Market Report.
🌏 China has stated that it has not held any trade talks with the United States, contradicting repeated comments from the U.S. government suggesting there had been engagement. Chinese Foreign Ministry spokesperson Guo Jiakun told reporters that China and the U.S. have not conducted consultations or negotiations on tariffs, and that reports of such information are “false news.” A White House official said there have been lower-level in-person talks as well as a phone call between U.S. and Chinese staff this week.
📉 The conflicting statements from Washington and Beijing underscore the strained communication and uncertainty defining the current U.S.-China trade war, adding volatility to global markets and prolonging economic pain on both sides.
🏬 Warnings of empty store shelves have been in the headlines, as CEOs of top U.S. retail stores told President Trump that a prolonged trade war with China could lead to product shortages. The new 145% tariffs on Chinese imports effectively operate as an import ban.
📦 The risk of retail shortages will depend on how long the high tariff levels last. If they continue, expectations are that the U.S. consumer will face more persistent shortages, as Chinese suppliers focus on other markets.
🤔 But remember, the lack of product supplies on US shelves is only one side of the coin; the other side is factory closures and unemployment in China. Who will give in first?
📊 Bloomberg News said Thursday that China’s government is thinking of removing its 125% tax on a certain U.S. products. According to the article, which cited persons with knowledge of the situation, Chinese officials may eliminate the extra taxes on medical equipment and some industrial chemicals, such as ethane.
🇺🇸🇯🇵 The United States and Japan are moving closer to an interim arrangement on trade, but many of the biggest issues are being put off. President Trump had previously touted “big progress” in tariff talks with Japan after meeting with a Japanese delegation of officials, but the talks are still ongoing. Finance Minister Katsunobu Kato is expected to visit Washington later this week and meet with U.S. Treasury Secretary Scott Bessent to discuss currency rates.
🚗 The U.S. has imposed 24% tariffs on Japan’s exports, although they have been paused until early July. A 10% universal rate and a 25% duty on cars remain in place. The dollar hit a seven-month low against the yen on Monday, amid market speculation that Japan could face U.S. pressure to prop up the yen and help reduce the U.S. trade deficit.
📈 Strong gains in megacap tech names caused stocks to soar yesterday. Alphabet, the parent company of Google and YouTube, saw its shares rise over 5% in after-hours trading following first-quarter earnings that exceeded expectations. The company reported a 12% year-over-year revenue growth, surpassing Wall Street’s projection of 10%, as its search and advertising units maintained robust performance despite intensifying AI competition.
💻 Meanwhile, Intel also outperformed analysts’ estimates with its first-quarter results but issued a cautious outlook for the second quarter, citing macroeconomic uncertainty. Intel’s CFO, David Zinsner, further highlighted the potential economic risks posed by President Donald Trump’s tariffs and retaliatory measures from other nations, increasing concerns over a potential recession.
💊 In Europe, Merck reported a 7% increase in its first-quarter adjusted profit, despite a 2% decline in sales. For the full year, Merck lowered its earnings outlook slightly, citing an estimated $200 million in additional costs for tariffs implemented to date and a charge related to a licensing deal with Hengrui Pharma. Worldwide sales dipped 2% to $15.5 billion, but excluding the impact of foreign exchange rates, sales rose 1%.
📉 Merck cited the $200 million impact of tariffs implemented to date by the U.S. government on imports from other countries, as well as tariffs imposed by foreign governments on the United States, particularly those related to China.
🛑 I believe that in the coming months, we will see governments and corporations attributing every negative result to the ‘it was because of the tariffs’ bag. Adding to ‘it was because of COVID’ or ‘it was because of Putin’s war.’ These events are used as a catch-all excuse for any decline in performance.
🌍 Geopolitics:
🤬 Former U.S. President Donald Trump weighed in on the ongoing Ukrainian conflict, expressing strong disapproval of recent Russian strikes on Kyiv. “I am not happy with the Russian strikes on Kyiv. Not necessary, and very bad timing. Vladimir, STOP! 5000 soldiers a week are dying. Let’s get the Peace Deal DONE!”
⚔️ A new war coming: Tensions between nuclear-armed neighbors Pakistan and India have escalated dramatically following a deadly terrorist attack in Kashmir that claimed the lives of over 26 Indians and tourists. Both nations are on the brink of war, with Pakistan suspending trade and airspace access to India, while India has retaliated by suspending the Indus Waters Treaty, cutting off 80% of Pakistan’s water supply. Pakistan has declared any diversion of water an “Act of War,” with Defense Minister Khawaja Asif warning, “If our civilians are not safe, then Indian civilians will not be safe either.” Clashes were reported last night in Kashmir’s Leepa Valley, further fueling fears of full-scale conflict.
🔄 The second round of US-Iran nuclear talks in Rome were described as “constructive” by both sides, but conflicting signals from the Trump administration revealed internal rifts and foreign pressure on the US negotiating position. National Security Advisor Mike Waltz took a hardline stance, demanding Iran completely dismantle its uranium enrichment program. But Special Envoy Steve Witkoff later suggested Iran could be allowed limited enrichment for peaceful purposes, hinting at a modified return to the 2015 nuclear deal.
⚖️ But this pivot was short-lived, as Witkoff soon reversed course and doubled down on the demand for full dismantlement, following a meeting where top officials debated the US strategy.
🇮🇱 Israeli Prime Minister Netanyahu has condemned the talks, fearing they could soften Iran’s isolation and threaten Israel’s strategic position. But for Trump, the priority is his legacy – avoiding war and brokering a deal the American public can support.
📊 Market View:
📈 US futures remain optimistic, albeit with slight gains despite strong results from Intel and Google yesterday. Mini S&P 500 futures managed to rise above 5,500 points, currently trading at 5,535 points. Meanwhile, Nasdaq 100 futures exceeded 19,400 points and are currently trading at 19,420 points.
📉 However, the European market once again seems to be taking the lead despite its economic weakness. The DAX 40 has left behind the highs reached two weeks ago thanks to the good news of the postponement of tariffs and is currently approaching 22,300 points. The Eurostoxx 50 is following a similar pattern and has exceeded 5,090 points.
💵 The dollar index (DXY) is trying again and rising, approaching 100 points, currently trading at 99.75 points. This is causing the EUR/USD pair to weaken again, falling to 1.1340, while bearish patterns are beginning to emerge on the charts.
🛢️ Crude oil has halted its decline, with Brent crude returning to the $66 per barrel range, awaiting the outcome of the next round of negotiations between the United States and Iran, which will determine whether there will be more or less supply in this market.
💰 Gold, meanwhile, remains in the $3,300 range after slight gains during yesterday’s session.
💻 Finally, Bitcoin returned to around $94,500 last night, falling slightly to its current level of $93,470. If Wall Street closes with Bitcoin at current levels, there is room for optimism.
