📊 Market Report
🌏 Allianz Trade, a trade insurance provider, conducted a survey of 4,500 exporters across various key global markets and found that 95% of Chinese exporters surveyed are either planning to expand or have already redirected their export strategies toward international markets beyond the United States. This shift reflects a deliberate effort to diversify trade destinations and reduce reliance on the US market.
📉 Even after the recent tariff reduction deal between Beijing and Washington, the US trade-weighted tariff rate on Chinese goods remains high at 39%, significantly above the 13% rate before the Trump administration. Chinese exporters in the coastal city of Ningbo remain undeterred by the tariff truce and are sticking to their plans to “go global,” with Southeast Asia emerging as the top choice for relocating production.
🇺🇸 However, as mentioned in our previous reports, there is currently no viable substitute for the annualised aggregate consumption of the United States. It is twice that of the entire EU and more than double China’s aggregate consumption, reaching the staggering figure of $16 trillion in annualised consumption.
🤔 While China is seeking substitutes for the consumption of its products, the US is seeking substitutes for their production. Could Indian industry be one of them?
🤝 The Indian government is negotiating a three-phase trade deal with the United States as it seeks to mitigate the impact of President Trump’s impending tariffs. The first phase is expected to include market access for industrial goods, certain agricultural products, and the resolution of non-tariff barriers such as quality control specifications. This initial deal is targeted for completion by July.
📅 A broader and more comprehensive second phase is anticipated between September and November, covering 19 areas specified in the April terms of reference. This could coincide with Trump’s visit to India for the Quad leaders’ summit. The final phase of the agreement is likely to materialise next year, pending approval from the US Congress.
🌍 On 15 June, the G7 will meet in Canada with the aim of forming a united front, like a coven, to confront the US in its trade war. The G7 members want to present their case against Trump’s trade policy to Treasury Secretary Scott Bessent while also trying to find common ground, particularly on China. However, the G7’s ability to unite against China has been somewhat fractured by Trump’s aggressive trade measures against traditional allies such as Canada and the EU. The finance ministers will also need to discuss the limits of monetary policy and the risk of stagflation if the trade war intensifies further.
💹 Bonds in the world’s major economies are overheating, with those in Japan doing so at a faster rate than others.
📉 The long-dated Japanese government bond (JGB) market saw little relief on Wednesday after a poor auction result sent yields to record levels. The selloff in bonds poses a quandary for the Bank of Japan, which is trying to taper its debt purchases and normalise monetary policy. Rising long-term borrowing costs are also a warning sign for Japan’s highly indebted government. The lack of buyers at the Ministry of Finance’s sale of 20-year JGBs on Tuesday resulted in the worst auction outcome since 2012.
🔗 The market seeks assurance of a reduction in new bond issuance, which is technically possible within this fiscal year. Inflation above target and the possibility of further fiscal stimulus are putting upward pressure on yields (rates will have to remain on an upward path), although a sustained flight from JGBs is considered unlikely.
📈 The Japanese government may need to remain mindful of its commitment to returning Japan to a primary budget balance, as an uptick in inflation suggests fewer bond purchases by the BoJ.
🚗 Elon Musk, the CEO of Tesla and SpaceX, has stated that he plans to spend “a lot less” on political donations in future, signalling a change in his approach compared to his significant spending to support Donald Trump in his bid for re-election. When asked at the Qatar Economic Forum whether he would continue spending at similar levels in upcoming elections, Musk said he would not, stating, “I think I’ve done enough.” Musk’s increased visibility and controversial actions and opinions have earned him criticism from the media and parts of the American public, reflecting the establishment’s backlash against Trump. Despite political challenges, he said he remains committed to leading Tesla for the next five years.
🤖 Elon Musk also confirmed that Tesla will have robotaxis on the streets of Austin, Texas, by the end of June 2025. Tesla plans to expand the robotaxi service to Los Angeles and San Francisco following the Austin launch. The service will start with approximately 10 vehicles in Austin and rapidly expand to thousands if the launch proceeds without incident. Tesla’s robotaxis will be Model Y vehicles equipped with a forthcoming version of the company’s “full self-driving” (FSD) technology, known as FSD Unsupervised.
🇪🇺 The Spanish Foreign Minister José Manuel Albares has called on the European Union to use its economic ties to pressure Israel as it expands its military attacks in the Gaza Strip. He stated that the “time for words has ended” and that the EU should take diplomatic measures and potentially impose sanctions to persuade Prime Minister Benjamin Netanyahu to halt the assault on Gaza. Several other EU foreign ministers, including those from Ireland, Luxembourg, and Slovenia, have also signed a letter calling for the EU to revisit its agreement with Israel regarding its treatment of Palestinians. EU foreign policy chief Kaja Kallas acknowledged the dire humanitarian situation in Gaza, stating that Israel’s decision to allow some aid in is “a drop in the ocean” and insufficient.
📉 Trade with the EU accounts for a third of Israel’s total trade, so revising the EU-Israel agreement could potentially include trade barriers that could only be removed if Israel undertakes specific actions.
🔥 Israeli Prime Minister Benjamin Netanyahu has harshly criticised France, the United Kingdom, and Canada for warning Israel to halt its attacks on the Gaza Strip and allow humanitarian aid to enter. Netanyahu has accused these countries of “rewarding” Hamas for the terrorist attack on 7 October. Israeli Finance Minister Bezalel Smotrich has also strongly criticised these three nations, accusing them of having “moral alignment with a terrorist organisation.” France, the United Kingdom, and Canada have threatened to take “concrete measures” against Israel if it does not cease its actions in Gaza and allow humanitarian aid, describing the situation as “intolerable” for the civilian population.
🌍 Speculation is growing that the US may formally recognise an independent Palestinian state, which could reshape the strategic architecture of the Middle East. President Trump’s recent visit to the Gulf states, bypassing Israel, signals a potential recalibration of Washington’s priorities in the region. This marks the first time in decades that a sitting US president visiting the Middle East has consciously excluded Israel from the agenda.
❄️ This exclusion suggests a potential cooling of US-Israel relations, as the White House appears more inclined to build pragmatic, business-driven partnerships with Arab states in the region.
🛢️ Oil prices rose by more than 1% on Wednesday amid reports that Israel is preparing to strike Iranian nuclear facilities, raising fears of potential supply disruptions in the Middle East. New intelligence obtained by the US suggests that Israel is preparing to strike Iranian nuclear sites, according to multiple US officials. It remains unclear whether Israeli leaders have made a final decision. Brent crude futures for July rose 97 cents, or 1.5%, to $66.35 per barrel, while US West Texas Intermediate crude futures for July climbed 96 cents, or 1.6%, to $62.99.
🗨️ Trump has also criticised the Biden administration for its heavy involvement in the Ukraine conflict, which he believes “should have remained a European situation.” The former president stated that the Ukraine conflict is “not our war” and that the US would have been “a lot better off” if the situation had remained a European issue.
⚔️ However, this view overlooks the fact that the invasion of Ukraine stems from a previous civil war, which began in 2014 when US neoconservatives intervened in the Ukrainian government, with officials such as Victoria Nuland involved in shaping it, as revealed by leaked phone calls.
🌐 Following his call with Putin, Trump stated that Russia wants to engage in “large-scale trade” with the US and that a potential settlement of the conflict could help Ukraine become “a great beneficiary” of trade as well.
💼 Once again, Trump appears to favour business over war as a means of reshaping the international order.
📉 Market View:
📉 The markets are in the red after the recent euphoria, with slight declines following several sessions of strong gains. The Mini S&P 500 futures came close to the 6,000-point mark but have retreated to 5,930 points. Similarly, Nasdaq 100 futures pulled back, failing to reach 21,600 points and instead settling at the current figure of 21,310 points.
📉 In the case of the European market, yesterday’s session reached new highs for DAX 40 futures at 24,145 points, before retreating to the current level of 24,015 points. For EuroStoxx futures, the movement was similar; they approached 5,500 points during yesterday’s session and have since fallen to the current level of 5,440 points.
💵 The US Dollar Index weakened significantly during the last session, experiencing a decline of approximately 1% since Monday, dropping from levels around 100.50 to the current 99.50. Among major currency pairs, the dollar’s weakness has led to gains, with EUR/USD reaching 1.1350 in recent hours and GBP/USD climbing above 1.34 to its current level of 1.3450 — levels not seen since 2022.
📈 All of this is evolving in line with the overheating of US bond yields, with the 10-year bond yield surpassing 4.50%.
🛢️ Crude oil has broken out of the range it had been trading in since Monday, rising above $67 per barrel for Brent. This move has been driven by an increase in tensions in the Middle East.
🥇 In this context, gold has also recovered following last week’s losses. Gold futures are currently trading at $3,320 per ounce.
💰 Finally, Bitcoin is on its way to new all-time highs. It has surpassed the $105,000 mark in recent days and is currently trading at $107,800, approaching its record high of around $109,250. Technical projections suggest a potential target of $111,750 per Bitcoin.
