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The good news concerning US-EU trade talks caught up to US stocks yesterday following Monday’s market closure. The EU agreeing to fast-track trade negotiations was a welcome development for all involved and markets on both sides of the Atlantic reacted accordingly. All three major US indices enjoyed strong rallies; the Dow rising 1.8%, the S&P 500 gaining 2% and the Nasdaq closing the day 2.5% higher. European stocks also partook in the celebrations, with the German DAX in particular hitting a record high yesterday. It is fair to say that markets in general have settled down over the past two days. Cash flows have pivoted back towards the Dollar while gold has been dragged back below $3,300 early this morning. Crypto remains muted. Markets are patiently awaiting a couple of events later today. The first is the publication of the latest FOMC minutes, the second is the release of Nvidia’s first quarter fiscal results. The only question people will want an answer to with regards to the Fed is whether or not some board members are beginning to change their tune about the threat of inflation. There have been minor murmurings of dissent recently, as some members argue the impact of new duties will be limited and short-lasting. With that said, few are expecting a rate cut at the next meeting in June or indeed the one after. As for Nvidia, the chipmaker is certainly one of the heavy hitters on the earnings calendar and the latest results will no doubt trigger a few ripples, although the report will only hit the newswires after the closing bell. The company has been on the receiving end of both import tariffs and export bans as a result of the ongoing trade antics. One point of interest is the impact of the recent export restrictions to the Chinese market, which currently accounts for 14% of Nvidia’s revenue.
Tensions between America and Europe peaked at the end of last week, culminating in president Trump imposing a straight 50% tariff on all EU goods. By all accounts, negotiations between the two blocs had proceeded poorly up until that point, with Trump accusing the EU of being “very difficult to deal with” and that the discussions “were going nowhere”. European and US indices reacted badly to the announcement, dropping sharply last Friday while the Dollar continued to lose out against the majors. The move also prompted fresh inflows into gold, ever the safe haven in troubled times, raising the precious metal to $3,358 an ounce. It did not take long to bring the EU back into the fold. By Sunday night, the Trump administration had agreed to postpone the deadline to the 9th of July, giving more time for a deal to be reached. US futures have shot up following the announced delay. The selloff in the Dollar continued this morning, lifting the Euro up to $1.14 while the Pound Sterling pushed towards $1.36 – a three year high. The shift to risk-off conditions late last week cut short the momentum in crypto, causing a minor fall for Bitcoin from highs of $112k down to $108k over the weekend. Some measure of bullishness has returned to cryptocurrencies this morning but it is too early to say whether or not we will be seeing new highs again this week. The economic calendar is particularly dry this week – it is the end of the month after all. Markets have the FOMC minutes to look forward to on Wednesday, although given how consistent the Fed has been in recent months, the latest meeting will likely provide nothing of substance. The big event of the week will be the PCE price index, set to be released on Friday. So far inflation in the US has not been the catastrophic blight that economists have been warning about, in fact figures have consistently fallen below expectations. The latest publication will reveal whether or not the trend continues.
On the 22nd of May 2010, a young man named Laszlo bought two large pizzas for the eye-watering sum of 10,000 BTC. It is quite fitting then that fifteen years later to the day, Bitcoin broke a new record by reaching $112,000 per coin. For those keeping track, those pizzas are worth over a billion Dollars by today’s prices. The stars are starting to align for cryptocurrencies, firstly in terms of regulations, secondly in terms of capital flows. Genuine work is being done to bring clarity to crypto, most recently with a bill in the US Senate, which aims to build proper legal frameworks for stablecoins. As Bitcoin surges upwards into uncharted prices, the crypto industry at large enters a new era of financial legitimacy. Back in the real world, manufacturing and services PMIs published on Thursday provided the latest look into global growth. European figures uncovered contraction across the board, with some bad misses particularly in the service sector. Japanese figures largely fell in line with predictions, showing a shrinking manufacturing industry. In the US meanwhile, the latest numbers came in higher than expected at 52.3, indicating accelerated expansion in both sectors. The economic calendar has had very little to offer so far this week and this will not change later today. Currencies have been stable over the last couple of days and nothing seems to have caught the imagination of traders this morning either. The passage of a new tax bill through the House of Representatives prompted a selloff in US stocks on Wednesday but the move did not retain any momentum during the following session. All in all a relatively calm week so far.
A pretty mundane start to the week so far. The Dollar Currency Index is currently aiming for its third consecutive daily close in the red and has fallen below 100 as of this morning. A number of elements are weighing on the Greenback, among them the downgrade of the United States’ credit rating from AAA to AA1 by Moody’s last Friday. The change in score has had limited impact, but adds to the narrative of reduced confidence in the US to service its debt. The other two major credit rating agencies, Fitch Group and S&P Global Ratings, lowered their scores in 2023 and 2011 respectively. The latest change by Moody’s puts all three agencies on the same page. A weaker Dollar has helped precious metals over the last couple of days, pushing gold back over $3,300. Several Fed board members have spoken this week, unanimously voicing their concerns about the outlook of the US economy and labour market. While nothing new, the comments will do nothing to instil confidence in the mind of the average investor during these uncertain times. Little of substance has materialised on the trade front over the last few days, although attentions are understandably directed towards the G7 meeting currently taking place in Canada. Restoring global stability and growth is one of the main focuses of the gathering, although Ukraine and sanctions against Russia also occupy much of the agenda. In crypto meanwhile, a bill relating to the GENIUS act passed the US Senate as expected on Monday, paving the way for a genuine regulatory framework for stablecoins. Stablecoins have experienced staggering growth since their inception in 2014 and now account for around $250 billion in market cap. Despite this, there has been very little progress on the regulation front up until now – a criticism valid for cryptocurrencies in general. Greater optimism in the fledgling industry has pushed Bitcoin up to $107k this week.
Stock markets around the world saw strong rallies once again last week as trade tensions continued to thaw. The pause on tariffs between the US and China has certainly done a lot to smooth things over with investors, while lower than expected inflation figures have also done their bit. The Dow Jones rose another 3.4% last week, while the S&P 500 climbed 5.3% and the Nasdaq Composite soared to a 7.1% weekly close. The former two indices are now in the green in 2025. Interestingly, the Magnificent Seven have actually weighed down the S&P 500 so far this year, leaving the remaining 493 companies to drag the index into positive territory. As impressive as the rally in precious metals has been thus far, gold has come off the boil in recent weeks and is barely hanging on to $3,200 at the time of writing. Bitcoin on the other hand appeared to soak up some of the outflows, allowing prices to rise above $106k late last night. The move seems to have already lost steam however, with Bitcoin dropping back down to $103k early this morning. Nevertheless, Bitcoin remains poised just under its record peak while Bitcoin dominance remains near historic highs. In the latest legal milestone, the US congress will debate a bill relating to the issuance of stablecoins later today, further entrenching cryptocurrencies within the American financial framework. The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, failed a previous attempt to pass the senate earlier in the month but is now expected to do so following a number of amendments. Very little on the economic calendar this coming week. The Reserve Bank of Australia is expected to lower rates on the Aussie Dollar tomorrow by another 25-bps to 3.85%. On Thursday meanwhile, S&P Global will release a number of manufacturing and services PMI figures for various parts of the world, providing the latest clues as to which way the wind is blowing with regards to global demand. A number of Fed board members will take to the stage over the coming days, although by and large they are expected to deliver much of the same message as their Chairman Jerome Powell. In the absence more substantive economic data, attentions will likely turn back to developments on the tariff front.
The latest batch of US PPI data hit the newswires yesterday. Following in the footsteps of CPI figures a couple of days prior, the report also pointed to lower inflation across the board, surprising markets with a 0.5% drop in the PPI as opposed to an expected 0.2% increase. The implication is that producer prices actually fell in April compared to the previous month, once again challenging the Fed’s narrative of high inflation risks. Despite this, FedWatch has yet to budge an inch, still overwhelmingly predicting a rate hold at the next meeting in June. In other economic news, US retail sales came in higher than expected on Thursday, while jobless claims largely fell in line with predictions. There is a subtle but noticeable shift among the doomsayers who have been predicting economic carnage for the US and indeed the world at large. More recently, such voices have reconsidered their stance and have adjusted growth forecasts to the upside. Among them, Barclays are now no longer predicting a recession for the US economy in the latter half of the year. Over at Blackrock, a senior member stated that the shift was “a clear appreciation by the market that some of the worst fears were maybe overly priced into the market”. Of course, the newfound confidence rests heavily on the establishment of new trade deals between the US and its trading partners, which will take many months to fully set in stone. Given the lack of momentum in markets over the last couple of days, it seems that many traders have already packed it in for the week. The only exception is gold, which closed 2% higher yesterday but not before sweeping the lows of $3,120 an ounce in an apparent hunt for stop-losses. While the softening trade situation will do nothing to promote the case for gold, the prospect of lower interest rates on the Dollar potentially will.
