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July 11, 2025

Markets surge to new highs, no longer terrified of Tariffs

Global equity markets recovered to register gains after an initial decline this week. The tariff deadline of July 9th  was not enforced and pushed forward to August. However, President Trump announced a 50% tariff on Brazil due to the ongoing trial against former President Bolsonaro. Markets were also concerned about the announcement of a 35% tariff on Canada, 50% on copper and 15-20% on the rest of the world effective from August 1st. The U.S. has decided to resume supply of arms to Ukraine, after Russia escalated with drone and air attacks on Kyiv. Russian foreign minister Sergei Lavrov and US secretary of state Marco Rubio met in Malaysia to discuss an end to the war. President Trump is scheduled to make a statement on the Russia-Ukraine war soon. Israel also resumed its attacks on Gaza this week. Elon Musk announced the formation of a new political party.

Global Updates
  • The MSCI All Country World Index rose slightly after an initial decline earlier in the week. Global equity markets lagged initially due to uncertainty regarding the tariff deadline on July 9th. However, markets recovered following the postponement of the deadline to August. President Trump also communicated with South Korea, Japan and other countries to discuss potential trade deals. Later in the week President Trump announced a 35% tariff on Canada and 50% on copper imports effective August 1st. All other trading partners would be levied in the 15-20% range. 
  • U.S. pharmaceutical firm Merck has announced plans to acquire Verona Pharma for $10 billion to enter the respiratory therapy sector. 
  • TSMC posted a higher-than-expected revenue of $31.9 billion due to the increased AI driven demand for its chips.
  • The members of OPEC+ have agreed on raising their daily output by 548,000 barrels in August due to the positive economic outlook for the near future. However crude oil prices rose due to the possible sanctions on Russia and the rising supply risks due to Houthi attacks on two cargo vessels in the Red Sea. The increased demand from China also signaled increasing demand.
  • Stock prices of Lynas Rare Earths and other Australian mining firms rose after the U.S. Department of Defense entered into an agreement with MP materials for the production of rare earth magnets. 
  • China’s GDP growth is expected to slow down to 5.1% during the second quarter due to the trade tensions with the U.S. 
  • Gold prices were subjected to opposing forces this week. The rising bond yields reduced the demand for gold, whereas the tariffs announcement raised its safe haven demand. Copper prices also jumped sharply owing to President Trump’s decision to levy a 50% tariff on copper imports essential for industrial use.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq continued to rise for the third consecutive week. Both the broad market indices the S&P 500 and the Nasdaq closed at record highs this week. Nvidia became the first public company whose market capitalization crossed the $4 trillion mark this week. The security markets were broadly unaffected by President Trump’s tariff announcements. 
  • The unemployment benefit claims unexpectedly dropped to 227, 000 for the previous week, as layoffs were less than expected by the U.S. Labor Department. 
  • Tesla stock price declined following the removal of the $7,500 tax credit for electric vehicles from the new budget bill passed by the U.S. Congress. Tesla CEO Elon Musk’s announcement for the launch of a new political party, the ‘America Party’, also disheartened investors due to the possible extension of the Trump-Musk conflict. 
  • First Solar and other renewable energy companies declined due to the removal of the federal tax credits for solar installations. President Trump signed an executive order this week, terminating federal subsidies for renewable energy projects. The budget bill passed last week had already terminated ‘clean energy tax credits.’ 
  • Wells Fargo has raised the price target for Uber Technologies stock based on its positive income outlook due to its expansion strategies. 
  • Moderna’s stock price fell this week following a directive by the U.S. Department of Health and Human Services removing the COVID-19 shot from the immunization schedules for infants. 
  • Intel is expected to lay off more than 500 personnel from its Oregon facilities.   
  • Delta Airlines posted a higher-than-expected EPS of $2.1 on revenue of $15.5 billion for the second quarter. Delta also restored its full-year EPS outlook to the $5.25-$6.25 range. 
  • AI cloud provider CoreWeave announced its plans to acquire Core Scientific for $9 billion to leverage its data center infrastructure.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index was slightly lower this week.
  • The U.S. 10-year Treasury yield rose to 4.382% and the yield on the 2-year note was slightly higher at 3.887% over the week. 
  • The U.S. Dollar Index rose slightly to 97.81 this week.

HCM-030624-063.GWS

July 4, 2025

Markets soar higher, yet investors remain wary of tariff suspense

U.S. and global equity markets continued to register gains this week. Investors were enthused by the higher-than-expected employment number from June. However, markets continue to be apprehensive about the 90-day pause in tariffs set to expire next week. The Trump administration has given mixed signals if the deadline would be enforced or extended. U.S. Treasury Secretary Scott Bessent has also indicated that many countries are in the process of negotiating trade deals with the U.S. 

President Trump announced the finalization of a trade deal with Vietnam this week. The U.K. government had to abandon the proposed welfare reforms to avoid the defeat of its landmark welfare bill. The U.S. government has lifted the restrictions on semiconductor software exports to China as part of the trade agreement between the two countries. The U.S. Senate and House of Representatives have passed the U.S. tax bill, which now awaits President Trump’s signature.

Global Updates
  • The MSCI All Country World Index continued to rise for the second consecutive week closely tracking the U.S. security markets. While investors were increasingly optimistic due to the positive employment data emerging from the U.S., some measure of volatility has emerged due to the upcoming tariff deadline. 
  • The U.K. security markets experienced some volatility this week due to the rollback of welfare reforms by the Starmer government in the U.K. parliament. The reforms would have significantly reduced the impact of government welfare on its budget. It was also a political setback for Prime Minister Stahmer due to the opposition by his own party members.
  • London pharmaceutical company AstraZeneca is considering moving its listing to the U.S. This announcement had a major negative impact on European stocks as it is the largest company by valuation listed on the London Stock Exchange. 
  • President Trump announced the finalization of a trade deal with Vietnam, on Truth Social this week. The deal is said to include tariff free access for U.S. goods to Vietnam’s markets, a 20% tariff on Vietnamese imports to the U.S. and a 40% tariff on transshipped goods.
  • China’s Caixin/S&P Global manufacturing purchasing manager’s index for the month of June indicated a continued expansion in manufacturing indicated by the PMI reading of 50.4.
  • Oil futures continued to rise this week due to the planned increase in crude output by OPEC+. However, Iran’s expression of commitment to the NPT partially offset the rising prices.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq continued to rise sharply for the second consecutive week. Both the broad market indices the S&P 500 and the Nasdaq closed on record highs ahead of the Independence Day holiday. A better-than-expected job report raised investor sentiments, even as the markets priced out a rate cut in July.  Nvidia’s valuation rose to $3.89 trillion this week, close to surpassing Apple and reaching the $4 trillion mark. The passing of the tax and spending bill by the U.S. congress, with its large spending cuts yet large deficit has increased consumer apprehension for its net impact on the economy. 
  • The nonfarm payrolls data showed an additional 147,000 jobs in June which was higher than the early estimate of 110,000 jobs. The unemployment rate also declined to a better-than-expected 4.1% in June. Earlier in the week, ADP data raised fears of economic slowdown with a decrease of 33,000 in private payrolls.
  • As part of the U.S.-China trade agreement, the U.S. Department of Commerce has lifted its restrictions on export of semiconductor software to China. This was confirmed by Siemens AG, Synopsys, and Cadence.
  • Federal Reserve Chair Jerome Powell has said that the Fed would have cut interest rates already this year, if President Trump would have not raised worldwide tariffs and introduced market volatility and inflationary pressures in the markets.
  • The U.S. Department of Justice has approved the $14 billion takeover of the networking company Juniper Networks by Hewlett Packard Enterprise. 
  • First Solar’s stock price rose following the passing of the latest version of the tax bill by the senate which includes provisions for new taxes on imported equipment for renewable energy. 
  • Palantir Technologies stock rose after the announcement of its collaboration with Accenture to provide services to the federal government. 
  • Goldman Sachs, Citigroup and the Bank of America announced higher dividend payouts following the Federal Reserve’s stress test. 
  • Morgan Stanley and JP Morgan have announced stock buyback programs of $20 billion and $50 billion, respectively.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose slightly this week.
  • The U.S. 10-year Treasury yield rose to 4.348% and the yield on the 2-year note also rose to 3.886% over the week. 
  • The U.S. Dollar Index depreciated slightly to 97.0 this week.

HCM-030624-063.GWS

June 30, 2025

Potential China-U.S. trade agreement raises markets to record levels

The U.S. and global equity markets surged this week spurred by investor optimism for the Iran-Israel ceasefire and a China-U.S. trade agreement. U.S Commerce Secretary Howard Lutnick has indicated the possibility of 10 more agreements with U.S. trading partners being signed in the near future. OPEC+ is set to raise Crude supplies from August, putting downward pressure on oil prices. The U.S. joined the Iran-Israel conflict this week by bombing three nuclear sites in Iran. Iran responded by launching an attack on the U.S. airbase in Qatar. President Trump later announced a ceasefire between Israel and Iran. In Europe, the European Union (EU) and Canada entered a security pact facilitating joint procurement of military resources. NATO leaders met in Hague this week to discuss a defence spending target of 5%. Spain was the only holdout to the spending decision.

Global Updates
  • The MSCI All Country World Index jumped this week driven by the recovery in U.S. equity markets driven by growing investor optimism regarding the Sino-U.S. trade agreement and hope for reduced tariffs. Defence stocks also rose due to the higher spending agreement by NATO members. 
  • The EU has announced its plans to impose retaliatory tariffs on U.S. imports including Boeing aircrafts, if the U.S. imposes a baseline tax on EU exports
  • Germany has announced its plans to raise 19 billion euros in debt in the third quarter to finance its defence and infrastructure expenditure. 
  • The German automobile parts manufacturer Continental has lowered its profit guidance for 2025 to the 10.5% to 11.5% range due to currency effects and trade tariffs.  
  • UBS will be commencing its $2 billion share buyback program from July 1st. 
  • The Canadian senate has approved Prime Minister Mark Carney’s bill to fast-track projects which are essential for national interests. 
  • Canada’s consumer inflation remained in line at 1.7% for May due to drop in gasoline costs.
  • Copper prices rose this week due to a surge in copper imports by the U.S. due to inventory building ahead of proposed tariffs. The price surge was also pushed by the strong demand for Copper from China.  
  • OPEC+ countries have signaled their plan to regain their market share by increasing production by 411,000 barrels per day in August. The news has weighed on crude prices since its announcement.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq rose sharply this week. The S&P 500 Index reached a new record 6,173 benchmark on Friday. U.S. Commerce Secretary Howard Lutnick announced that the U.S. and China have agreed to a trade framework along with lower tariffs and resumption of access to rare-earth minerals. He also mentioned that agreements with 10 major trading partners are in the pipeline. China’s ministry of commerce also confirmed the agreement on a trade framework in London earlier this month.  
  • President Trump has indicated the end of trade talks with Canada due to the adoption of a digital services tax by Canada under which all technology companies operating in Canada would be taxed. 
  • Senate Republicans have removed the Section 889 provision, also called the ‘Revenge Tax’ provision from the Federal Tax Bill, on the request of Treasury Secretary Scott Bessent. 
  • Nike’s stock price rose after the company posted a larger-than-expected fourth quarter (fiscal) revenue of $11.1 billion. However, the company reported a 14% drop in direct sales and a 26% drop in online sales for the same period. The company reportedly plans to raise prices as well as reduce its production in China after losing $1 billion in additional costs due to tariffs.
  • Tesla’s stock price jumped following the launch of its Robotaxi service in Texas. Tesla plans to expand its service to other locations by the end of 2026.
  • Evercore ISI raised the price target for Arista Networks in expectation of a revenue jump from its collaborations with Meta and other cloud services. 
  • Super Micro Computer’s stock price dropped after the company announced its intention to issue convertible notes worth $2 billion.
  • Northern Trust has rejected a merger proposal by the Bank of New York Mellon, reiterating its commitment to remain independent and deliver long-term value to its stakeholders. 
  • Meta stock price rose after the company was reportedly interested in acquiring PlayAI, a startup which specializes in replicating voices using AI.  
  • The Trump administration is currently planning to sign executive orders which will regulate and authorize energy infrastructure necessary for AI development and expansion in the U.S.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose this week.
  • The U.S. 10-year Treasury yield fell to 4.283% and the yield on the 2-year note also lagged to 3.74% over the week. 
  • The U.S. Dollar Index depreciated slightly to 97.25 this week.

HCM-030624-063.GWS

June 23, 2025

Markets remain cautious as the Middle East heats up

The Iran-Israel conflict continued this week with both countries launching attacks on each other. President Trump resolved to take a stance on the U.S. interceding in the conflict within two weeks, even as he warned the residents of Tehran to leave the city. Iran’s Parliament approved the blockade of the Strait of Hormuz which would drastically impact the global energy trade, while Iran was in the process of transporting oil stocks out of Tehran. Major central banks across the world chose to keep their policy rates unchanged this week citing global uncertainties and inflation risks. President Trump left the G7 summit in Canada early, citing the ongoing Iran-Israel conflict. Canada increased pressure on President Trump to arrive at a trade deal. On the sidelines of the G7 summit, Canada and India agreed to renew the diplomatic relations between the two countries. President Trump’s crackdown on illegal immigration at workplaces has increased economic stress for American businesses.

Global Updates
  • The MSCI All Country World Index was lower this week due to the escalating Iran-Israel conflict. 
  • In the United Kingdom consumer confidence rose by 2 points in June, indicating greater optimism of consumers in the economy. This marked the third consecutive month of gains in confidence and the highest confidence levels since December 2024.
  • Canada’s Prime Minister Carney has suggested higher counter-tariffs on steel and aluminum from the U.S. if the two countries are unable to arrive at a trade deal in 30 days. 
  • The Bank of England kept its policy rate unchanged at 4.25%, citing rising global uncertainty and inflation risks.
  • Japan’s core inflation rose to 3.7% in May, the highest in more than two years. This may force the Bank of Japan to raise interest rates despite the economic uncertainty from U.S. tariffs.  
  • The People’s Bank of China kept its key lending rates unchanged in line with market expectations due to rising retail sales and the country’s economic growth continuing to be on track to its growth targets.
  • China’s retail sales growth rate of 6.4% in May, driven by the “618” ecommerce event for consumer goods, was the fastest in 18 months. However, China’s growth in industrial production and fixed-asset investments slowed down to 5.8% and 3.7% respectively in the same period.
  •  China’s exports of rare earth minerals fell by 53% to a five-year low in May due. China had placed export restrictions citing concerns for its national security and supply chain stability. 
  • Global oil prices touched a five-month high this week due to fears of global supply bottlenecks due to the escalation in the Iran-Israel conflict.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq were weighed down by the escalating tensions in the middle east and the uncertainty regarding rate cuts by the fed. However, the redeployment of U.S. military assets to the Middle East has indicated a greater likelihood of U.S. involvement in the conflict.
  • On the economic front the U.S. industrial production slowed down by 0.20% in May, declining for the second time in the second quarter, due to cooling in demand. The NAHB housing market index which measures homebuilder sentiment also dropped to the lowest in 30 months, weighed down by the higher mortgage rates and economic uncertainty.
  • President Trump’s use of workplace raids to reign in illegal immigration has triggered workplace avoidance by workers in New York, Colorado, Texas and California leading to stress on businesses and farms. 
  • The Fed chose to hold interest rates steady this week. Fed Chair Jerome Powell reiterated the importance of Fed’s data driven approach to its interest rate policy. However, Fed Governor Christopher Waller anticipated an earlier rate cut, as early as July. He downplayed the inflation risk from tariffs and prioritized tackling unemployment and the economic slowdown by lowering the borrowing costs. 
  • Chip stocks declined this week due to the possible change in U.S. policy permitting use of American technology by Multinational semiconductor companies in their manufacturing units in China. The policy change to limit China’s access to advanced technologies affected the stock prices of Broadcom, TSMC, Nvidia and other companies.
  • J.P. Morgan announced its plans to launch a stablecoin which will only be available to its institutional clients. J.P. Morgan CEO Jamie Dimon initially expressed significant skepticism about the long-term viability of cryptocurrencies.
  • The Trump administration has extended ByteDance’s deadline for selling its U.S. division of TikTok by 90 days.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index dipped slightly this week.
  • The U.S. 10-year Treasury yield fell to 4.375% and the yield on the 2-year note also lagged to 3.908% over the week. 
  • The U.S. Dollar Index rose slightly to 98.71 this week due to safe haven demand for the currency.

HCM-030624-063.GWS

June 13, 2025

U.S. China agree to trade – Conflict in the Middle East drives risk-off sentiment

President Trump has announced an in-principal trade agreement between the U.S. and China where they would impose 10% and 55% tariffs respectively. The U.S. would also receive rare earths from China as part of the deal. Economic data from the U.S. and Canada also improved market sentiment this week. China’s embargo on supply of rare-earth and magnets continues to put Auto companies and other industries at risk of supply bottlenecks.  Resurgent tensions in the middle east have led to a risk-off sentiment in the markets.

Tensions in the middle east resurfaced this week following the commencement of Israel’s ‘Operation Rising Lion’ wherein Isreal attacked Iran targeting its nuclear infrastructure and its leadership. U.S. Secretary of State Marco Rubio distanced the U.S. from the attack on Iran, to head off any reprisals by Iran. Boeing stock price dropped following a major airline crash of a Boeing 787 Dreamliner in India killed 240 people. Colombian presidential candidate Senator Miguel Uribe remains critical after being shot on the campaign trail.

Global Updates
  • The MSCI All Country World Index was higher this week driven by positive economic data. The in-principal agreement in London between the U.S. and China to resolve their disputes also encouraged investor sentiments. The trade deal would encompass supply of rare earths, magnets and education of Chinese students in the U.S. among other issues. The agreement awaits the final approval by the political leadership of the respective countries.
  • The unemployment rate in Canada jumped up for the third consecutive month to the highest of 7% in nine years in May. The uptick in unemployment was driven by the near stagnation in employment growth.
  • Prime Minister Mark Carney announced the largest increase in Canada’s defense spending by $9 billion this year to meet NATO’s 2% spending threshold. Sweden will also be raising its defense spending to 5% of its GDP.
  • France’s BPCE, which is the fourth-largest banking group in the euro zone has arrived at a $ 7.9 billion agreement to acquire Portuguese bank Novo Banco
  • China’s exports to the U.S. dropped by 34.5% year-on-year to $28.8 billion in May, which marks the largest decline in U.S. bound exports from China since the COVID pandemic.
  • Oil and gold prices have risen following the resurgence of conflict in the middle east. The markets are exhibiting concerns on the risks to Strait of Hormuz, which is the conduit for one fifth of the world’s oil supply.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq ended higher this week due to renewed confidence in the U.S. economy despite tariff concerns. Additionally, the in-principal agreement between the U.S. and China also improved market sentiments.
  • The U.S. Bureau of Labor Statistics has reported a higher-than-expected additional 139,000 jobs in the U.S. economy in May, while the unemployment rate remained steady at 4.2%. The continued resilience of the U.S. labor market elevated market optimism. The unemployment claims for the previous week also remained steady at 248, 000.
  • The U.S. CPI inflation reading for May was lower than expected at 2.4% due to lower energy prices.
  • According to Bloomberg, U.S. Treasury Secretary Scott Bessent has been shortlisted succeed Fed Chair Jerome Powell. Bessent has also suggested the possible extension of the 90-day tariff pause deadline, to enable negotiations, while testifying in front of the House Ways and Means Committee.
  • Oracle has reported a higher than expected 11% growth in its fiscal fourth quarter revenue to $15.9 billion and an adjusted net income of $4.88 billion. The growth was driven by a 52% jump in the company’s cloud infrastructure revenue to $3 billion. The company also raised its growth forecast for the cloud infrastructure to 70%.
  • Adobe has posted a record higher-than-expected adjusted net income of $2.17 billion on the second fiscal quarter revenue of $5.87 billion. The growth was driven by a 11% jump in its revenue from Creative Cloud subscriptions. The company also raised its full-year revenue outlook to $23.5 billion.
  • Boeing stock price dropped following the major crash of a Boeing 787 Dreamliner, flying from India to the U.K., on a medical college hostel in India. More than 242 people are reported killed in the incident.
  • Apple unveiled a new Liquid Glass Design and its new AI driven strategy this week, at the 4-day long Apple Worldwide Developers Conference. The release of the Siri AI upgrade has been now delayed to the Spring of 2026.
  • Tesla’s stock price continued to slide this week following the public disagreement between President Trump and Elon Musk. Elon Musk later expressed regret for some of his social media posts on X.
  • Walmart and Amazon are exploring the possibility of issuing stable coins which would enable their cross-border transactions and significantly reduce bank fees.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose slightly this week.
  • The U.S. 10-year Treasury yield fell to 4.351% and the yield on the 2-year note also lagged to 901% over the week.
  • The U.S. Dollar Index depreciated to 98.23 this week due to cooling inflation.

HCM-030624-063.GWS

June 6, 2025

Tariff delays power global equities rally

The week began with China accusing the U.S. of violating the temporary agreement between the two countries. However, the call between President Trump and President Xi revived hopes of normal trade resuming between the two countries. This week the representatives of the U.S. Federal Reserve (Fed) have suggested that the path to a rate cut would not be straightforward due to the prevailing tariff and economic uncertainty in the global economy. However, the cooling of the U.S. labour market has revived calls for the Fed to cut interest rates. 

South Korea has voted in Lee Jae-myung of the Democratic Party as the new President after months of political chaos following a failed attempt at imposing martial law in the country. In the U.S. former Trump supporter Elon Musk has publicly expressed his criticism of the republican spending and tax bill currently being discussed in the senate, for the fiscal deficit entailed. Russia rejected Ukraine’s ‘unconditional ceasefire’ proposal at their peace talks in Istanbul. A devastating drone attack by Ukraine on Russian airbases prior to the talks had destroyed 41 Russian strategic bombers.

Global Updates
  • The MSCI All Country World Index was higher this week due to rate cuts by major central banks in Europe, Canada and India along with data indicating labour market resilience. Increased optimism for the normalization of trade ties between the U.S. and China also resulted in market gains. 
  • The European Central Bank cut its deposit facility rate by 25 bps to 2%. The yield on German and French bonds fell following the announcement. The bank also lowered the inflation expectation due to a strong euro and declining energy prices. 
  • China had accused the U.S. of violating the trade truce agreement earlier in the week. However, a call between President Xi and President Trump revived hopes of normalization in trade ties between the U.S.A and China. 
  • Canada’s annual GDP growth rate rose to 2.2% in Q1, 2025. The Bank of Canada (BoC) prioritized controlling inflation and kept its interest rate unchanged at 2.75% this week. BoC Governor Tiff Macklem suggested that further softening of Canada’s economy in the future could justify a rate cut.
  • Canada’s manufacturing Purchasing Managers Index (PMI) reading of 46.1 for May indicated continued contraction in manufacturing activity despite a slight improvement from the previous month. 
  • Tesla’s new car sales fell by 46% to 1,758 units in Britain in May due to increasing competition and CEO Elon Musk’s political stance. However, the car maker continues to be the leader in the electric vehicle market. 
  • The Caixin/S&P Global manufacturing PMI for China declined to 48.3 in May indicating a sharp drop in manufacturing activity for the month due to decline in export orders.  
  • South Korean equities hit 10-month highs with the Kospi briefly crossing the 2800 benchmark this week on renewed hopes of political stability following the election of Lee Jae-myung of the Democratic Party as the new President of the country.
  • The Reserve Bank of India implemented an unexpectedly large 50 bps cut to its repo rate to 5.50% due to an under control inflation and uncertainty in global trade.
  • The OPEC+ group plans to hasten the unwinding of their voluntary production cuts (from November 2023) and raise their crude output by 411,000 barrels per day (bpd) from July. This was partially offset by the 344, 000 bpd disruption in Canada’s oil production due to wildfires.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq ended higher this week due to rise in U.S. steelmaker equities, trade talks between President Trump and President Xi, and increasing optimism from data indicating labour market resilience in April. This was partially offset by data indicating a cooling labor market in April and the higher tariffs on steel and aluminum imports.  
  • President Trump has signed in the 50% tariff on steel and aluminum imports into the U.S. The U.K. was granted an exemption from these taxes. The news along with the Trump administration’s green light for the U.S. steel and Nippon steel’s partnership had led to an upsurge in steel-based securities. 
  • The annual inflation of the U.S. Core PCE price index slowed to 2.5% in April, in line with expectations.
  • Constellation Energy’s 20 year power supply deal with Meta to drive its Artificial Intelligence projects drove up the Nuclear Power behemoth’s stock price. 
  • Fed Governor Lisa Cook anticipates that U.S. tariffs will jeopardize price stability and the Fed’s path to cutting rates this year. Atlanta Fed President Raphael Bostic suggested that the stability of the U.S. economy enables the Fed to delay the change in monetary policy for greater effectiveness.
  • The Organisation for Economic Co-operation and Development (OECD) had to trim its GDP growth forecast for the U.S. to 1.6% for 2025 from the previous estimate of 2.2% for 2025. The global growth estimate for 2025 has also been lowered to 2.9%. The economic slowdown is expected to be focused on the U.S., Canada, Mexico and China due to policy uncertainty and fiscal constraints.
  • The Job Openings and Labor Turnover Survey (JOLTS) for April indicated a cooling U.S. labor market with a higher-than-expected 7.4 million job openings in April even as layoffs rose to 1.78 million. The rise in vacancies was driven by health care and social assistance. However, the ADP employment report indicated a stagnation in job creation in May, with new jobs in private sector slowing down to 37,000. 
  • GlobalFoundries unveiled its plans to invest $16 billion in increasing chip production in the U.S. in collaboration with Apple and General Motors. 
  • Nvidia’s market capitalization reached $3.45 trillion this week, surpassing Microsoft as the most valuable company, due to a 24% jump in stock value over the past month.
  • The Fed has lifted the $1.95 trillion asset cap from Wells Fargo imposed 7 years ago to penalize the bank for the fake accounts scandal. The bank can now pursue asset growth through deposits, loans and asset management.  
  • The trading platform Robinhood has acquired Bitstamp for $200 million to enter the global crypto market.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose this week.
  • The U.S. 10-year Treasury yield fell to 4.391% and the yield on the 2-year note also lagged to 3.914% over the week. 
  • The U.S. Dollar Index depreciated to 99.78 this week. Morgan Stanley anticipates a further 9% drop in the USD by mid-year, 2026, due to the downstream effects of President Trump’s disruptive policies.

HCM-030624-063.GWS

May 30, 2025

Tariffs and fiscal deficit continue to dominate the global zeitgeist

Global markets were optimistic following European Commission President Ursula von der Leyen’s success in convincing President Trump to delay the deadline for the European Union (EU) and the U.S. to arrive at an accord to July 9th. The suspension of tariffs by the US Court of International Trade also briefly enthused the markets, which was later reversed by the U.S. Court of Appeals.

Discussion of the ballooning U.S. budget deficit and a poor demand for long term bonds at Japan’s 40-year bonds auction weighed on the sovereign debt markets this week. The tax on passive incomes of foreign investors in the U.S. budget proposal being discussed in the U.S. senate also weighed on market sentiments. Elon Musk completely stepped down from the Trump administration this week to return to managing Tesla and SpaceX. US Treasury Secretary Scott Bessent has hinted that the China-U.S. trade talks are currently stalled, and President Trump and President Xi may need to intervene for the talks to resume.

Global Updates
  • The MSCI All Country World Index was on an upward trend this week as investors were optimistic following President Trump’s agreement to delay the deadline for arriving at an EU-U.S. consensus. The concerns of the ballooning U.S. deficit have also weighed on markets. Fiscal deficit concerns also weighed on the demand for Japan’s long-term bonds.
  • A Bloomberg report has suggested that the European Central Bank is highly likely to cut interest rates two more times this year, in May and in September. Experts and Analysts have advised the ECB to not delay the rate cuts in the interest of market stability.
  • Retails sales declined 1.1% unexpectedly in April in Germany. However, on an annual basis the retail sales rose by 2.3%.
  • National Bank of Canada reported a 56% jump in its higher-than-expected $846.78 million second quarter adjusted profits driven by tariff-based volatility in the markets.
  • The OPEC+ group reaffirmed the production levels determined at its December meeting. The group plans to lower production by 2 million barrels per day till 2026 end. OPEC+ representative will again meet on Saturday to discuss their July production levels. The Iran-U.S. talks, an anticipated future supply glut along with the global economic slowdown have been weighing on crude prices this week.
  • Fiscal deficit concerns also weighed on the demand for Japan’s long-term bonds at an auction of 40-year bonds leading to a sale of $3.46 billion at a below-average bid-to-cover ratio of 2.21.
  • Tokyo Core CPI inflation jumped to 3.6% in May due to food and fuel costs.
  • Japan reported a lower-than-expected 0.9% drops in industrial production in April, bolstered by local demand despite U.S. tariffs. South Korea’s industries on the other hand were subject to energy constraints in April and industrial production dropped by 0.9%.
  • Nippon Steel will be investing $6.05 billion electronic furnaces to reduce carbon emissions in three steel plants in Japan.
  • China has indicated, it is amenable to negotiating supply of rare earths and magnets, which are integral to manufacturing electronic appliances, automobiles and planes. On the other hand, U.S. exporters to China have been required to procure licenses to export ethane and butane to China.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq were higher this week after President Trump pushed the deadline for negotiating down the 50% tariffs on EU imports to July 9th, following his conversation with the European Commission President Ursula von der Leyen. Discussions of the U.S. budget deficit estimated to be $ 1.5 trillion this year, raising the total US debt to $ 37 trillion have negatively weighed on market sentiments. The Trump tariffs are currently generating an estimated $ 190 billion in revenues annually and which could offset the tax cuts and reduce the fiscal deficit of the government.
  • Investors are also increasingly apprehensive of the tax on foreign investors’ passive incomes, included in the budget bill, which could impact the U.S. dollar and treasuries.
  • The minutes of the Fed’s last meeting released this week, reaffirmed the Fed’s difficult decision of balancing policies targeted to manage inflation and volatility with policies for economic growth and controlling unemployment. The Fed will wait for the ongoing tariff driven financial and economic uncertainties to abate before employing the monetary tools at its disposal.
  • The US Court of International Trade blocked President Trump’s tariffs this week. This ruling was later temporarily paused by the U.S. Court of Appeals, giving the Trump administration room to approach the Supreme Court.
  • Cantor Fitzgerald has arrived at an agreement to acquire O’Connor Asset Management from UBS. O’Connor has $ 11 billion in assets under management.
  • Nvidia reported a 73% annual growth in its data center business driving up its first quarter revenue by 69% to a higher-than-expected $44.06 billion, resulting in an adjusted EPS of 96 cents. Nvidia reportedly absorbed a $4.5 billion charge due to the government restrictions on exports of AI chips to China. Nvidia’s CEO Jensen Huang expects the export restrictions to further cost the company $8 billion in sales reducing the company’s second quarter sales to $45 billion.
  • Salesforce reported an adjusted net income of $2.5 billion for the first quarter, on a revenue of $9.83 billion which beat estimates. Salesforce raised its fiscal 2026 revenue estimate to the $41 billion-$41.3 billion range.
  • Elon Musk has officially ended his involvement with the U.S. government and will be devoting his time and efforts to Tesla. Tesla has reported a 53% drop in sales for April in the EU and a 46% drop for the January to April period in 2025.
  • Salesforce plans to acquire Informatica for $8 billion. Informatica provides AI enabled data management software.
  • The Financial Times has reported that the Trump Media & Technology Group is seeking to raise $3 billion through convertible bonds and equities to invest in cryptocurrencies.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose this week.
  • The U.S. 10-year Treasury yield dipped to 4.424% and the yield on the 2-year note also lagged to 947% over the week.
  • The S. Dollar Index depreciated slightly to 99.39 this week.

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May 23, 2025

Fiscal anxiety of the U.S. economy weighs on investor sentiments worldwide.

Global markets were increasingly apprehensive this week due to concerns regarding higher inflation and the ballooning U.S. fiscal deficit. The U.K. and Japan reported higher-than-expected inflation in April. Moody’s downgraded U.S. sovereign credit rating citing the fiscal stress on the U.S. economy. Possibility of an Israel-Iran conflict raised Crude oil prices which were subsequently cooled by the news of upcoming U.S.-Iran talks. China cut its domestic interest rates to revive the currently sluggish domestic demand. The U.S. house of representatives narrowly passed the Republican budget proposal, which now awaits the senate’s approval. The easing of U.S.-China trade relations continued with the talks between the US Deputy Secretary Kurt Campbell and Chinese Vice Foreign Minister Ma Zhaoxu this week. Chinese officials also expressed their interest in supporting U.S. businesses. This week President Donald Trump also unveiled a $175 billion plan for a Golden Dome program to shield the U.S. from Chinese and Russian attacks.

Global Updates
  • The MSCI All Country World Index was lower this week as investors globally digested the data on rising inflation and the ballooning U.S. fiscal deficit.
  • The inflation in the U.K. surged to 3.5% in April, the highest since January 2024, from 2.6% in March. The rising prices were motivated by higher payroll taxes and utility prices. Despite the inflation, retail sales in the U.K. recorded a strong 1.2% growth in April, due to the weather. Japan’s core inflation also rose to 3.5% in April, the highest in two years spurred by rising food grain prices due to the impact of U.S. tariffs. Central banks of both countries are increasingly cautious of changing their interest rates, given the inflation data.
  • The European Union and the U.K. unveiled an agreement covering the economic, political and security issues. The agreement attempts to reset relations between them, five years post-Brexit. 
  • U.K. telecom giant Vodafone reported a full-year operating loss of 411 million euros on a revenue of 37.4 billion euros, due to the impairment charges of 4.5 billion euros in Germany and Romania. 
  • The finance ministers and central bank leaders of the G7 countries met this week in Banff, Alberta to lay the groundwork for the upcoming meeting of the G7 leaders next month. The finance group came to a consensus on monitoring the risks from AI, combating financial crimes and support for Ukraine. 
  • Bloomberg news reported that the UBS group may be required by the Swiss government to hold $25 billion additional capital for loss absorption for 100% of its foreign units’ capital.
  • The People’s Bank of China cut its one-year loan prime rate (LPR) by 10 bps to 3.0 % and the five-year LPR from to 3.5 %. The rate cut was driven by sluggish demand in China’s economy which was exacerbated by the ongoing tariff crisis.  
  • Global oil prices fluctuated this week due to the fears of supply disruption. Earlier prices rose following the release of a CNN report which suggested that an Israel attack on Iran’s nuclear sites was imminent. Subsequently prices cooled following the news of the next round of U.S.-Iran nuclear talks scheduled in Rome. Bahrain and Russia are currently in talks for supply of Natural Gas.
  • Precious metals are set to gain this week due to concerns for the U.S. economy weighed down by fiscal stress.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq ended the week lower, weighed down by concerns for the U.S. economy. Moody’s downgrading of U.S. treasuries due to the fiscal stress on the U.S. economy was a cause of concern for investors this week. The discussions of the Republican tax and spending bill in the U.S. Congress, also highlighted the ballooning U.S. deficit. Investors were also cautious due to the higher inflation reported in the U.K. and Japan.
  • The U.S.’ sovereign credit rating was downgraded by Moody’s to Aa1 due to the fiscal strain of debt servicing costs and rising national debt in the current high-interest rate environment. 
  • The Republicans’ budget bill cleared the House of Representatives by a narrow margin. The bill incorporates significant tax and spending cuts. The U.S. senate will be discussing the bill next week. 
  • The U.S. senate is set to pass the first crypto currency legislation by the U.S. Congress, setting up the regulatory framework for cryptocurrencies. Cryptocurrency related stocks rose following the news. 
  • Seagate Technology Holdings has been authorized to repurchase stocks up to $5 billion, to support the company’s cash flow and capital. 
  • Alphabet shares rose following the unveiling of Google’s “AI Mode” in Google Search for all U.S. based users.
  • President Trump opined that the retail giant like Walmart should absorb the cost increases from his tariff policies instead of charging higher prices for the customers. 
  • Blackstone Infrastructure will be acquiring TXNM Energy, the power provider in New Mexico and Texas, for $11.5 billion. 
  • Nvidia CEO Jensen Huang, while praising President Trump on his flexibility on the tariffs imposed on AI related tech, has estimated the lost sales due to the government export restrictions on AI chips at $50 billion. The major loss in sales was in China, where Nvidia’s chips were substituted by domestically manufactured chips.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose this week as markets digested higher estimates for inflation and fiscal pressure in developed markets.
  • The U.S. 10-year Treasury yield rose to 4.513% and the yield on the 2-year note was in line at 3.983% over the week. 
  • The U.S. Dollar Index depreciated to 99.51 this week. The lackluster demand for 20-year bonds this week, led to a dollar selloff. The downgrading of U.S. treasuries by Moody’s and the ballooning U.S. deficit also weighed on the value of the U.S. dollar.

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May 16, 2025

U.S. and China slash tariffs, global markets heave a sigh of relief

U.S. and China agreed to drastically lower the mutually imposed tariffs, enthusing the equity markets. The Federal Reserve (Fed) chair appraised the markets of the possibility of interest rates being maintained to manage supply shock inflation. President Trump signs executive order to lower pharmaceutical drug costs and punitive action in case of non-compliance. President Trump toured the Middle Eastern countries this week and is expected to announce multiple deals during this period. Armed conflict between India and Pakistan ceased this week, which was facilitated by the U.S.A. President Trump also said that the nuclear deal talks with Iran are progressing well. Russian president Vladimir Putin avoided the highly expected meeting with Ukrainian President Volodymyr Zelensky in Turkey.

Global Updates
  • The MSCI All Country World Index was higher this week driven by the trade optimism after the U.S. and China agreed on a 90-day tariff truce in Geneva. Both countries rolled back their reciprocal tariffs by 115% lowering the U.S. tariffs to 30% and Chinese tariffs to 10%. The equity markets and the dollar rallied following the news and prices of safe haven assets like Gold declined.
  • Richemont reported a higher than expected 7% growth in first quarter sales, driven by higher spending by wealthy customers ahead of the U.S. tariffs. 
  • Novo Nordisk has agreed to the collaborative development of oral molecular drugs for treating obesity and diabetes, with the U.S. biotech firm Septerna.  
  • China has surpassed the U.S. as the leading customer for Canadian crude from the Trans Mountain pipeline. 
  • Alibaba reported lower than expected first quarter revenue of $32.8 billion due to sluggish consumer spending and increased competition. China’s IT stocks were weighed down by the possibility of the U.S. widening the export blacklist of Chinese semiconductor firms 
  • Japan’s real GDP contracted by 0.7% in the first quarter of 2025. The economy was weighed down by declining exports demand and stagnation in private consumption.
  • Crude oil prices benefited from the potential oil demand anticipated due to the lowering of the U.S.-China tariffs. Crude oil prices had been initially weighed down by the supply pressures from OPEC+ and the possible suspension of sanctions on Iran due to the nuclear deal being negotiated by the U.S. with Iran.
U.S. Equity
  • The S&P 500, Dow Jones and Nasdaq indices recovered this week driven by market optimism for the Sino-U.S. tariff truce. The reduced tariffs between the two countries drove up the stock prices for electronics, AI related products and Automobiles.
  • U.S. retail sales were lackluster in April, recording only 0.1% growth in sales. Producer prices contracted by 0.5%, due to the sharp drop in travel costs due to softening demand. Sluggish economic growth is now anticipated in the near future. 
  • Fed chair Jerome Powell cautioned the markets of the possibility of interest rates being maintained higher for longer, to deal with supply shocks and inflation in the near future. The Fed will have to recalibrate and balance its approach to manage the twin mandates of controlling inflation and supporting economic growth. In the long run, the fed still considers its target inflation rate of 2% to be achievable.
  • The UnitedHealth Group’s stock price fell following the news of an investigation by the U.S. Department of Justice for Medicare fraud by its Medicare Advantage business. The health insurance company’s CEO Andrew Witty also stepped down for personal reasons. The company also had to suspend its full year outlook due to higher-than-expected expenditure costs. 
  • Walmart stock price gained after the company reported a higher than expected first quarter Earnings per Share (EPS) of $0.61 on a revenue of $165.99 billion. Walmart reiterated is fiscal 2026 guidance issued in the year beginning. Walmart CEO Doug McMillon cautioned for higher prices in the coming months due to tariffs. 
  • Nvidia’s market cap rose to $3.2 trillion, after it announced a new chip supply deal with the Saudi Arabian AI startup Humain.  
  • President Trump signed an executive order this week, setting up a 30 day deadline for pharmaceutical companies to lower the prices of prescription drugs indexed to the lowest price charged in other developed countries. In case of unsatisfactory action by pharma companies, the Trump administration will impose limits on prices paid by the government. The Republicans have also unveiled plans to reduce $880 billion from the budget allocation for Medicaid 
  • Boeing stock gained after the Chinese government raised the restrictions placed on airlines from taking delivery of planes manufactured in the U.S. The restrictions which had been setup by Beijing were relaxed subsequent to a temporary Sino-U.S. tariff agreement.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index recovered from a decline earlier in the week.
  • The U.S. 10-year Treasury yield rose to 4.406% and the yield on the 2-year note edged up to 3.926% over the week. 
  • The U.S. Dollar Index appreciated slightly to 100.55 this week.

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