Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.
What has happened
The past 24-hours have seen more tariff trade war swings for investor sentiment. On the positives, it was confirmed late yesterday that US Treasury Secretary Bessent and US Trade Representative Greer will be heading tomorrow to Switzerland to hold trade talks with China’s Vice Premier He – that and separately, US President Trump yesterday promised an announcement that will be “as big as it gets” later this week, while Bessent said some “very good” offers had been made in trade negotiations by other countries. On the negatives, there are reports that the European Union (EU) are making detailed plans to hit US goods with tariffs if US-EU trade talks fail, while Trump yesterday said that “We don’t have to sign deals, they have to sign deals with us. They want a piece of our market. We don’t want a piece of their market.”
Oil prices
Oil price weakness has been something of a theme so far this year, notwithstanding a small bounce this week, in part as tariff-led economic growth fears have risen. Adding to downside risks, the Organization of the Petroleum Exporting Countries (OPEC) plus certain non-OPEC members including Russia (OPEC+) in their latest meeting last weekend agreed to accelerate oil production hikes. These increases in supply are designed to ultimately unwind post-COVID production curbs that were put in place to protect prices, but which have cost OPEC+ producers global market share. However, OPEC+’s latest production hike raises concern that such additional supply could lead to a global glut just as a global tariff trade war threatens broader economic growth.
China cuts a key policy interest rate
China’s central bank, the People’s Bank of China (PBOC) earlier today announced that it will be cutting a key policy interest rate, its 7-day reverse repurchase agreement (reverse repo) rate to 1.4% from 1.5% as well as separately lowering the reserve requirement ratio for banks. The measures announced should guide borrowing costs from the banks lower and release some extra monetary liquidity into the economy. This is because by cutting the reverse repo rate, the PBOC can boost monetary liquidity by making it less attractive for banks to deposit excess funds with the central bank – as a result, this encourages banks to instead lend more of those excess funds into the economy, increasing the overall money supply and promoting economic growth.
What does Brooks Macdonald think
Oil price weakness so far this year might be unwelcome news for energy producers, but it might be much better news for central banks. Oil prices can at times be a significant swing factor for the broader inflation outlook. At a time when tariff trade wars are risking higher price pressures as a result of increased trade friction in international trade, lower oil prices might help to keep a lid on inflation, and in turn might offer central banks some room for manoeuvre in being able to cut rates should economic growth falter.
Please check in again with us soon for further relevant content and market news.
Chloe
07/05/2025