was also down, whilst miners were firmer on commodity prices.