Market Report.
📉 Asian markets have experienced a decline, primarily due to disappointing Chinese retail sales figures, highlighting the significant challenges in transforming China’s export-oriented economy into one centered on domestic consumption. Consumer spending remains notably subdued in the region, and there are no clear indicators that Chinese authorities are eager to alter this situation. Meanwhile, President Donald Trump’s approach involves both restricting American access to Chinese goods and implementing trade measures that inadvertently push for increased consumer spending within China.
📊 Retail sales in China rose 5.1% in April, missing analysts’ estimates of 5.5% growth, and slowing from 5.9% growth in the previous month. Industrial output grew 6.1% year-on-year in April, stronger than expected but slower than the 7.7% jump in March. The urban unemployment rate in China eased to 5.1% in April from 5.2% in March, despite concerns about job losses due to the U.S.-China trade war. The data published by the statistics bureau seems to be trying to show us that Trump’s trade war is not having much of an impact.
📩 U.S. President Donald Trump said that over the next 2-3 weeks, U.S. officials will be sending letters to countries outlining “what they will be paying to do business in the United States.” Trump did not clarify further what this means, but it suggests the U.S. may be seeking more payments or fees from countries to do business in the U.S. The U.S. and China announced a trade war truce on Monday after talks in Geneva, which Trump mentioned along with a separate trade deal with Britain. Trump said U.S. officials like Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick will be sending the letters, and countries can appeal the terms.
📜 Treasury Secretary Scott Bessent said President Trump will impose tariffs at the rate he initially threatened last month on trading partners that do not negotiate in “good faith” on deals. Bessent said the administration is focused on its 18 most important trading relationships, and that countries not negotiating in good faith will receive letters stating their new tariff rates, likely returning to the April 2 levels. Bessent suggested the administration may pursue more regional trade deals, setting rates for groups of countries like Central America or parts of Africa. Bessent said he spoke to Walmart’s CEO and the company will absorb some of the tariff costs, contradicting Trump’s claim that Walmart and China should “eat the tariffs.”
📉 Moody’s has downgraded the US sovereign credit rating by one notch due to concerns over the nation’s growing $36 trillion debt pile. The downgrade comes as Republicans seek to approve a package of tax cuts, spending hikes, and safety-net reductions, which could add trillions to the US debt. The downgrade is expected to refocus market attention on fiscal policy and the “Big Beautiful Bill” being negotiated in Congress. The White House has dismissed concerns, claiming the downgrade is politically motivated. Urgency is mounting as key deadlines approach, including raising the debt ceiling by mid-July to avoid default.
💰 The truth is that Trump has committed to reducing spending, and the largest fiscal expansion in history was carried out by the previous Biden administration. On the other hand, Trump denounced months ago that the wars initiated by the Democrats over the last few decades have cost trillions of dollars and millions of lives.
📜 U.S. President Donald Trump’s sweeping tax-cut bill, which had been stalled by Republican infighting, won approval from a key congressional committee on Sunday. The bill would extend Trump’s 2017 tax cuts, reduce taxes on tips and overtime, boost defense spending, and provide more funds for border and immigration enforcement. Republican hardliners want bigger cuts to Medicaid and the complete repeal of green tax credits, while moderates oppose cuts that would hurt Trump’s base voters. Treasury Secretary Scott Bessent dismissed the Moody’s downgrade, saying the bill would spur economic growth to outpace the rising debt.
💸 Donald Trump recently suggested that tariff revenues could generate 800 billion dollars, which would not only reduce US debt but could also allow for the elimination of income taxes, potentially generating a boom in consumption and a wealth effect among the population.
📈 There is an old rule in economics: if you reduce taxes but increase the tax base that pays them, you increase public revenue without burning the economy.
🌍 Meanwhile, Europe, a region in serious crisis, does not seem to be attracting the attention of the mainstream media. Belgium’s central bank governor, Pierre Wunsch, told the Financial Times that the European Central Bank (ECB) may need to cut interest rates to “slightly below” 2% due to downside risks to inflation and growth from global trade tensions. Wunsch, previously known for his hawkish stance, said recent shocks and uncertainty could justify a mildly supportive monetary policy, including a potential cut below the current 2.25% deposit rate. He said developments since U.S. President Donald Trump’s tariff announcements on April 2 have created clear “downside risks to inflation” in the euro zone, along with additional threats to economic growth.
💡 He is possibly referring to the deflationary risks we mentioned a few days ago in our reports. The surplus of unsold Chinese goods in the US could reach Europe, causing a sudden drop in prices. On the other hand, remember that something we have pointed out and the financial media continue to ignore is that Europe is once again dangerously approaching negative interest rates. This could cause a reversal of the capital flows we have seen in recent months, causing the EURUSD pair to fall sharply.
📉 Markets now see a roughly 90% chance of an ECB rate cut on June 5, with the deposit rate potentially bottoming out at 1.75%.
Geopolitics:
🤝 The talks in Istanbul last week provide a prospect for peace in the Ukraine conflict, though the three-year proxy war could have been avoided if diplomacy had been permitted by Washington in early 2022 instead of being sabotaged. There appears to be a more enlightened policy under the new U.S. President Trump, compared to the reckless pursuit of strategic defeat of Russia under the previous administration.
🕊️ Russian negotiator Vladimir Medinsky stressed in Istanbul that the aim of direct talks is to achieve lasting peace by addressing the root causes of the conflict, avoiding temporary or vague agreements such as those in Minsk, which were signed but not implemented.
🌏 For Russia, the conflict stems from the Western position of seeking a NATO military deployment on its border. This is similar to the Cuban missile crisis, when it was the USSR that deployed missiles on the US border. However, this point has been avoided by the media, which is trying to create a noble cause for this war.
💵 President Trump has criticized the amount of aid being sent to Ukraine. The U.S. president slammed the $60 billion in aid sent to Ukraine by the previous administration, saying he “hated to see the way it was, you know – excuse me – pissed away.” Trump praised Zelensky’s ability to lobby for American aid, calling him “the greatest salesman in the world” who walks out of Washington with “a hundred million every time.”
🗳️ A Romanian centrist wins victory over a ‘Trump loyalist from the far right,’ headlines Bloomberg. Against all odds, the independent candidate, supported by the European Union, finally wins the elections. The European Union suspended the previous elections in Romania, as French bureaucrat Thierry Breton said on TV, ‘We did it in Romania and we will obviously do it in Germany,’ referring to the possibility of annulling the results of the German general elections if the Germans voted for the ‘wrong’ candidate.
🇷🇴 The frontrunner in the polls in Romania, George Simion, had the backing of Trump and had accused the EU of interfering in the Romanian elections. France has been trying to subvert democracy in Romania, Euroskeptic presidential candidate George Simion. Simion, a critic of the EU who has been banned from entering Ukraine.
🎙️ During a Friday publication interview with entrepreneur Mario Nawfal, Simion was questioned about potential foreign interference, both overt and subtle. In response, Simion claimed that French officials were covertly exerting influence on Romania’s supreme court, media oversight body, and commercial sector. He asserted, “Through their diplomatic representation and international organizations, they’re investing considerable resources and applying pressure with the aim of undermining the Romanian citizens’ electoral rights.”
Market View:
📈 The markets closed last Friday with consistent gains and opened today at levels close to those seen at the end of last week. Mini S&P 500 futures are currently at 5,915 points, while Nasdaq 100 futures stand at 21,245 points, having surpassed the 21,500-point mark last Friday.
💵 The dollar is retreating, with its index approaching the 100.60-point level. Considering the dollar’s surge last Tuesday, when it nearly reached 102 points, this could represent a pullback that might lead to further gains, provided it remains above 100.50 points.
💶 Similarly, the EUR/USD pair is attempting to position itself above 1.12. However, unless it breaks the 1.1250 level, it could signal a bearish continuation pullback. A similar scenario applies to the GBP/USD pair, which, although slightly outperforming the euro, may face a similar outcome. It is currently trading above 1.3320.
📈 European equities remain bullish, with DAX 40 futures trading near last week’s all-time highs, currently above 23,780 points. Similarly, Eurostoxx 50 futures are holding above 5,400 points, close to the historical highs reached in February.
🛢️ Oil prices rose last Friday, with Brent crude reaching $65.50 per barrel. However, it is now experiencing a slight pullback, falling to $64.80.
🪙 Gold futures approached $3,150 per ounce on Friday before recovering some lost ground and closing the week at $3,205 per ounce. This week’s opening has been optimistic, with contracts currently trading at $3,230 per ounce. However, if these levels fail to consolidate, the decline initiated last week could continue, potentially reaching the $3,080-per-ounce zone.
₿ Bitcoin surpassed $107,000 a few hours ago but has since fallen back to its current price of $102,445.
