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.
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(Writing by Jamie McGeever; Editing by Marguerita Choy)
