In its latest appraisal of potential risks to financial stability in the eurozone, the European Central Bank (ECB) warned that risks are rising amid a slowing global economy and escalating trade tensions.

The report, known as the Financial Stability Review (FSR), cautioned that weaker-than-expected growth and a possible deterioration of international trade relations could trigger further falls in asset prices. On eurozone sovereign debt, the FSR noted the vulnerable countries are set to face higher financing costs should the downside risks to growth materialise and that could lead to the re-emergence of debt sustainability worries. The report also said that bank profitability in the eurozone is expected to remain low in the next two to three years.

Meanwhile, Germany’s unemployment rate rose unexpectedly in May, the first increase in more than five years, in a sign that the labour market is mirroring the slowdown in Europe’s largest economy. The seasonally-adjusted jobless rate increased to five per cent in May from a post re-unification low of 4.9 per cent in April, data published by the Federal Employment Agency showed on Wednesday.

Economists forecast that the unemployment rate would remain unchanged. In internationally comparable terms, the May figure translates into an unemployment rate of 3.2 per cent, below the 3.6 per cent rate recorded in the US for April, the most recent month for which data are available.

Finally in the US, consumer confidence rose by more than expected in May, rising to the highest level since November of last year. In the meantime, Americans felt the most upbeat about their current economic conditions in 18 years, amid a robust labour market and rising wages.

The Conference Board’s consumer confidence index climbed to 134.1 in May, according to data published by Conference Board last Tuesday. The figure exceeded economists’ estimates.

The index that measures the present situation increased to 175.2, the highest since December 2000, while the gauge for expectations for the future situation rose to a six-month high of 106.6. However, Richard Curtin chief economist at Surveys of Consumers, noted that the preliminary data was gathered mostly before the US-China trade talks collapsed.

This report was compiled by Bank of Valletta for general information purposes only.