Growth in borrowing by businesses and households in Europe is showing signs of levelling off, indicating a slower transmission of monetary easing through the lending channel, ING Group said on Monday.

To better reflect recent developments, ING prefers to analyse shorter time frames for bank lending growth, unlike the European Central Bank’s year-on-year reporting in its press releases, the agency said in a report.

“We notice some weakening effects of monetary transmission in the numbers,” Bert Colijn, chief economist, Netherlands at ING Group, said in the report. 

Reduced economic uncertainty appears to have diminished the effect of the European Central Bank’s rate cuts.

Should this trend continue, it will introduce a dovish perspective to the September discussion regarding a potential subsequent rate reduction, according to Colijn.

Bank lending in the EU

Corporate bank lending, for the first time since July of last year, saw a decline in May compared to April.

Despite its volatility, the three-month average growth rate has consistently decreased. 

This suggests that the European Central Bank’s (ECB) shift to neutral interest rates has not yet significantly boosted bank lending to corporations, ING said.

A notable deviation from the established pattern can be observed in the growth of bank lending to households. 

Throughout 2024, this lending segment experienced a significant acceleration, indicating a strong upward trend. 

Shift in market dynamics

However, as of this year, that vigorous growth appears to have reached a plateau, settling at a consistent rate just exceeding 0.2% on a month-on-month basis. 

This stabilisation, following a period of rapid expansion, suggests a potential shift in market dynamics or a maturing of this particular lending sector, Colijn said. 

Further analysis would be required to ascertain the underlying reasons for this plateau and its potential implications for the broader economy.

Growth experienced a slight dip in May, reaching its lowest point since November. 

Colijn said:

Overall, we’re seeing a levelling off effect, which suggests that monetary easing conditions are not translating as forcefully through the lending channel anymore.

Reluctance in borrowing

Businesses are increasingly hesitant to borrow for investment, a trend evident in the April bank lending survey, driven by prevailing uncertainty.

Rising uncertainty since then logically explains a May downturn in borrowing, according to ING. 

“The big question is how long this uncertainty will continue to suppress borrowing appetite among businesses, as this suppresses investment in the eurozone economy,” Colijn added. 

The ECB is widely expected to pause its rate cuts in July.

The primary goal of holding rates in July would be to understand the evolving economic landscape amid significant uncertainty, rather than to assess the immediate impact of current policies, according to Colijn.

If economic uncertainty has become so large that it starts to weaken lending and investment substantially, that could provide another dovish argument for a further rate cut in September.

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Brazilian central bank figures released on Monday show a slight rise in the public sector gross debt to 76.1 per cent of gross domestic product (GDP) in May versus 76.0 per cent in April.

The modest rise highlights continued strain on public finances against a backdrop of elevated interest rates and an increasing debt burden.

During the month, the composition of the debt has been mainly due to interest payments, said the central bank, even as the government recorded a primary fiscal balance that was “better” than market forecasts.

Rising interest costs drive debt growth

Latin America’s largest economy paid 92.145 billion reais ($16.82 billion) in nominal interest in May, a 23.9% rise over the same month last year.

The increase reflects both the country’s high benchmark interest rate and the growing magnitude of its public debt.

The central bank’s continued monetary tightening campaign has accelerated the trend of rising interest payments. To control inflation, officials boosted the benchmark Selic rate by 25 basis points to 15% earlier this month.

This new decision brings the total number of rate increases since September to 450 basis points.

The primary deficit is narrower than expected

Even with an increasingly expensive debt burden, Brazil ended up with a smaller-than-expected primary budget deficit, with analysts surprised by the performance.

In May, the primary deficit in the public sector came at 33.74 billion reais, much less than the 42.7 billion reais shortfall forecasted by a Reuters poll of economists.

The primary deficit (the deficit excluding interest payments) is a leading indicator of the fiscal stance of the government budget.

A smaller gap indicates either a slight improvement in fiscal discipline or better revenue-gathering, but such advances were not significant enough to fully counter the pressure from rising interest outlays.

Twelve-month figures reveal structural imbalances

On a rolling 12-month basis, the public sector had a tiny primary surplus of 0.2% of GDP. However, interest payments during the same time totalled 7.77% of GDP, bringing the overall nominal deficit to 7.58% of GDP.

These numbers demonstrate the widening structural disparity between Brazil’s revenue and debt obligations.

While the government has maintained a primary surplus for the past year, the high level of interest payments has resulted in a continuous nominal deficit and an increasing debt-to-GDP ratio.

Fiscal outlook hinges on inflation and rates

New data reflect the fiscal challenges that Brazil faces while in a tightening monetary policy cycle.

Governments are under constant pressure on the broader fiscal outlook as the cost of servicing public debt continues to rise, and interest rates remain at historically higher levels to tackle inflation.

Public debt dynamics are still vulnerable to future choices over inflation control as monetary policy remains restrictive stance and the benchmark rate is currently at a multi-year high.

The objective of the government to reduce primary deficits has not been enough to offset this trend, driven by higher interest payments, discouraging the progress towards a stabilisation of the country’s debt dynamics, according to the May data.

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Oil prices ticked down on Tuesday as prospects of more supply from the Organization of the Petroleum Exporting Countries and allies weighed on sentiments. 

Reports suggest that OPEC+ is expected to announce an additional output increase of 411,000 barrels per day for August. This announcement is anticipated ahead of their meeting this coming weekend.

“This increase in supply is helping to put a lid on prices, as is the steady fall in global demand growth which looks set to continue,” said David Morrison, senior market analyst at Trade Nation. 

At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $64.82 per barrel, down 0.5%. Brent crude oil on the Intercontinental Exchange was down 0.4% at $66.46 a barrel. 

Last week, crude oil prices dropped significantly. 

The drop was due to speculation that US airstrikes had successfully hampered Iran’s military nuclear program and a ceasefire between Israel and Iran. 

However, conflicting reports have emerged since then. It is likely too soon to fully assess the damage, and definitive intelligence may still take time to materialise, according to Morrison.

“Despite this, oil traders have assumed that the US airstrikes are done, and do not presage an escalation in hostilities.”

OPEC+ August plans

Last week, Reuters had reported that eight members of the OPEC+ alliance, including Saudi Arabia and Russia, are likely to raise output by 411,000 barrels per day in August as well. 

OPEC and its allies, including Russia, are scheduled to convene on July 6. 

If their proposed supply increase is approved, it would raise their total supply for the year to 1.78 million barrels per day, representing over 1.5% of the world’s oil demand.

The eight members within the cartel had been expanding oil output by over 400,000 barrels a day since May. 

“Considering its strategic realignment, we anticipate the group will sustain these substantial increases,” ING Group’s analysts said in a report. 

This would result in the full 2.2 million b/d of supply being reinstated by the close of the third quarter, a year earlier than initially planned.

Adequate supply

The global oil market is expected to remain well supplied for the rest of the year due to these significant increases in supply, according to ING.

It’s set to return to a large surplus in the fourth quarter of this year.

The market’s primary focus appears to be on this supply, as indicated by recent price action.

Following the ceasefire between Israel and Iran, the geopolitical risk premium has eroded fairly quickly.

“Expectations for a comfortable oil balance, along with a large amount of OPEC spare production capacity, appear to be comforting the market, ING analysts further said. 

Additionally, oil prices remained suppressed due to the uncertainty surrounding US tariffs and their potential impact on global growth.

Brent futures are projected by Morgan Stanley to fall to roughly $60 by early next year. 

This is attributed to a well-supplied market and diminishing geopolitical risks, particularly after the de-escalation between Israel and Iran.

Furthermore, Morgan Stanley anticipates an oversupply of 1.3 million barrels per day (bpd) in 2026.

Technical outlook for WTI

WTI has technically established support around the 38.2% Fibonacci retracement level of the January–April decline, at $64.18, according to FXStreet.

Support is currently established at the psychological level of $64.00 for WTI crude.

Should the price fall below this point, it could lead to a retest of the 50-day Simple Moving Average (SMA), which is positioned at $63.35.

Consolidation near support, rather than an immediate rebound, is suggested by the inability to hold above the 100-day SMA and recent tight-range candles, FXStreet said.

Additionally, if the price drops below the June 24 low of $63.73, it may continue to fall, potentially reaching the 23.6% Fibonacci level at $60.59.

“As long as supply concerns remain subdued, upside momentum appears limited, with the 100-day SMA providing short-term resistance around $65.45,” FXStreet said in a report.

The Relative Strength Index (RSI) is currently tracking just below the neutral 50 mark, at 46, signaling a lack of strong bullish momentum.

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United Kingdom house prices experienced their most significant monthly decline in over two years in June, a clear sign that prospective buyers are feeling the pressure after an increase in transaction taxes came into effect in April.

The unexpected drop casts a shadow over the near-term outlook for the UK property market.

According to a report released Tuesday by Nationwide Building Society, one of Britain’s top mortgage lenders, the average cost of a home unexpectedly fell by 0.8% in June, bringing the average price down to £271,619 ($373,270).

This marked the third price decline in as many months and was the largest single monthly drop since February 2023.

The data starkly contrasted with the expectations of economists polled by Reuters, who had forecast a modest 0.1% increase for the month.

The annual rate of house price growth also cooled considerably, falling to 2.1% in June, down from 3.5% recorded in the previous month.

This annual growth figure was also well below the 3.1% expansion that economists had anticipated.

Stamp duty hike and economic headwinds bite

This latest report suggests that a brief boost seen in May’s house price data was short-lived.

Aspiring buyers are now contending with the impact of higher stamp duty taxes, which have added thousands of pounds to the cost of purchasing a home.

The stamp duty thresholds reverted to their pre-2022 levels on April 1, a move that has increased costs for many property buyers and injected volatility into both prices and transaction volumes.

First-time buyers, for example, now start paying the levy on properties worth £300,000 or more, a significant change from the previous, higher threshold of £425,000.

Robert Gardner, Nationwide’s chief economist, directly linked the downturn to this policy change, stating:

The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April.

Beyond the tax changes, Britons appear reluctant to tap into their savings to fund property purchases.

A climate of heightened trade tensions, elevated mortgage rates, and rising costs for essential bills is seemingly eclipsing the benefits of what has otherwise been strong wage growth.

A cautious outlook for the summer

Despite the gloomy June figures, Nationwide’s chief economist offered a cautiously optimistic outlook for the coming months.

Gardner stated that he expects “activity to pick up” from the summer.

He pointed to several underlying strengths in the economy that could support a recovery in the housing market, noting that “the unemployment rate remains low, earnings are rising at a healthy pace in real terms, household balance sheets are strong and borrowing costs are likely to moderate a little”.

However, for now, the sharpest price drop in over two years indicates that the UK housing market is navigating a period of significant pressure, with affordability and buyer confidence being put to the test.

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The clock is ticking down on what could be a defining moment for transatlantic trade.

In a high-stakes gambit, the European Union is signaling it might be willing to swallow a bitter pill—a 10% universal tariff on many of its exports to the United States—but only if it can extract crucial concessions from the Trump administration.

With a deadline of July 9 looming, the two economic superpowers are locked in a tense negotiation to avert a trade war that could send shockwaves through the global economy.

Europe’s calculated risk

Behind closed doors, a potential pathway to a deal is taking shape.

According to a report in Bloomberg that cited people familiar with the delicate negotiations, the EU’s play is to accept the baseline 10% tariff but carve out vital protections for its most critical industries.

Brussels is pushing hard for lower rates on key sectors like pharmaceuticals, alcohol, semiconductors, and commercial aircraft.

Furthermore, they are demanding quotas and exemptions to blunt the severe impact of Washington’s existing 25% tariff on automobiles and its crushing 50% tariff on steel and aluminum.

Sources, who spoke on the condition of anonymity to Bloomberg, describe the proposed arrangement as one that still tilts in America’s favor.

Yet, it’s a compromise the European Commission, the EU’s trade authority, believes it could ultimately live with—a pragmatic choice in the face of a far worse alternative.

That alternative is a scenario where, come July 9, President Donald Trump makes good on his threat to slap tariffs of up to 50% on nearly all of the bloc’s exports to the US.

President Trump has made these tariffs the centerpiece of his economic doctrine, arguing they are necessary to resurrect American manufacturing, fund his tax-cut agenda, and punish countries he claims have taken advantage of the US.

Growing list of Donald Trump’s trade tariff cases

_{(Source: Bloomberg)}

The sheer gravity of the situation was reflected in the market’s knee-jerk reaction to reports of these talks; the S&P 500 briefly stumbled, losing 12 points in seconds before recovering, a testament to the anxiety rippling through Wall Street.

The numbers at stake are staggering. In 2024 alone, the EU shipped €52.8 billion ($62.2 billion) worth of cars and auto parts to the US, its single largest export destination.

The bloc also sent €24 billion in steel and aluminum, primarily from industrial powerhouses Germany, Italy, and France.

A full-blown trade war would put all of this, and much more, in jeopardy.

EU’s trade chief Sefcovic’s mission to Washington

Despite the high tension, a fragile optimism persists. There is a growing belief on both sides of the Atlantic that an interim agreement, a sort of temporary truce, can be hammered out before the deadline.

This would pause the immediate tariff threat and allow the complex negotiations to continue.

To that end, the EU’s trade chief, Maros Sefcovic, is leading a delegation to Washington this week in a crucial, last-ditch effort to find common ground.

The a-la-carte deal would be complex, likely covering not just tariffs but also non-tariff barriers, strategic purchases of key US goods like liquefied natural gas (LNG), and frameworks for cooperation on economic security.

But even if an “agreement in principle” is reached, a cloud of uncertainty will remain, as officials have been unable to specify how long such an interim deal would last.

Four Sscenarios and a retaliation arsenal

The European Commission has been candid with its member states about the endgame, outlining four potential scenarios:

1. a deal is struck with an “acceptable level of asymmetry”
2. the US presents an unbalanced offer that the EU is forced to reject;
3. the deadline is extended, buying more time for talks; or
4. President Trump walks away from the table entirely and unleashes the tariff storm.

The last scenario is the one that keeps policymakers in Brussels awake at night. If talks collapse, officials have made it clear that the EU is prepared to retaliate with its full arsenal of countermeasures.

The bloc has already approved tariffs on €21 billion of US goods, ready to be deployed at a moment’s notice.

This list is surgically precise, targeting politically sensitive American states and iconic products: soybeans from Louisiana (home to House Speaker Mike Johnson), agricultural goods, poultry, and motorcycles.

And that’s just the opening salvo.

An additional, more punishing list targeting €95 billion of American products has also been prepared. This would hit major industrial goods, including Boeing Co. aircraft, US-made cars, and American bourbon.

Beyond tariffs, the EU is exploring more creative and painful measures, such as export controls and restrictions on US firms’ access to lucrative public procurement contracts.

As the high-stakes negotiation enters its final, critical phase, the world watches to see if diplomacy will prevail or if two of the world’s largest trading partners are about to step off the economic cliff together.

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