Newly installed rightist governments are finding the path of fiscal consolidation and tax cuts is tougher than expected

Global sovereign bond yields surged to two-decade highs as the U.S. Treasury expanded bond buybacks amid deficit pressures and Federal Reserve uncertainty.

Attempt to steer economy toward sustainable growth running into increasingly difficult terrain with economic policy facing sharp trade-off between fighting stubborn inflation and fixing external imbalances.

Yapay zeka sektöründe olası bir kazanç krizi küresel ekonomiyi nasıl etkiler? Capital Economics baş ekonomisti üç senaryo üzerinden yanıt veriyor.

Data compiled by S&P Global Ratings indicates that technology hyperscalers and key hardware suppliers such as Nvidia issued $225 billion in corporate

US equities struggled to maintain gains as investors grappled with the looming threat of a potential 'massive' US attack on Iran and renewed concerns about artificial intelligence spending. The market's cautious sentiment was underscored by Capital Economics' analysis, which suggested a possible rally in major indices later this year before a significant correction in 2027. However, analysts warned that the market could have already peaked, highlighting the precarious balance between optimism and risk. The article notes that geopolitical tensions and AI-related uncertainties continue to cast shadows over equity markets, with megacap tech companies' earnings reports serving as critical catalysts for investor confidence. Despite these challenges, some experts remain cautiously optimistic about a potential rebound, though they caution against complacency in the face of ongoing global uncertainties.

Fed officials are casting doubt on a December cut, but analysts see space for Mexico to keep easing and for Brazil to start cutting its 15% policy rate

Investing.com - The impact on the U.S. economy from President Donald Trump aggressive tariffs has been limited so far, but is expected to gradually build over time, according to analysts at Capital Economics. Observers have long argued that Trump’s elevated levies will push prices higher and weigh on growth, although data this week suggested that the inflationary pressures in the U.S. remain muted. Still, concerns remain that the full effect of the duties has yet to be felt. In a note, the Capital Economics analysts led by Simon MacAdam predicted that the levies will have a growing -- and upward -- influence on the pace of price gains in "the months ahead." "So far, there has been very little pass-through to consumer prices, but this can’t last," the analysts wrote, referring to a potential move by some companies to transfer expenses incurred from the tariffs on to customers. Some economists have suggested that the relatively tepid pace of inflation in July was partly due to firms still whittling down inventories that were expanded by a rush of orders prior to Trump’s "reciprocal" tariff announcement in early April. Others have argued that businesses may have also chosen to eat more of the costs of the tariffs in a bid to protect market share. "While U.S. retailers seem to have been very willing to absorb the initial hit of tariffs via lower margins, this is not sustainable," the Capital Economics analysts said. "With many trade deals agreed, there is now greater certainty about where tariffs will end up, which should allow retailers to finally raise their prices." They estimated that the U.S. tariff rate now stands at 17% following the implementation of Trump’s heightened "reciprocal" trade taxes earlier this month, adding that the figure could climb further should the White House follow through on threats to slap levies on imports of semiconductors and pharmaceuticals. These tariffs, coupled with an ongoing White House crackdown on immigration, are anticipated by Capital Economics to keep core inflation -- an underlying gauge stripping out volatile items like food and fuel -- above 3% "well into 2026."

Investing.com - Despite increasing concerns in some corners over the state of the U.S. economy, neither equity analysts nor investors seem to be particularly worried, according to analysts at Capital Economics. Weak employment data for July, coupled with steep revisions for payrolls in June and May, reignited some worries that President Donald Trump’s policies, especially a crackdown on immigration, could be feeding into a wider slowdown in labor demand. Subsequent figures this week showed a U.S. services sector that has all but stalled, with little change in orders and a further softening in employment. Prices paid by these firms also rose by the most in almost three years, painting a picture of a possible period of tepid growth and elevated inflation dubbed "stagflation." Stock markets, however, have seem relatively unperturbed. After slumping in the wake of the jobs data last Friday, the benchmark S&P 500 clawed back those losses this week, as sentiment was spurred on by solid corporate earnings and ongoing enthusiasm over the applications of artificial intelligence. Hopes are also high that the Federal Reserve, keen to quell any downturn in the labor market despite wariness over persistently above-target price gains, will move to slash interest rates at its upcoming meeting in September. In a note, the Capital Economics analysts led by John Higgins flagged that equity analysts’ forward-twelve-month projections for earnings per share indicate that much of the growth in the S&P 500 has been in the so-called "Big Tech" sectors like information technology and communication services. Much of this is due to the hype around AI, the analysts said. Meanwhile, after flatlining in recent years, the same figure for the rest of the index has risen by around 8% since the end of 2023. "That doesn’t scream impending recession," the analysts wrote. They added that investors do not seem to be "remotely concerned" about the trajectory of the economy either, citing a data showing marked outperformance in cyclical and defensive sector stocks against a gross domestic product-weighted index of headline manufacturing and services activity surveys from the Institute for Supply Management. "One interpretation is that [investors] are being complacent. Another is that the economic outlook is better than the ISM surveys suggest," the analysts said. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Investing.com - July’s weak employment report is a "taste of what is to come," as payroll gains slow in the coming quarters due to Trump administration policy moves, according to analysts at Capital Economics. Concerns over the trajectory of the U.S. labor market intensified after last month’s all-important nonfarm payrolls data came in under expectations. Averaged over the last three months, employment gains stood at 35,000, versus 123,000 in the corresponding period a year ago. Perhaps even more crucially, the payrolls figures from the Bureau of Labor Statistics for June and May were both revised sharply lower, indicating that the U.S. added 258,000 fewer roles than had initially been reported during those months. Markets tumbled in the wake of the data, and were further dented after U.S. President Donald Trump dismissed the commissioner of the BLS, citing, without providing evidence, of falsifying the data. But in a note, the Capital Economics analysts led by Stephen Brown argued that the market’s reaction to the BLS numbers may have been "overdone." "The large downward revisions to May and June look unusual outside of recession, but two-month revisions on that basis are not a reliable recession indicator," they wrote. "The mid-1980s saw several slightly smaller downward revisions, even as gross domestic product growth was strong. The latest revisions are arguably even less concerning given that half of the downgrade was due to a re-assessment of state and local education payrolls, which had originally looked abnormally strong[.]" Still, the analysts flagged that BLS’s diffusion index, which gauges whether payrolls are rising or falling across 254 sectors, is below 50 -- "meaning that more segments are cutting jobs than adding them." Meanwhile, the jobless rate in July increased slightly to 4.2%, as household employment dropped -- suggesting that cracks may be forming in a jobs picture that has been partly responsible for holding up the wider economy in the face of headwinds from an immigration crackdown and an aggressive trade stance under Trump. The White House’s push to limit immigration has led to a "dramatic slowdown in labor supply" and is the "key reason why we continue to expect payroll gains" to average 50,000 per month in the second half of the year, the analysts said. Nonfarm payrolls stood at 73,000 in July. Capital Economics also anticipates that the unemployment rate will finish 2025 at 4.3%. Traders are now turning their focus to August’s employment report, which could prove to be a major factor in whether the Federal Reserve opts to resume cutting interest rates next month. A loosening in labor market conditions could prompt such a reduction, the Capital Economics analysts said, but noted that this would only be the case if Trump’s tariffs do not trigger an acceleration in consumer price growth. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Investing.com - The Reserve Bank of India (NSE:BOI) (RBI) is expected to maintain its repo rate at 5.50% during its upcoming Monetary Policy Committee meeting on August 6, despite a sharp decline in headline inflation in June, according to Capital Economics. The significant drop in inflation has prompted speculation about potential additional interest rate cuts following the RBI’s substantial 50 basis point reduction in June. However, Capital Economics believes the central bank will likely keep rates unchanged. Capital Economics noted that the RBI had clearly signaled after its June meeting that the easing cycle was complete, establishing what the research firm describes as a "high bar" for further rate cuts. This stance suggests the recent inflation data may not be sufficient to trigger additional monetary easing. The economic research firm projects that the repo rate will remain at its current level of 5.50% not only at next week’s meeting but "well into 2026," indicating an extended period of rate stability ahead for India’s economy. The RBI’s decision comes amid a balancing act between responding to lower inflation figures and maintaining its previously communicated policy trajectory, with the central bank having already implemented significant monetary easing through its June rate cut. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

Investing.com - A trade deal with the U.S. has helped the European Union avoid the worst of a tariff war with the world’s largest economy, but it remains to be seen how long this truce will last for, according to analysts at Capital Economics. In a note, the analysts led by Jack Allen-Reynolds flagged that the average tariff rate on U.S. imports from the EU will now rise to around 17% from just 1.2% in 2024 -- an increase that they predicted will reduce growth in the bloc by around 0.5%. Washington and Brussels reached a landmark trade agreement on Sunday that includes a 15% tariff on EU goods entering the U.S. The tariff applies to a wide range of items, including semiconductors and pharmaceuticals. However, there are some exceptions, such as a 50% levy on steel and aluminum that will remain in place. The broad-strokes deal encompasses significant EU purchases of U.S. energy and military gear, along with substantial investments in the American economy. U.S. President Donald Trump said the European Union has committed to purchasing $750 billion worth of energy from the United States. He also stated that the EU has agreed to make $600 billion in investments in the U.S. "They are agreeing to open up their countries to trade at zero tariff," Trump told reporters. He added that the EU would "purchase a vast amount of military equipment" from the U.S. European Commission President Ursula von der Leyen confirmed the agreement would include 15% tariffs across the board, noting that this measure would help "rebalance" trade between the two major trading partners. Of the $3.3 trillion in goods imported by the U.S. last year, more than $600 billion came from the 27-member EU. The pact could help bring some calm to investors, who had been wary that both sides could fail to reach a deal before August 1, when Trump’s sweeping "reciprocal" tariffs are due to come into effect. The EU had been facing heightened levies of 30%, and had reportedly been pushing for a zero-for-zero agreement with the White House. "[F]or now the deal has avoided a much bigger and more damaging increase in U.S. tariffs, as well as EU retaliation. This will reduce uncertainty in the near term and has understandably been greeted positively by the markets this morning," the Capital Economics analysts said. European stocks have risen to a four-month high, while U.S. stock futures pointed higher on Monday. However, the fine details of the agreement have yet to be ironed out, the analysts flagged, adding that Trump could "still change his mind even after the deal has been finalized and signed." "So uncertainty is likely to remain high for the foreseeable future," they said.

Investing.com -- The recent trade agreement between the United States and Japan has eliminated a key downside risk, potentially leading the Bank of Japan to present a more positive assessment of economic prospects at its upcoming meeting next week. With inflation continuing to exceed the Bank’s pessimistic forecasts, analysts expect the central bank to resume its tightening cycle with another interest rate hike in October. The Bank of Japan had adopted a more negative stance on GDP growth and inflation outlooks during its May meeting in response to growing trade tensions, maintaining this cautious position at its June meeting. The trade deal finalized between the US and Japan this week has reduced some of these downside risks. According to press reports, the Bank had already begun showing increased optimism about economic conditions even before the latest developments regarding US tariffs. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Investing.com - U.S. President Donald Trump’s aggressive trade agenda may bring some manufacturing jobs back into the country, although the scale of the reshoring is likely to be limited, according to analysts at Capital Economics. Trump has argued that his move to slap heigthened duties on a range of trading partners will help to bolster domestic job growth in the manufacturer sector, which has seen a multi-year shift in jobs out of the United States. In a note, the strategists led by Thomas Ryan flagged that the past three presidential administration’s prior to Trump’s second term in the White House have all "attempted and failed" to enhance job reshoring. The latest effort, made through the expanded use of tariffs, will "be no different," the analysts said. The analysts suggested that some segments of manufacturing -- such as automotive and pharmaceutical production -- appear to be more conducive to reshoring and could see a boost from the levies. In both cases, capacity utilization is relatively low, meaning there are fewer immediate production constraints, they noted, adding that these industries are also not directly competing with "ultra-low-cost manufacturing locations." A large share of drug imports are made by subsidiaries of U.S. firms in countries like Ireland, Switzerland and the Netherlands, chiefly for tax reasons, the analysts said. Auto imports also come from a tightly-integrated North American supply chain, "implying that shifting production to the U.S. could occur with relatively limited disruption," they added. But, on the whole, "a tariff-led approach to attracting foreign manufacturers to the U.S. faces major constraints -- namely, a tight labor market and signficantly lower production costs overseas -- that even the promise of preserving tariff-free access to the U.S. consumer market cannot overcome," they wrote. Although the tariffs "at the margin" may cause some jobs to come back to the U.S., these structural barriers are seen limiting the scale of reshoring and keeping factory employment well below its late-1970s peak, the analysts said. AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

Investing.com - The impact of U.S. President Donald Trump’s sweeping tariff agenda is likely to be seen in the upcoming second-quarter corporate earnings season, according to analysts at Capital Economics. Despite having largely delayed the implementation of his punishing "reciprocal" levies first unveiled in April, Trump has left a baseline 10% tariff in place, as well as heightened duties on items like steel, aluminum and autos. The effective U.S. tariff has in turn increased compared to its level at the beginning of Trump’s second term earlier this year, analysts have suggested. This week, Trump has embarked on a new chapter of his tariff drive, issuing letters to more than a dozen nations threatening them with elevated duties if they are unable to reach a trade deal with Washington. However, Trump has paused the date for his reciprocal tariffs to take effect to August 1. They were previously slated to kick in on Wednesday, after having initially been postponed in April. Trump has also said he will slap 50% duties on U.S. copper imports and hinted that other sector-specific tariffs could be coming on semiconductors and pharmaceuticals. Economists have predicted that the tariffs could drive up consumer prices and, eventually, weigh on activity. In a note to clients, the Capital Economics analysts said "there has not been big effect" on prices so far, although they flagged that they anticipate the uptick in inflation will be reflected in the upcoming consumer price index report for June. "While that could partly be the result of a winding down of stockpiles accumulated before higher tariffs came into effect, we now suspect U.S. firms will eat more of their cost, if only in the short run for political reasons," the analysts wrote. Notably, Trump previously took aim at Amazon (NASDAQ:AMZN), after reports said the e-commerce giant was planning to outline the cost of trade tariffs to its customers. The higher tariffs could become more apparent in companies’ next quarterly results, with the levies particularly threatening to dent gross profit margins, the Capital Economics analysts said. They noted that Wall Street estimates for forward twelve-month gross margin expectations were already pared back following Trump’s "Liberation Day" tariff event on April 2. The analysts added there has also not been "big downgrading" to margin predictions across the U.S. stock market. "A glass-half-empty view would that there is plenty of margin for error," they said.

Investing.com -- Ireland’s economy appears well-positioned to navigate potential risks from U.S. policy changes, according to a new analysis by Capital Economics on Thursday. Despite concerns about Ireland’s close economic ties to the United States, which accounts for 30% of Irish goods exports and significant inward investment, the research suggests the impact of potential U.S. tariffs on pharmaceuticals and tax policy changes may be less severe than initially feared. The analysis indicates that more than half of Ireland’s pharmaceutical exports would remain unaffected by U.S. tariffs as they are destined for other countries. Additionally, the sector is expected to maintain its international competitiveness even if faced with new U.S. trade barriers. On the tax front, while changes to U.S. tax policies could reduce Ireland’s attractiveness for multinational tax optimization and potentially decrease GDP figures and corporate tax revenues, more meaningful economic indicators such as modified domestic demand (MDD) and employment would likely see less impact. Ireland’s strong fiscal position provides further insulation against these risks. The country currently runs a large budget surplus and maintains a low debt burden, which should help sustain public finances even if corporate tax revenue declines. The Irish economy has significantly outperformed the euro-zone since the pandemic according to MDD, which excludes spending with little relation to domestic activity. This growth has been accompanied by rapid employment increases. Capital Economics projects Ireland’s average growth rate, measured by MDD, will continue to exceed the euro-zone’s for the foreseeable future, with expectations of over 2% annual growth through the rest of this decade compared to around 1% for the rest of the euro-zone. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?

Investing.com -- The lack of clarity around US tariff policy is not expected to hold back US markets, according to Capital Economics, which maintains its outlook for US equities and the dollar to rally through the remainder of the year. The US tariff situation has impacted markets in two key ways over recent months. First is the direct effect on US inflation, economic growth, and potential central bank responses. With the administration extending the pause on additional "reciprocal" tariffs until next month, market participants must wait longer for clarity on the final tariff structure. Treasury Secretary Bessent has indicated that without deals, "Liberation Day" tariffs would begin in early August, but progress toward many of these agreements remains unclear. The second major question is how much trade policy uncertainty will affect US markets. The unpredictable development of the policy appeared to trigger early-April sell-offs in US assets and the dollar, raising concerns that policy uncertainty might deter investors from US markets for an extended period. However, these concerns seem to have diminished. The weekend’s announcement about the tariff pause extension did not cause any significant reaction in equity futures or the dollar. The US equity market is trading near all-time highs, and equity risk premiums have returned to levels close to recent lows. While Treasury bonds have recovered since April, this appears to reflect higher "term premia" being offset by increased expectations for rate cuts. This could indicate compensation for greater policy uncertainty, particularly regarding inflation effects, though it may also reflect concerns about the federal deficit. The dollar’s ongoing weakness could reflect some concern about US trade policy implementation, but might also stem from other factors, such as possible deliberate appreciation of certain currencies against it or changes in foreign exchange hedging behavior. Capital Economics maintains that tariff uncertainty alone is unlikely to severely impact the US economy or dampen investor enthusiasm for US equities. However, the firm believes the uncertainty will significantly influence the Federal Reserve, as many FOMC members appear reluctant to cut rates until the inflationary effects of tariffs become clearer. Capital Economics doubts the Fed will cut rates this year, which could negatively impact Treasury bonds but potentially boost the dollar eventually. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Investing.com - The European Central Bank is expected to wait until September to cut its key policy rate again as officials eye ongoing trade uncertainty and the recent appreciation of the euro, according to analysts at Capital Economics. In June, the ECB slashed borrowing costs for the eighth time in a year, bringing its key deposit rate down by 25 basis points to 2.0%, although policymakers did not provide outright guidance for changes later this year. In a statement, the ECB said its latest decision to lower rates came as the euro area economy faces waning inflation but persistent uncertainty around the impact of global trade tensions. The cut was widely anticipated by markets, meaning that much of the debate among analysts heading into the announcement swirled around the central bank’s plans for rates over the rest of the year. Given an easing in inflation back down to the ECB’s 2% target, some investors have bet that policymakers will push pause on the rate-reduction cycle in July and potentially roll out one more drawdown before the end of 2025. But, writing in a note to clients, the Capital Economics analysts led by Franziska Palmas argued that the ECB is "much more likely to wait until September to ease policy further." The comment comes as murkiness surrounds U.S. President Donald Trump’s tariff plans, with a pause to his sweeping "reciprocal" tariffs is due to expire on on July 9. The White House has previously targeted the European Union -- which includes several euro zone countries -- with these levies, hitting out at the bloc for perceived unfair trade practices. European trade officials met with their Trump administration counterparts in Washington this week. But a trade agreement has yet to be reached, with the EU pushing for a deal "in principle" that would include immediate tariff relief for key sectors. Media reports have suggested that a pact could see the European Commission -- the chief trade negotiator for the EU -- accept a baseline 10% U.S. tariff in exchange for reduced duties on those industries. Yet some in Brussels are calling on the EU to take a stronger stance and insist on a reduction to the 10% levy rate. The ECB warned that the uncertainty may weigh on business investment and exports in the short term, although medium-term growth is tipped to be bolstered by increased government spending on defense and infrastructure. "We think the most likely outcomes are an extension of talks or a quite vague preliminary deal," the Capital Economics analysts predicted. Along with the ongoing trade negotiations, some ECB insiders have also become more concerned over a steep jump in the euro against the U.S. dollar this year, according to the Financial Times. Bolstered by a shift by investors into European assets earlier this year during a time of increased U.S. policy uncertainty, the euro has surged by almost 14% so far this year. The ECB may need to signal that too much strengthening in the euro could be issue, as it might lead inflation to hover below targets, the paper reported, quoting a senior European central banker. A stronger euro can pull down price gains and make imports cheaper, but also dent make exported products more expensive abroad and weigh on overall economic activity. Coupled with signs of tepid growth in the eurozone, along with possible headwinds from U.S. tariffs, some central bankers have become uneasy, the FT reported. Earlier this week, ECB Vice President Luis de Guindos told Bloomberg TV that this type of "overshooting" of the euro should be avoided. Although the euro exchanging hands at roughly $1.18 may be acceptable, it would be "complicated" for policymakers to wave off levels above $1.20, de Guindos warned.

Investing.com - India’s goods trade deficit with China now stands at a record high, rising to over $100 billion in the year to May, stemming in part from increased low-cost imports. In a note to clients, analysts at Capital Economics said that elevated goods imports from China may bring benefits to some areas of India’s economy. "Chinese imports span a huge variety of goods but electronics components are the single largest category," the Capital Economics analysts noted. "Imports of components are encouraging if they are manufactured into final goods in India and then sold abroad." Imports of low-end manufactured products have also helped to keep a cap on household goods inflation over the past few years, they added, flagging that more cheap Chinese products could continue to exert disinflationary pressure. Yet the trend could also pose threats to India’s domestic industries, especially manufacturing. "That is true both in terms of serving India’s enormous domestic market, but also further afield too. After all many major economies have experienced rising imports from China, making it harder for Indian firms to compete abroad," the analysts said. They flagged that, for all its gains in capturing global export market share of high-end manufactured goods in recent years, India’s export share of low-end items like textiles and toys is now lower than a few years ago. Several policymakers and industry bodies have raised some concerns over the inflow of Chinese goods, with the Confederation of Indian Industry highlighting the nation’s over-reliance on Chinese imports and the Ministry of Steel and Directorate General of Trade Remedies voicing worries over the "threat from China," the analysts said. In response, they predicted that India may move to erect stronger tariff barriers against Chinese products, although these levies would likely not be as broad as sweeping U.S. duties imposed on China under President Donald Trump. "Given India’s low reliance on demand from China and India’s precedent in enacting anti-dumping measures, there is a good chance that policymakers will raise tariffs further and potentially introduce more industrial policies if low-cost imports from China continue to rise," they wrote.

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Investing.com - The economic and financial impact of the conflict between Israel and Iran will likely be muted unless there is "actual disruption" to the flow of energy supplies, according to analysts at Capital Economics. Despite the heightened violence between the regional rivals, the effect on major global financial markets has been "relatively limited," the analysts led by Jonas Goltermann argued in a note. Oil prices have seen some volatility due to in part to increased worries that the violence could spil over into shipping lanes out of the Middle East, particularly the crucial Strait of Hormuz. No disruptions have yet to be reported. Meanwhile, the main averages on Wall Street ended higher on Monday, while bond yields and currencies were relatively muted, with analysts noting some moderation in fears over the implications of several days of airstrikes between Israel and Iran. "The lack of further volatility on account of the conflict appears to reflect a view that, as proved the case with other escalations in the region over recent years, this one will not result in significant damage to energy production or transportation infrastructure," the Capital Economics analysts said. "Ultimately, that is the primary channel through which the conflict could have a major impact on the global economy." Still, they flagged that the intensification of Middle East tensions comes at a "tricky time" for investors already grappling with murkiness around U.S. trade and fiscal policies. "An unpredicatable environment" has become "even more so," the analysts said. On Tuesday, Israel’s military said that it had carried out "several extensive strikes" on military targets in western Iran, including on surface-to-surface missile storage sites and launch infrastructure. A senior Iranian general "in the heart of Tehran" was killed overnight, Israel’s Air Force also claimed. Iran has not yet confirmed the statement. Meanwhile, the Trump administration is discussing with Iran the possibility of holding talks this week on a potential nuclear deal and an end to the conflict with Israel, Axios has reported. U.S. stock futures pointed lower as the fighting entered its fifth day. Which stock should you buy in your very next trade? With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Investing.com - The U.S. federal debt pile is "undoubtedly" on an unsustainable path, with ballooning obligations potentially leading to higher inflation and denting the wider economy, according to analysts at Capital Economics. Treasury Department data shows that U.S. federal debt currently stands at $36.22 trillion, a burden that the Capital Economics analysts led by Paul Ashworth said is "already close to 100% of gross domestic product." Ashworth added that, should the U.S. budget shortfall remain around 6% of GDP for the foreseeable future, the total debt-to-GDP ratio could climb to 120% within in the next decade. "Concerns about ballooning supply have driven up the term premium component of Treasury yields further this year and there is a risk of a vicious cycle developing -- with fears about the long-term sustainability of the federal debt raising borrowing costs, which add to the deficit and make the debt path even more unsustainable," Ashworth said. Although the U.S. government can avoid bankruptcy by printing its own money, Ashworth flagged that this tactic could result in rising inflation and "the crowding out of private investment and consumption" that may have a "negative impact on broader economic performance." The comments come as U.S. President Donald Trump and his Republican allies in Congress are racing to approve a massive fiscal package that would include deep tax cuts and spending increases on defense and border security. Republicans in the U.S. Senate are currently looking to release an updated version of Trump’s "big, beautiful bill," with the GOP facing a self-imposed July 4 deadline to pass the sweeping measure. Yet lawmakers remain at odds over the spending cuts and borrowing increases that will be needed to fund tax relief and elevated expenditures proposed by the bill. Slashes to the Medicaid program for low-income Americans and clean energy tax breaks are among the most pressing points of contention. The House of Representatives previously passed its version of the multitrillion legislation by a thin margin, with Republicans in control of the lower chamber just about overcoming party holdouts and Democratic opposition. Should the Senate pass its version, the House would then need to approve it before a final bill is sent to Trump’s desk to be signed into law. Tesla (NASDAQ:TSLA) CEO and former close associate of Trump Elon Musk has been among the most outspoken conservative figures to come out against the net $2.4 trillion price tag of the more than 1,000-page legislation, calling it a "disgusting abomination." The tech billionaire’s statement sparked a heated online row with Trump earlier this month. The official Congressional Budget Office and outside economists have flagged that the bill could further increase the U.S. debt load. Financial markets have also flagged concerns over the U.S. debt load, with Moody’s in particular citing these worries as a motive for its decision to cut its once-pristine "Aaa" U.S. credit rating. The legislation would raise the U.S. debt ceiling by $5 trillion, a move that Congress must adopt or risk the U.S. defaulting on its debt obligations. However, Trump and other Congressional Republicans have largely shrugged off these fears, with Senate Finance Committee Chairmain Mike Crapo arguing that any argument that the bill will increase the U.S. deficit is "absolutely wrong." Should you invest $1,000 in TSLA right now? Don't miss out on the next big opportunity! Stay ahead of the curve with ProPicks AI – 6 model portfolios powered by AI stock picks with a stellar performance in 2024. Unlock ProPicks to find out