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.

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