Global Economic Slowdown and Market Volatility

The OECD forecasts a sharp economic slowdown in the US, with GDP growth expected to decline to 1.6% in 2025 and 1.5% in 2026, due to the impact of tariffs and uncertainty around economic policies. The organization also predicts that inflation will "spike in mid-2025" and reach 3.9% by the end of 2025, as tariffs are passed on to consumers in the form of higher costs. Global economic growth is also expected to slow to 2.9% in 2025 and remain there in 2026, down from 3.3% last year and 3.4% in 2023.

Australia's economy grew 1.3% year-on-year in the first quarter of 2025, unchanged from the previous quarter and lower than the estimated 1.5% growth in a Reuters poll. The growth was attributed to shrinking public spending and weakened consumer demand and exports, with extreme weather events also impacting domestic demand and exports. The Reserve Bank of Australia had slashed rates to 3.85% in May, and the latest GDP release may bolster the case for further monetary policy easing, with some economists predicting additional rate cuts in the coming months.

Asia-Pacific markets rose on Wednesday following a tech-led rally on Wall Street, with Nvidia's nearly 3% gain driving its market cap past Microsoft's. South Korean stocks led the gains after opposition party leader Lee Jae-myung won the presidential election, with the Kospi index jumping 2.43% to its highest level since August last year. Other markets also advanced, including Japan's Nikkei 225, which climbed 0.82%, and Australia's S&P/ASX 200, which rose 0.77%. Mainland China's CSI 300 index moved up 0.52%, while Hong Kong's Hang Seng Index added 0.72%. India's Nifty 50 and BSE Sensex also ticked higher. The US economic outlook remains uncertain due to tariffs, but a better-than-expected jobs report supported Wall Street's gains.

European markets are expected to open higher on Wednesday, with the FTSE 100 predicted to rise 6 points to 8,788, DAX up 56 points to 24,135, CAC 40 up 20 points to 7,780, and FTSE MIB up 60 points to 40,155. The gains come as Asia-Pacific markets advanced overnight, driven by a tech rally on Wall Street led by Nvidia, and South Korean markets rose after opposition party leader Lee Jae-myung won the presidential election. US tariffs are in focus after President Donald Trump announced plans to double tariffs on steel imports, prompting criticism from the European Union, which said it is "prepared to impose countermeasures." Despite this, analysts believe European steel buyers and manufacturers could benefit from the higher metals tariffs as they may put downward pressure on steel prices in the region. The day's economic data includes Spanish and Italian services purchasing managers' index data, and Poland's central bank is set to announce its latest monetary policy decision.