Take Two: ECB leaves rates on hold; US-Japan trade deal lifts global stocks
- 28 July 2025 (3 min read)
What do you need to know?
The European Central Bank (ECB) left interest rates unchanged at 2.0% for the first time in a year, saying that the macroeconomic backdrop “remains exceptionally uncertain”. Last month the ECB made its seventh consecutive rate cut since September, but it has now paused its easing cycle, noting that inflation was currently at the bank’s 2% target with first quarter (Q1) GDP growth stronger than expected, partly as businesses frontloaded activity ahead of expected trade tariffs. ECB President Christine Lagarde cautioned that “risks to economic growth remain tilted to the downside”.
Around the world
Global stocks surged to new highs last week as Japan and the US struck a trade deal. Japan agreed to invest $550bn in the US while Japanese goods will be subject to a 15% tariff rather than the 25% previously indicated. Investors welcomed the news, in particular for Japan’s car industry which makes up around a quarter of its exports to the US, helping the Nikkei index climb to its highest level in a year. Elsewhere, the S&P 500, Nasdaq and FTSE 100 indices each hit a new high.
Figure in Focus: $124.3bn
Artificial intelligence (AI) attracted $124.3bn of equity investment in 2024, according to McKinsey’s Technology Trends Outlook 2025 report. The organisation identified 13 technology trends, grouped into three broad categories: the AI revolution; compute and connectivity frontiers; and cutting-edge engineering. It noted that equity investment increased in 10 of the 13 trends last year and that these technological developments have the potential to “transform global business”. However, it highlighted that the surging demand for compute-intensive workloads, “especially from gen AI, robotics, and immersive environments, is creating new demands on global infrastructure”, as well as labour shortages and supply chain delays.
Words of wisdom
Chrysopoeia: More commonly referred to as alchemy, chrysopoeia refers to the much sought-after process of turning base metals into gold. The Financial Times reported that a San Francisco-based start-up, Marathon Fusion, has claimed it has figured out how to turn mercury into gold. In a recent academic paper, the firm said that neutrons released in fusion reactions to generate electricity could create the yellow metal through nuclear transmutation. The paper has however yet to be peer reviewed. The report noted the highly technical process could mean the metal is partially radioactive, and the gold could have to be stored for up to 18 years before it is safe.
What’s coming up?
Monetary policy is in focus this week. On Wednesday, Bank of Canada and Federal Reserve (Fed) policymakers convene for their respective interest rate setting meetings. Fed officials kept rates unchanged at 4.25%–4.50% for the fourth consecutive time at their last meeting. The Bank of Japan holds its own meeting on Thursday - officials also chose to hold the key short-term rate steady at 0.5% at the June meeting. In terms of economic updates, Eurozone and US Q2 GDP growth numbers are issued on Wednesday, while on Friday flash Eurozone inflation data and the latest US employment report are published.
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