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Understand the power to drive global markets
By Markets columnist Jamie McGeever
Uncertainty about Washington’s global tariff war and worrying US financial outlook continues to stumble investors.
Equity benchmarks in broad US, Asia, Europe and emerging markets all rose, pushing the MSCI World Index to a fresh record high.
Of course, these broad sweeps hide some notable price movements on certain assets, such as Tesla’s 14% stock crash on Thursday, with the Treasury sliding within the touch distance of up to 15 basis points on Friday, or the new three-year low on Thursday.
Investors appear to be in a tolerant mood, and are willing to trust policymakers to overthrow the tensions in global trade, slow down US fiscal trains as they approach the edge of the cliff, and pilot the world economy with minimal disrupted water.
Investors faced several important monetary policy crosswinds this week. The Bank of Canada stands on the put, and the European Central Bank has been cut by a quarter percentage point, but their guidance was considered relatively Hawkish. Both the Canadian dollar and the euro have been strengthened.
Meanwhile, Switzerland is holding back the anti-swiss National Bank, and traders betting on returning to negative interest rates by the end of the year. Meanwhile, the Reserve Bank of India on Friday was cut more than expected.
Federal Reserve officials have primarily maintained the line that central banks are firmly present in “waiting and looking” camps due to the uncertainty about tariffs and the impact on growth and inflation. If the Fed resumes its easing cycle, it will not be until October, according to interest rate futures market pricing.
With the Global Central Bank likely going into a summer suspension, the focus will be on Trump administration’s trade cooperation negotiations with major trading partners such as China and Europe by July 9, when Washington suspends with mutual tariffs.
US President Donald Trump showed that his 90-minute call with Chinese Xi Jinping on Thursday was friendly, with plenty of smiles at an oval office meeting with German Prime Minister Friedrich Merz later that day.
But in the end, although the call to XI will be made in London next week, nothing concrete came about. And through the 27 European Union, contracts with Germany will be reached, not bilaterally.
The Washington Customs Commission has a huge number of moving parts, including sector tariffs, mutual tariffs, bilateral negotiations with dozens of countries, court rulings and anti-rulers.
Perhaps it’s a bit surprising that the investor’s glass is half full.
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Key market movements this week
*Tesla roller coaster. Elon Musk’s Evcompany shares fell 15%, shaking $155 billion from its market capitalization. This year’s 27% share rare is the majority of the world’s top 20 companies, sweeping $300 billion out of its value. *The S&P 500 was closed at over 6,000 points in February, and despite Tesla’s fall, Nasdaq rose more than 2% in two weeks, indicating a solid revival for US AI/Tech. Global stocks hit a record high with the MSCI World Index rising 1.5% in a week. *The precious metals are shining. Silver rose by around 10% in its highest week since September, rising to its 2013 high of $36/oz. Platinum has also increased by 10%, with 2 weeks in 3 weeks. *US crude oil futures rose 6% to trade above $64, the biggest weekly rise since September, about US Sino trade tensions loans and Hope concerns and Hope. *The US bond yield curve is led by sell-offs at the sheet end, boosting some of the recent steepest. The 2-second/10s curve flat is 11 bps this week, the most since February.
This week’s chart
Again, this week we have two charts, both of which are customs duties.
The first shows how much tariff-related confusion has navigated since the S&P 500 was sworn in by Trump.
The second is based on a New York Fed survey published this week, showing how US companies are passing price increases to their customers. Most surprising, almost half of service companies pass 100% of the tariffs.
Here are some of the best I’ve read this week:
1. US Outlook: Unsure -Mark Zandi2. KingTrump vs. The Bond Market -Kenneth Rogoff3. America’s Retreat is a great opportunity for Europe – Pinelopikoujianou Goldberg4. US tariffs and global inflation – Robin Brooks5. How should Europe respond to King Donald? – Brad Sesser
What can you move through the market on Monday?
*Japan GDP (Q1, final) *Nippon External Trade and Current Accounts (April) *China PPI and CPI inflation (May) *China Trade (May) *Taiwan Trade (May)
The opinions expressed are those of the author. They do not reflect the views of Reuters News. Reuters News is committed to integrity, independence and freedom from bias under the principle of trust.
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(Written by Jamie McGeever, edited by Marguerita Choy)
