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France Cuts 2026 Economic Growth Forecast to 0.7%

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France has lowered its economic growth forecast for 2026 to 0.7%, down from the previously projected 0.9%, according to a mid-year public finance update presented to lawmakers by the Finance Ministry. The revised outlook reflects weaker-than-expected economic performance during the first half of the year.

Finance Minister Roland Lescure said the downgrade was driven by a slower start to the year, partly due to the impact of special budget legislation. He also cited the challenging international environment, including ongoing instability caused by the conflict in the Middle East, as a factor weighing on France’s economic prospects.

The updated forecast highlights the pressures facing Europe’s second-largest economy as it navigates domestic fiscal challenges alongside global geopolitical uncertainty. The government is expected to continue monitoring economic conditions while adjusting its fiscal strategy to support growth and maintain financial stability.

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Mega-Deals Drive Global M&A to Record High in First Half of 2026

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Global mergers and acquisitions (M&A) reached a record $2.8 trillion in announced deals during the first half of 2026, marking a 48% increase compared to the same period last year, according to LSEG data. The surge was largely driven by 47 mega-deals valued at over $10 billion each, which together accounted for more than $1.3 trillion in transactions. Despite the record value, the total number of deals fell 9% to around 24,000, the lowest level in six years.

Investment bankers say companies are taking advantage of improved regulatory conditions, strong financing availability, and growing investor preference for larger, more focused businesses. High-profile transactions, including NextEra Energy’s acquisition of Dominion Energy and SpaceX’s purchase of Cursor, reflected the increasing appetite for transformational deals. Analysts believe many companies are now pursuing long-planned acquisitions to strengthen their competitive position and drive future growth.

Technology remained the most active sector, recording $649 billion in announced deals, with artificial intelligence and infrastructure-related industries attracting strong interest. Cross-border M&A activity also rose 62% year-on-year to $893 billion, led by transactions involving the United States and the United Kingdom. Experts expect dealmaking momentum to continue through the rest of 2026 as companies seek expansion, strategic partnerships, and business restructuring opportunities.

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Fed Chair Kevin Warsh Makes Global Debut as Inflation Takes Centre Stage

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U.S. Federal Reserve Chair Kevin Warsh made his first major international appearance at the European Central Bank’s annual forum in Sintra, Portugal, joining ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem. The discussion focused on the shared challenge of bringing inflation under control, while also highlighting differing views among central banks on issues such as climate change and central bank independence.

Warsh, who assumed office in late May, has adopted a hawkish stance on inflation, keeping U.S. interest rates unchanged during his first policy meeting while reaffirming the Federal Reserve’s commitment to its 2% inflation target. His comments raised expectations that the Fed could consider another rate hike later this year. Unlike previous Fed leaders, Warsh has also reduced the use of forward guidance, arguing that markets should rely less on central bank signals and more on economic data.

The event also drew attention to broader policy differences between the Federal Reserve and its global counterparts. While European and Canadian central bankers continue to consider climate change as an important financial risk, Warsh has argued that the Fed should avoid expanding beyond its core mandate. The panel also came amid renewed debate over the Federal Reserve’s independence following recent legal developments involving Fed Governor Lisa Cook, although Warsh has largely avoided commenting publicly on the issue.

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G7 Leaders Reaffirm Support for Ukraine, Plan Tougher Sanctions on Russia’s Energy Sector

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Leaders of the G7 nations have reaffirmed their united support for Ukraine, pledging to back the country’s sovereignty and territorial integrity. Meeting at the G7 Summit in Evian-les-Bains, France, the leaders agreed to intensify pressure on Russia by strengthening sanctions aimed at its war-driven economy.

In a joint statement, the G7 announced plans to expand restrictions on Russia’s oil and gas sectors as part of broader efforts to limit Moscow’s ability to finance the ongoing conflict. The move signals continued international commitment to supporting Ukraine while increasing economic costs for Russia.

The leaders also welcomed the recent agreement between the United States and Iran and expressed readiness to assist with its implementation. Additionally, they pledged to diversify global energy supply routes, reduce dependence on the Strait of Hormuz, and build up energy reserves to improve long-term energy security.

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G7 Summit Focuses on Iran and Ukraine as France Seeks Unity with Trump

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France is preparing to host the G7 Summit in Evian-les-Bains from June 15–17, with the conflicts in Iran and Ukraine expected to dominate discussions. French President Emmanuel Macron has crafted a carefully balanced agenda aimed at maintaining unity among G7 leaders and avoiding tensions with U.S. President Donald Trump. Leaders from Gulf nations, including Saudi Arabia, the UAE, Qatar, and Egypt, have also been invited due to their involvement in regional security and mediation efforts.

A key focus will be the fragile U.S.-Iran ceasefire and ongoing diplomatic efforts to prevent further escalation in the Middle East. Diplomats believe the atmosphere of the summit could depend heavily on whether Washington secures progress with Tehran before the meeting. At the same time, Ukrainian President Volodymyr Zelenskiy is expected to push for stronger Western support as negotiations with Russia remain stalled and Ukraine intensifies drone attacks on Russian military and energy targets.

Beyond security concerns, G7 leaders will discuss economic challenges such as critical mineral supply chains, global trade imbalances, and reducing dependence on China. France has also encouraged broader discussions involving countries such as India, Brazil, Kenya, and South Korea. Rather than issuing a broad final communiqué, the summit is expected to produce targeted agreements on issues including critical minerals, migration, and international security cooperation.

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Inditex Defies Consumer Slowdown as Zara Delivers Robust Early Summer Growth

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Zara owner Inditex has reassured investors with a strong start to the summer season, reporting currency-adjusted sales growth of 11.5% in May, well above analysts’ expectations of 8%. The performance comes despite weaker consumer confidence and economic uncertainty linked to rising inflation concerns and geopolitical tensions. The retailer’s shares climbed as much as 5% following the announcement.

During the February-to-April quarter, Inditex recorded sales of €8.75 billion, representing an 8.8% increase on a currency-adjusted basis. The company also improved profitability, with gross margin rising to 61.2% from 60.6% a year earlier. Executives said the group has successfully adapted its supply chain to manage disruptions in global shipping and transportation caused by the ongoing conflict in the Middle East.

Inditex remains optimistic about future growth, particularly in the United States, its second-largest market after Spain. The company said sales growth is being driven mainly by higher product volumes rather than price increases, while investments in larger stores and strategic expansions continue to attract customers. Inditex maintained its full-year outlook, including stable gross margins, a 5% increase in retail space, and capital expenditure of €2.3 billion.

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U.S. Dollar Faces Long-Term Weakness as European Markets Eye Opportunity for Growth

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The U.S. dollar is projected to weaken over the long term due to unsustainable fiscal debt and trade imbalances in the world’s largest economy, according to Patrick Thomson, EMEA CEO of JPMorgan Asset Management. Speaking at an International Capital Markets Association conference in London, Thomson noted that while the dominance of U.S. Treasuries remains intact, fixed-income investors are increasingly concerned about the long-term sustainability of elevated U.S. debt levels. Although the dollar recently gained nearly 2% as a safe-haven asset following the outbreak of the Iran war, it experienced sharp declines last year driven by U.S. policy uncertainty and the implementation of “Liberation Day” tariffs.

This shifting dynamic has positioned Europe as a major beneficiary, with investors actively seeking diversification through the euro and Chinese yuan. Despite economic challenges brought on by the regional conflict, JPMorgan Asset Management has reported substantial business growth in Europe, now managing over a trillion dollars in assets. This influx of capital is being driven by increased fiscal spending in Germany, a strategic push by policymakers to mobilize household savings, and a renewed appeal for European companies and investment opportunities as portfolio diversifiers.

However, financial experts emphasize that Europe must implement critical reforms to effectively compete with the United States. Thomson pointed out that unlocking retail bank deposits and encouraging individual market participation represents a massive opportunity to drive new market issuance and demand. Echoing this sentiment, Euroclear CEO Valerie Urbain stated that for Europe to truly rival the U.S. financial landscape, it must develop deeper, more integrated capital markets by actively attracting a larger volume of both investors and issuers.

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G7 Urges Action To Limit Middle East War’s Economic Impact

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Finance leaders from the Group of Seven stressed the urgent need to reduce the economic fallout of the ongoing Middle East conflict, warning that a prolonged war could weigh heavily on global growth. Meeting on the sidelines of the International Monetary Fund and World Bank Group spring gatherings in Washington, officials also reaffirmed the importance of working toward a lasting peace.

The conflict was one of the top issues discussed by finance ministers and central bank governors, alongside concerns about securing supply chains for critical minerals. The group highlighted that disruptions from geopolitical tensions could further strain global markets and economic stability if not addressed promptly.

In addition, G7 officials reiterated their commitment to supporting Ukraine amid ongoing Russian aggression. The discussions, led under France’s G7 presidency, underscored a broader effort to manage geopolitical risks while safeguarding the global economy from escalating shocks.

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German Inflation Rises Amid Energy Shock from Iran Conflict

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Inflation increased to at least 2.5% across four German states in March, driven largely by rising energy prices linked to the ongoing U.S.-Israeli conflict with Iran. In North Rhine-Westphalia, Germany’s most populous state, annual inflation climbed to 2.7% from 1.8% in February. Similar increases were recorded in Bavaria, Baden-Wuerttemberg and Lower Saxony, signalling a likely nationwide rise in inflation figures expected later in the day.

Economists surveyed by Reuters predict Germany’s harmonised inflation rate will reach 2.8% in March, up from 2.0% the previous month. Analysts warn that while energy costs are currently the main driver, broader price increases may follow. Berenberg Bank chief economist Holger Schmieding said higher transport costs and potential fertiliser shortages could push food prices higher, with inflation possibly exceeding 3% if the conflict continues.

A survey by the Ifo institute showed German companies increasingly expect to raise prices due to rising production and transport expenses. The data comes ahead of eurozone inflation figures, with markets anticipating further monetary tightening by the European Central Bank. Investors now expect up to three interest rate hikes this year as policymakers respond to mounting inflation pressures.

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Reeves Calls for G7 Unity Amid Iran Conflict

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British Finance Minister Rachel Reeves will urge G7 counterparts to avoid unilateral trade measures while the Iran war continues, warning that such actions could threaten global energy security. Speaking at a meeting with finance and energy ministers, she stressed that collective action is crucial to maintain resilience and avoid shifting pressure onto partners.

Reeves emphasized that protectionism and new trade barriers could disrupt supply chains, raise costs, and exacerbate the economic fallout from the conflict. She called for cooperation to ensure the flow of energy and goods and to help reduce bills over time.

The ongoing war in Iran, initiated by the U.S. and Israel on February 28, has already caused thousands of casualties and triggered unprecedented disruptions to global energy markets, affecting economies worldwide.

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