Trading Day: Markets rise above the fray
ORLANDO, Florida (Reuters) - - TRADING DAY
Making sense of the forces driving global markets
By Jamie McGeever, Markets Columnist
For all that the uncertainty around Washington's global tariff war and worrisome U.S. fiscal outlook continue to unnerve investors, not to mention the Trump-Musk public mud-slinging circus, world markets just closed out a quietly impressive week.
Broad U.S., Asian, European and emerging market equity benchmarks all rose, pushing the MSCI World index to a fresh record high, while the dollar, Treasury yields and gold generally held steady over the week.
Of course, these broad sweeps mask some notable price moves in certain assets, such as Tesla's 14% share price crash on Thursday, Treasury yields spiking up to 15 basis points on Friday after the latest nonfarm payrolls data, or the dollar sliding to within touching distance of a new three-year low on Thursday.
Investors appear to be in a forgiving mood, willing to trust that policymakers will dial down global trade tensions, slow the U.S. fiscal train as it approaches the cliff edge, and steer the world economy through these choppy waters with minimum damage.
Investors faced several key monetary policy crosswinds this week. The Bank of Canada stood pat and the European Central Bank cut rates by a quarter of a percentage point, but their guidance was seen as relatively hawkish. The Canadian dollar and euro both strengthened.
On the other hand, Switzerland's slide into deflation ups the ante on the Swiss National Bank and traders are betting on a return to negative interest rates by the end of the year. Meanwhile, the Reserve Bank of India on Friday cut rates by more than expected.
Fed officials mostly continue to hold the line that uncertainty around tariffs and their impact on growth and inflation is so high that the central bank is firmly in the 'wait and see' camp. If the Fed is to resume its easing cycle, it won't be until October, according to rates futures market pricing.
With global central banks perhaps entering a summer pause, focus will intensify on the Trump administration's trade deal negotiations with major trading partners like China and Europe ahead of July 9, when Washington's pause on reciprocal tariffs expires.
U.S. President Donald Trump indicated that his 90-minute telephone call with China's Xi Jinping on Thursday was friendly, and there were lots of smiles in his meeting later that day in the Oval Office with German Chancellor Friedrich Merz.
But ultimately, the call with Xi yielded nothing concrete, although U.S.-China talks will take place in London next week. And it is through the 27-nation European Union that any deal with Germany will be reached, not bilaterally.
There are so many moving parts on Washington's tariff board, including but not restricted to: sector tariffs, reciprocal tariffs, bilateral negotiations with dozens of countries, and court rulings and counter rulings.
It's a little surprising, perhaps, that investors' glass is half full.
I'd love to hear from you, so please reach out to me with comments at . You can also follow me at @ReutersJamie and @reutersjamie.bsky.social.
This Week's Key Market Moves
* The Tesla rollercoaster. Shares in Elon Musk's EVcompany fell 15%, wiping $155 billion off its market cap. Sharesare down 27% this year, the most of the world's top 20companies, wiping $330 billion off its value. * The S&P 500 closes above 6000 points for the first timesince February, and the Nasdaq rises more than 2% for a secondweek despite Tesla's tumble, indicating an otherwise solidrevival in U.S. AI/tech. Global stocks hit a record high withthe MSCI World index up 1.5% on the week. * Precious metals shine. Silver rises nearly 10%, its bestweek since September, climbing to a 13-year high of $36/oz.Platinum also up 10%, for a second week in three. * U.S. crude oil futures rise 6% to trade above $64/bbl,the biggest weekly rise since September, on supply concerns andhopes of a thaw in U.S.-Sino trade tensions. * U.S. bond yield curves flatten, led by selloff at theshort end, retracing some of the recent steepening. 2s/10s curveflattens 11 bps this week, the most since February.
Chart of the Week
Again, two charts for you this week, both on tariffs.
The first shows how much tariff-related turmoil the S&P 500 has navigated since Trump was sworn in. In many ways, it's remarkable that the index is up on the year.
The second is based on a New York Fed survey published this week showing how U.S. firms are passing on price increases to customers. Most strikingly, almost half of services companies are passing on 100% of the tariffs.
Here are some of the best things I read this week:
1. U.S. Outlook: Unsure - Mark Zandi 2. King Trump vs. the Bond Market - Kenneth Rogoff 3. America's Retreat Is Europe's Big Opportunity - PinelopiKoujianou Goldberg 4. US tariffs and global inflation - Robin Brooks 5. How Should Europe Respond to King Donald? - Brad Setser
What could move markets on Monday?
* Japan GDP (Q1, final) * Japan trade, current account (April) * China PPI and CPI inflation (May) * China trade (May) * Taiwan trade (May)
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Trading Day is also sent by email every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.
(Writing by Jamie McGeever; Editing by Marguerita Choy)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Indianapolis Star
34 minutes ago
- Indianapolis Star
Trump-Musk feud shows why GOP can't actually balance the budget
The honeymoon phase of President Donald Trump and Elon Musk's bromance has been waning for weeks, and now their relationship appears torn beyond repair just as publicly as it started. The pair exchanged blows on social media June 5, with Trump threatening on Truth Social to strip Musk's companies of subsidies, while Musk took credit for the 2024 GOP victory and took to X to accuse Trump of being on the Jeffrey Epstein list. This ridiculous escalation distracts from the real point at issue, though. Musk seems frustrated that Republicans used him in their charade to balance the federal budget, frustrated that Trump used him for his own end. But he really should be frustrated that he was so gullible – because he should have seen all of this coming. I'm frustrated that this is the only thing receiving attention, considering the amount of work that needs to be done with the budget. Whether Musk genuinely believed himself when he promised to cut $2 trillion (before quickly tempering that estimate) is up for debate. If he did believe it, he was entirely naive about both the current state of the Republican Party and our federal government. Republicans thought they could use Musk as a political win and distraction, allowing him to claw back government spending through the U.S. Department of Government Efficiency, while congressional Republicans authorized massive deficit increases. Even after accounting for the economic growth that the One Big Beautiful Bill Act would stimulate, it's projected to add $2.4 trillion (yes, with a T) to the federal deficit over the next decade. This figure stands as a mountain next to the small pile of $2 billion (yes, with a B) worth of verifiable budget cuts from DOGE. Hicks: Soaring national debt means cities need to prepare for cuts All the while, Republicans and Trump sang Musk's praises, knowing that they would turn around and spend money that we don't have. But Musk should have realized it was all a show. Trump skyrocketed the deficit in his first presidency, and every promise he's ever given for a balanced budget has been a lie. As much as MAGA likes to claim otherwise, Trump's GOP is no different than the swamp creatures they like to criticize. Those who are actually interested in cutting government spending, which I think Musk at least somewhat seems to be, should not attach the idea to political parties because they will inevitably disappoint. There hasn't been a genuine effort to produce a balanced budget since the late 1990s, and there isn't likely to be from either Republicans or Democrats anytime soon. I'm not the least bit surprised that these two narcissists' relationship flamed out so quickly. There was never enough room in Trump's White House for both his and Musk's personalities. Trump has never maintained an extended relationship with somebody who is willing to disagree with him publicly. During his first term, Trump had extremely high personnel turnover rates, both among his Cabinet and his aides. Trump's 'you're fired' catchphrase really says a lot about his approach to relationships. He is quick to turn on people who disagree with him or even just publicly embarrass him. Hicks: Indiana's startling Medicaid math forces unpleasant choices Musk has been loudly advocating against Trump's "Big Beautiful Bill" for its impact on the deficit. After a week of Musk criticizing the deficit spending in Trump's bill, the president has clearly had enough. He cannot tolerate a dissenting voice from within his ranks. Trump and the GOP are now likely to kick a powerful ally to the curb, all because Trump is so vain that he cannot handle differing opinions. This is why the Republican Party is now made up of yes-men, because they have allowed Trump to push all the spine that he can out of the party. Now that the sideshow of Musk is gone, Republicans have one less thing to hide behind. I'm not sure that makes it any more likely they'll act responsibly, but at least it's more transparent to Americans now.
Yahoo
36 minutes ago
- Yahoo
Xi Has 'Bowed To Reality,' Says China Analyst, Urges More Engagement Between Leaders To Resolve Trade Issues: 'No Substitute For Direct Negotiations With Trump'
Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. As U.S. President Donald Trump and Chinese President Xi Jinping break the ice with a phone call after months of silence, analysts weigh in on what's in store for the U.S.-China trade. What Happened: The U.S. and China have been at odds over trade for a considerable period. The call signifies some advancement in establishing ground rules for a potential meeting. Jeremy Chan, Senior China Analyst at the Eurasia Group consultancy, stated that this communication suggests a level of respect from President Trump towards President Xi, reported The South China Morning Post. Trending: Start investing with eToro's CopyTrader — . However, analysts have noted that more than optimistic statements are required to resolve the deeply rooted trade differences between the two nations. Chan further noted that Xi typically consents to meetings with foreign leaders only after substantial groundwork has been laid through lower-level diplomatic efforts. "Xi has bowed to reality, like so many other foreign leaders before him, that there is no substitute for direct negotiations with Trump," stated Chan, who is also a former U.S. diplomat. On the other hand, ASPI's Wendy Cutler highlighted the complexity of the upcoming trade talks and the challenges. "The likelihood of further misunderstandings, coupled with a fundamental lack of trust, will present enormous challenges for the negotiators as they try to hammer out a deal," cautioned It Matters: This phone call comes in the wake of escalating trade tensions between the two countries. On Thursday, U.S. stocks dipped following reports of a phone call between Presidents Donald Trump and Xi Jinping, signaling a possible thaw in China trade tensions. The outreach was said to have come from the U.S. side, as per CNBC, citing Chinese state media. Earlier in May, President Trump had expressed his willingness to travel to China to meet with President Xi Jinping, emphasizing the importance of the U.S.-China relationship. In early May, the South China Morning Post reported that the U.S. and China are struggling to resume trade talks. China suggested using special envoys, but the U.S. prefers direct talks between Trump and Xi—a move China considers 'risky and uncertain.' This latest phone call could be seen as a step towards that potential meeting, and a move towards resolving the trade disputes. Baidu Inc (NASDAQ:BIDU) and Alibaba Group Holding Ltd – ADR (NYSE:BABA) climbed 1.13% and 0.43%, respectively, on Thursday. Meanwhile, Inc. (NASDAQ:JD) declined 0.72% Read Next: Nancy Pelosi Invested $5 Million In An AI Company Last Year — Here's How You Can Invest In Multiple Pre-IPO AI Startups With Just $1,000. Invest Where It Hurts — And Help Millions Heal: Invest in Cytonics and help disrupt a $390B Big Pharma stronghold. Image via Shutterstock This article Xi Has 'Bowed To Reality,' Says China Analyst, Urges More Engagement Between Leaders To Resolve Trade Issues: 'No Substitute For Direct Negotiations With Trump' originally appeared on
Politico
42 minutes ago
- Politico
This Musk counterpart actually knows how to use the government to dismantle it
The Elon Musk era of the Trump administration's fiscal sturm und drang is over. But his much more understated — and savvy — counterpart, Russ Vought, is just hitting his stride. Vought, the two-time director of the Office of Management and Budget, is the most strategic player in executing the Trump administration's effort to slash the federal government. Just this week, Vought has been everywhere from doing TV hits at the White House and on the Sunday shows to sitting in Speaker Mike Johnson's office to sell the 'big beautiful bill' and lay the groundwork for codifying the DOGE cuts. His omnipresence highlights how Vought's work is taking on a more public profile after months of behind-the-scenes planning as Musk captured the spotlight — and that far from slowing down, his agenda to fundamentally remake government from the ground up remains in high gear. Whereas Musk bulldozed through bureaucracy and largely ignored Capitol Hill, Vought relies on a different playbook: pushing change through institutional channels, backroom conversations, and contingency planning. That sort of meticulousness and deep understanding of government has inspired fear among federal workers as he strengthens presidential authority to dismantle large parts of the federal bureaucracy, underscoring that unlike Musk, Vought actually knows how to get things done. His ultimate goal is to 'bend or break the bureaucracy to the presidential will,' and use it to send power from Washington and back to America's families, churches, local governments and states, he wrote in Project 2025. 'It wasn't actually Musk holding a chainsaw. Musk was a chainsaw in Russ Vought's hands,' said a senior government employee with a front row seat to Trump's remaking of government, who, like others in this story, was granted anonymity to describe it. The contrast between the two men is stark, and increasingly consequential. While Musk operated with a kind of maniacal urgency, Vought has proven he's willing to slow down before speeding up. While Musk staffed DOGE with tech loyalists barely old enough to rent cars, Vought's team at OMB is a veteran-heavy group with deep roots in government. 'Elon is an owner. Russ has, for his entire career, been an exceptional staffer,' said Paul Winfree, who held various policy roles in the first Trump administration. 'Russ knows how to manage both up and down, and he also knows how to use the levers of government, whether or not they're at OMB, and how to think more broadly about legislative strategy and working with Congress, basically the way that things get done in this town,' Winfree added. 'He is a master at this.' And it takes a mastery of government and near-endless patience to achieve what Vought really wants: stripping down what he has long seen as a bloated federal budget, bringing an unwieldy federal bureaucracy to heel and drastically transforming the foundation of the U.S. government. Musk arrived with grand plans to slash $2 trillion from the federal budget but left his role having cut less than 10 percent of that figure, forced to admit that the sprawling federal bureaucracy was not as easy to wrap his arms around as he originally thought. 'Everyone thinks they can come to D.C. and fix it,' said one former Trump administration official. 'But you have to have a really good understanding of this town, how the policies are cooked and baked. At OMB, that's the team. These are seasoned policy guys. They've been working on their issue areas forever.' Vought has spent more than two decades in Washington, including stints as executive director of the Republican Study Committee, a group of conservative House members; and vice president of Heritage Action, the conservative Heritage Foundation's advocacy arm. At his core, Vought is both a fiery conservative ideologue and a budget wonk, allies say. He's known for spending free time poring over budget documents — even on weekends — but also has been one of the administration's sharpest messengers on traditional cable news networks and conservative distinction between Vought and Musk is apparent in the rescissions package, a $9 billion bundle of cuts originally slated to be sent to Congress in April. When internal GOP whip counts showed the White House wouldn't have enough Senate votes to pass it, Vought pulled back, recalibrated, and started working the phones. 'Why the delay? Because the House actually wants to pass it … and put pressure on the Senate,' Vought said on longtime Trump adviser Steve Bannon's WarRoom show late last month. 'I don't want to send a rescissions bill out there that goes nowhere.' Trump allies on the Hill have welcomed his engagement.'I'm glad he comes over here. We need that,' said Rep. Byron Donalds (R-Fla.). 'We can't have an administration where you never hear from them, never see them, except when they want to spend a ton of money.' Assisting Vought is a team of allies from his first OMB stint, including deputy chief of staff Hugh Fike, general counsel Mark Paoletta and communications director Rachel Cauley. Unlike Musk, Vought isn't an act-first, come-up-with-the-legal-theory-later type. If his recissions package fails to pass Congress, Vought has a plan B and if that fails, a plan C, which he's started to outline publicly in recent days. Vought has long been a proponent of the idea that the executive can legally impound, or withhold, spending that has been approved by Congress. Critics say only Congress has the power of the purse. Though an OMB memo from the early days of the administration suggested it was poised to wage that fight — by abruptly freezing all federal financial assistance — the office quickly pulled the order back. Vought's allies say he's being deliberate about which fights he picks over impoundment and is waiting to build a solid legal case. Another interim strategy if Congress declines to approve the package is pocket rescissions, a process in which the White House would send the rescissions package at the end of the fiscal year and then run out the clock on Congress's ability to act on the proposal, leading to the automatic cancellation of funds when the fiscal year ends. 'I've worked closely with him for 15 years, and one of the things that he has always done a pretty good job at doing is thinking out into the future,' Winfree said. 'With this recissions package that he's moving on the Hill right now — it isn't just about the recissions. He's thinking about, how do the moves on this package set up the next move that sets up the next move?' Former administration officials say that Vought learned from the failed recissions fight of 2018 — spearheaded by then-Trump budget director Mick Mulvaney — by building relationships on the Hill that he hopes will get the package across the finish line this year. Now, 'I think they're more attuned to the push and pull here, and the need to find the center of gravity with the Hill,' a second former Trump administration official said, even if that means making small tweaks to the recissions package to get it across the finish line in the Senate. 'Give them a win, and then it should be fine.' Others are less optimistic about the totality of the administration's legislative agenda, including the president's 'one big beautiful bill,' which Vought also is playing a key role in shepherding. 'Russ is going to have to get in there with some hand-to-hand combat and get these guys to 'yes,'' a third former administration official said. 'If this bill passes, Trump's going to have everything. He'll have [deregulation] on steroids with Russ. He'll have tariffs as a negotiating tool and tactic for China and he'll have [the] cost of living going down for all Americans. And that's the midterms. Like, the end.' 'If one of those things falters,' the person added, 'I think Republicans lose the midterms.'
