Key Takeaways
- The European Central Bank (ECB) held its key interest rates steady at 2.00% for the deposit facility rate, 2.15% for the main refinancing rate, and 2.40% for the marginal lending facility, as widely anticipated.
- The U.S. labor market showed continued strength, with initial jobless claims for the week ending July 19 falling to 217,000, below the estimated 226,000, contributing to a rise in U.S. Treasury yields.
- Canadian retail sales declined significantly by 1.1% month-over-month in May, a sharper contraction than the 1.0% estimated, indicating a potential cooling in consumer spending.
- UnitedHealth Group (UNH) is currently addressing civil and criminal investigations initiated by the Department of Justice.
- European Union leaders are navigating complex international trade dynamics, with discussions on supply chain support with China and maintaining trade retaliation power while nearing a deal with the United States.
Central Banks Maintain Course Amidst Varied Economic Data
The European Central Bank (ECB) announced today that it would keep its key interest rates unchanged, with the deposit facility rate at 2.00%, the main refinancing rate at 2.15%, and the marginal lending rate at 2.40%. This decision aligns with market expectations, as traders continue to anticipate approximately 22 basis points in further rate cuts throughout 2025. The ECB emphasized that future interest rate decisions will remain data-dependent, focusing on the inflation outlook and economic risks, while noting that domestic price pressure has reduced with slightly slower wage growth.
The ECB also stated that the current economic resilience in the Eurozone partly reflects its previous rate cuts, despite ongoing global uncertainties, particularly due to trade disputes. The central bank confirmed it would not commit to a fixed rate path, reinforcing its flexible approach to monetary policy based on incoming economic data and underlying inflation trends.
US Labor Market Resilience and Treasury Yields
The U.S. labor market continues to exhibit resilience, with initial jobless claims for the week ending July 19 dropping to 217,000, a decrease from the previous week's 221,000 and better than the 226,000 estimate. Continuing jobless claims for the week ending July 12 were 1.955 million, slightly below the previous 1.956 million. This robust labor market data has led to an uptick in U.S. Treasury yields, reinforcing the view that the employment sector remains strong enough to support current interest rate levels.
Further supporting this view, the US Chicago Fed National Activity Index for June improved to -0.10, better than the estimated -0.15 and a significant improvement from the revised May figure of -0.16.
Canada's Retail Sales Contract
In Canada, retail sales experienced a notable downturn in May, contracting by 1.1% month-over-month. This figure was worse than the 1.0% decline anticipated by analysts and represents a significant shift from the revised 0.4% growth seen in April. Excluding the volatile auto sector, retail sales still saw a decrease of 0.2%, though this was a slightly better outcome than the estimated 0.3% decline. The weaker retail sales data could signal a cooling in Canadian consumer spending, potentially impacting future economic outlooks for the country.
Corporate and Geopolitical Developments
UnitedHealth Group (UNH) announced it is addressing ongoing civil and criminal investigations by the Department of Justice. This development could bring increased scrutiny to the healthcare giant's operations.
On the geopolitical front, European Commission President Ursula von der Leyen highlighted the critical role of China's stance on Russia in determining future EU-China relations, urging Beijing to convince Russia to engage in peace talks. Von der Leyen also noted an agreement on a new supply chain support mechanism and reiterated Europe's commitment to open markets for Chinese goods, while observing that Chinese leaders are now addressing overcapacity issues. She emphasized that Europe's openness on trade is not being reciprocated by China.
Separately, the European Union plans to maintain its trade retaliation capabilities even as it approaches a deal with the United States, as reported by the Financial Times. EU's Costa also affirmed the EU's dedication to strengthening partnerships and addressing issues transparently.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.