1.       US - Europe decoupling

NowCasting's tracking GDP for the EuroZone has enjoyed a decent bounce in May. At the start of the month Europe was growing at a 1.4% clip; that number has now doubled andstands at 2.8%.

In Qi z-score terms,European GDP is almost 2 standard deviations above trend - that's very much thetop end of recent ranges. More striking is the outperformance versus the US where tracking GDP growth is running at trend.

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Given our economic growth factor features as a prominent driver in several European equity models (both outright and relative to US equities), this factor move augurs well forthe idea of ongoing rotation away from US exceptionalism.

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2. There’s always a but…

NowCasting captures current quarter tracking GDP estimates; but equity markets discount forward expectations for growth & earnings.

One way to think about the latter is to update Qi's Credit Impulse which simply takes all thefactors in our Financial Conditions bucket (real yields, curve shape, credit spreads, currency strength, rate vol, money market liquidity etc ) and distills them into an aggregate score for the ease of credit and liquidity conditions.

When Qi's Credit Impulse is below zero it means credit conditions are tightening; and both US and Europe are in negative territory today. But it is notable how the April tariff shock hit Europe harder. And that while both display a V-shaped recovery, European financial conditions have tightened by more over the last few weeks.

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Net-net, European growth is enjoying decent momentum at the end of Q2 but, at these levels, aggregate credit conditions suggest there are headwinds building for H2 2025 and into 2026.

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3. Nifty already sniffing out a US-India trade deal

Treasury Secretary Bessent has hinted a trade deal with India is near; somewhat at odds with Trump’s comment that Apple would get a 25% tariff on those iPhones made outside the US. Nevertheless, in a world of lower oil, higher tariffs prompting supply chain relocation and seemingly greater geopolitical clout with US, Indian equities would seem to stand out asa winner.

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That said, be aware that Qi’s fair value gap for the index is at 1yr highs and has been closely tracking the spot price, i.e. weshould pay heed if the FVG starts to mean revert.

Over the last 2 weeks, Qi’s model price has been falling, divergent to the index which has rallied. In other words, expectations of adeal are building but this is not an ideal time for India bulls to be adding topositions.

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