Investors' sentiment continued to deteriorate amid escalating trade tensions and Russia's initial refusal to agree to a truce in Ukraine. Equity markets ended lower, particularly in the US, and Treasury yields fell as investors increased their demand for safe-haven US government debt. Oil prices declined as markets weighed the risk that the tariff war could dampen global energy demand.
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Investors traded cautiously amid heightened tariff uncertainty, fresh rounds of talks between Russia and Ukraine, and mixed macro data. In the US, the Conference Board Consumer Confidence index fell to its lowest level since 2021, while the German Ifo business climate index rose, as companies' expectations about the future improved.
Mixed session amid little macro data and a lack of trade negotiations news to trade on. Sovereign bond yields edged slightly higher on both sides of the Atlantic, with US yields receiving a boost by hawkish remarks from Fed officials warning of the potential impacts of tariffs on prices. The 2-year Treasury yield closed above 4% for the time since late March.
Investors kicked off the week on a cautious note after Moody's downgraded the US credit rating from Aaa to Aa1, citing concerns about the country's fiscal trajectory, rising debt burden and high interest costs. With this downgrade, the US lost its only remaining triple A credit rating.
Yesterday, global financial markets were marked by heightened investor caution amid rising fiscal uncertainty and underwhelming macroeconomic indicators. In the US, the House of Representatives narrowly approved a sweeping tax and spending package projected to inflate the national debt by approximately $3.8 trillion over the next decade.
Improved sentiment during yesterday's session was driven by optimism on trade talks between the EU and the US, and macroeconomic developments. US consumer confidence strongly rebounded, with the Conference Board index jumping to 98.0 in May from 85.7, and in France, inflation rose 0.6% yoy in May vs. 0.9% expected, and down from 0.9% in April.
Yesterday, global financial markets delivered a mixed performance, shaped by judicial developments in the United States and uneven economic data. In the US, an initial court ruling blocked most of President Trump’s tariffs, only for a federal appeals court to later reinstate them, injecting renewed uncertainty into ongoing trade negotiations.
Financial markets were mixed yesterday. US Treasury yields were flat after the OECD lowered its global growth outlook from 3.1% to 2.9% in 2025, citing concerns over Trump's trade war and its impact on the US economy. JOLTS data showed the resilience of the US labour market in April, while new orders from businesses fell, possibly due to frontloading in Q1.
Markets rebounded on Monday as geopolitical fears eased amid signs that Iran was seeking to end hostilities with Israel. Sovereign yields fell modestly across the eurozone with peripheral spreads narrowing slightly, as news that the EU would be willing to accept a broad 10% tariff on EU goods from the US were dismissed by the European Commission.
Yesterday, global markets ended the session on a cautious footing as mounting tensions in the Middle East and renewed trade uncertainty weighed on investor sentiment. European equities edged lower amid broad risk-off flows, while U.S. markets remained shut in observance of Juneteenth. In fixed income, eurozone sovereign yields rose, particularly at the long end of the curve, while peripheral spreads widened.
Investors traded in an apparent risk-on mood in yesterday's session, with both stocks and sovereign yields rising across the board. Commodity prices also increased across energy, metals and agriculture products. In FX markets the USD wavered and the EUR traded close to $1.18. Market sentiment benefited from the announcement of a U.S.-Vietnam trade deal.
US headline inflation rose to 2.7% (2.4% in May) and core inflation rose 0.1pp to 2.9%. A detailed breakdown showed prices have begun to rise in some goods categories, suggesting tariffs are beginning to impact. Investors pushed expectations of the first rate cut from September to October, and Treasury yields rose along the curve. The dollar slightly strengthened.
Markets had a mixed session yesterday. Sovereign yields continued to decline across the U.S. and euro area, while the EUR crawled back above $1.17 and touched a 10-day high. European stock markets were mixed while the U.S.' S&P 500 wavered. This morning Japan's Nikkei rallied on the back of a U.S.-Japan trade deal that would set tariffs on Japan at 15% (incl. cars).
Initial optimism over the EU-U.S. trade deal, which had boosted European stocks early in the trading session, soon faded and the region's main indices closed lower with losses led by German stocks (-1%). U.S. stocks had a choppy session and ended mostly flat, while large-cap tech stocks edged higher. The euro slipped to just below $1.16, its lowest in over a month
Euro area investor sentiment recovered following the EU-US trade deal, sending stocks higher across the region. In the US, investors traded in a risk-off mood on news that, after two days of negotiations in Stockholm, Chinese and US officials failed to deliver a trade deal and agreed only to seek an extension of the 90-day tariff truce. Stocks fell, and Treasuries rallied.
Global stocks rebounded and sovereign yields continued to decline as investors cemented their expectations for rate cuts ahead of the Fed's next week meeting. The USD weakened moderately across other major currencies and gold prices continued to surge.
U.S. equity markets reached new highs, led by technology, as sovereign yields declined after producer prices fell more than expected in August (-0.1% m/m), driven by lower services prices. The data reinforced market expectations of a Fed rate cut next week. In Europe, major indices closed mixed, with the notable gains in the IBEX-35 and the defense sector.
In the US, the latest revision of Q2 GDP growth confirmed the economy is expanding at a stronger pace driven by resilient personal consumption and solid private investment. Investors pared back expectations for future Fed rate cuts to four by the end of 2026. This shift pushed Treasury yields higher.
Without relevant macro data to trade on, no advances in negotiations to reopen the US government, nor any new developments in France, markets traded cautiously during yesterday's session. Euro area sovereign yields ended mostly flat while US Treasury yields edged lower, and stocks retreated globally. The euro weakened to 1.16 against the dollar.
Investor risk appetite soured and global risk assets fell after President Trump threatened a “massive” tariff hike on Chinese exports, citing “hostile” export controls over rare earths. Equity indices declined across the Atlantic, with the tech-focused Nasdaq among the worst performers. Trump’s threats were watered down over the weekend.