Jamie McGeever
Orlando, Florida (Reuters) - Trading Day
Understand the power of driving global markets
Jamie McGeever, Marketing Columnist
Bonds rebound
Global trade uncertainty raised several gaps this week, ensuring world markets ended with caution due to a series of court rulings surrounding U.S. tariffs.
On Friday, a series of economic indicators suggest that U.S. growth may slow faster than expected, which also added to depression, which held a turbulent meeting on Wall Street.
The rebalancing flow at the end of the month is expected to be bullish on bonds, which seems to be the result. After four consecutive weeks of decline, the treasury prices rebounded this week, especially at longer ends, cutting the earnings curve.
Friday's benchmark 10-year Treasury bond yield ended at a low of about 4.40% on a three-week shutdown, partly capped by a figure indicating last month's PCE inflation cooled to 2.1%, which is all intentions and purposes for the Fed's target.
It is worth noting, however, that S&P 500 and Nasdaq stocks climbed to several percentage points of February record highs despite the chaos in reimbursement of tariffs. Although it requires motivation, it doesn’t require much push to test them.
What might offer that kind of spark? The latest twists and turns, whether it’s social media posts from the court or the president, seem to be the most likely trigger for major market migration.
The U.S. Senate will begin debate on Trump’s tax and spending bill – a bill called “big and beautiful” – in its current form, which will add nearly $4 trillion to federal debt over the next decade.
An element of the bill has upset investors over the past 24 hours, a tax targeting foreign investors that could weigh on demand for U.S. Treasury bonds and the dollar. Deutsche Bank's George Saravelos warned that it could "turn a trade war into a major war."
Despite this week's rebound, the U.S. bond market is frustrating. The broad driving force behind Fed officials’ comments this week is that policymakers are still in a “waiting and watching” pattern of the economic impact of tariff uncertainty. Traders expect the Fed to lower interest rates again by September.
Meanwhile, next week's global calendar focuses on the US employment report on Thursday and May, another expected interest rate from the European Central Bank is also the US employment report.
I would love to hear from you so please contact me in my comments. You can also follow me on @reutersjamie and @reutersjamie.bsky.social.
Major market transfers this week
*The US Treasury won a four-week streak, while Thlong did not perform well. But May is a bad month for bonds – Theice Bofa Treasury index has fallen the biggest this year. *Long-term Japanese bond yields withdraw from last week's sales highs - 40-year yields are nearly 45 basis points, the biggest weekly fall ever. *Many key equity indexes have the best months for November 2023, including MSCI World (up 5.5%) and Nasdaq Stock (up 9.5%). *Japan's Nikkei has risen by more than 5% since May. * MSCI Asia’s former Japan Index won the six-week WinningStreak, which ended 0.9% of the week. * NVIDIA accounted for 24% in May, the biggest rise every month. The recent NVIDIA stock in May was a good month, with revenues rising 26% in Q1 and 36% in 2023 and the euro rose 0.4% in May, a negligible move but enough to earn monthly earnings for the fifth consecutive month, the longest win since 2017. seven.
Weekly Picture
I feel generous and have two charts for you this week.
First of all, Simon French from Panmure Liberum. It shows that the gap between the UK's 10-year bond yield and the total yields of G7 peers who exploded around the "truss" collapse by the end of 2022. More than two years later, it is wider than ever.
Obviously, investors are asking for substantial loans to the UK government than other G7 countries, but why? Possible explanations include: UK inflation is considered “higher and longer”, greater risk of fiscal slippage, and concerns about policy credibility.
The second chart may catch the White House's attention - and raises the hack. It shows the broadest measure of the Chinese yuan exchange rate, which has fallen to its weakest level since 2012 after long-term stability.
However, unlike previous elemental weaknesses (such as the mid-2000s), this is not driven by the FX market intervention in Beijing. In other words, currency "manipulation" and more capital outflows due to the huge challenges facing the Chinese economy.
Either way, the narrative of global trade and monetary imbalances must be addressed. But trade talks between the United States and China seem to have stalled, leaving investors back on defense.
Here are some of the best things I read this week:
1. Market discipline will prevail in the United States - Nourielroubini 2. Understand the new global economy - Dambisa Moyo 3. Not communicating is an economic policy risk.
Can the market be transferred on Monday?
*Japan, UK, Germany, US Made in PMIS (May) *US Manufacturing ISM (May) *Some Fed policymakers planning to speak on various events: Jerome Powell, Governor Christopher Waller, Dallasfer President Lorie Logan and Chicago Federal Government President Austangoolsbee
The opinions expressed are the opinions of the author. They did not reflect the views of Reuters News, which is committed to integrity, independence and freedom from prejudice under the principle of trust.
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(Written by Jamie McGeever; Edited by Nia Williams)