Big Beautiful Bill lifts Gold

European markets have kicked off the second half of the year on a somewhat unstable footing, with indices losing ground across the board. This comes off the back of yesterday’s US reversal that saw initial gains reverse into a negative close. Nonetheless, June has been good for the bulls, with US stocks playing catch up thanks to circa 5% gains across the major indices. The Nikkei 225 closed out the month with an unwelcome 1.3% slump, as a sharp bump higher for the yen hurt exporters. Meanwhile on the data-front we saw a welcome bump for the Chinese Caixin manufacturing PMI, rising up through the 50 threshold (50.4) to reverse the recent slump into contraction territory.

Rachel Reeves is back in the headlines today, with the Chancellor expected to announce a dramatic cut to the cash ISA allocation apparently in a bid to raise investment. The Nationwide house price survey saw the biggest monthly decline in over two-years, with many seeing this as an outcome from Reeve’s April stamp duty changes.

In the eurozone, we have seen inflation rise to 2% as expected, with the ECB on the lookout for any effects from the US-eurozone trade friction. Notably, we have seen China reroute many of its products into markets such as Europe, providing potential price competition that could keep a lid on inflation. With the ECB having already gone over and above the likes of the ECB when it comes to easing, there is a good chance that we see EURGBP strength as the BoE starts to gear up for additional cuts.

US markets enter H2 on a positive footing, with yesterday’s declines doing little to dampen sentiment that has seen the Nasdaq and S&P 500 hit record highs despite widespread uncertainty. The ability to avoid a drawn out war with Iran helped keep a lid on energy prices, and there is a hope that Trump can continue to do that in a bid to drive a raft of rate cuts from the Fed in the back end of the year. This week will be dominated by the so-called big, beautiful bill, although Elon Musk has sought to complicate matters, pledging to push out fiscal hawks that are now supporting Trump’s bill in the primaries. The dramatic rise in debt looks to only continue and that highlights exactly why the bull case for gold continues to play out. Nonetheless, in the absence of a sharp rise in bond yields, the passing of this bill has been seen as a positive for equities. Thus we currently stand in a position where we see both gold and equities taking on a positive footing.