Market Report.
🛫 Following yesterday’s festivities in London, we return with the best market and geopolitical report.
🤝 In response to US trade threats and clearly imitating Trump’s strategies, Macron travelled to Vietnam to strengthen trade ties. If Trump secured deals for Boeing in the Middle East, Macron has secured deals for Airbus in Asia.
✈️ France and Vietnam signed a deal for 20 Airbus planes, as well as other pacts, during President Emmanuel Macron’s visit to Hanoi. The visit aims to boost France’s influence in its former colony, Vietnam, as the country faces threats of crippling U.S. tariffs. The deals cover cooperation on nuclear energy, railways, Airbus earth-observation satellites, and Sanofi vaccines. Macron reiterated France’s support for freedom of navigation in the South China Sea, an issue important to Vietnam. Vietnam has been advised to ensure its decisions in trade talks with the U.S. do not come at the expense of European interests, as it could jeopardize its close ties with the EU.
⚖️ Vietnam, under pressure from the U.S. to buy more American goods, has made pledges in trade talks to avert 46% tariffs that could impair its growth, raising European concerns about deals at the region’s expense.
📹 Unfortunately, these agreements were overshadowed by an awkward moment upon Macron’s arrival in Vietnam. Videos went viral showing someone, possibly his wife, touching Macron’s face just as the doors of his plane opened.
📈 Yesterday, European stocks gained on a quiet trading day, as investors reacted to the latest developments on tariffs between the US and EU. US President Donald Trump announced he would delay imposing a 50% tariff on goods from the European Union until July 9th, extending trade negotiations. The tariffs were originally scheduled to take effect on June 1st, but Trump made the decision to push back the implementation after a conversation with European Commission President Ursula von der Leyen. The delay in imposing the tariffs provides more time for the US and EU to work towards a resolution and avoid the implementation of the punitive 50% levies.
📊 Berenberg Bank’s lead economist, Holger Schmieding, commented to CNBC that even if an agreement were reached to cut EU import duties to 20% or 30%, the bloc would “have no choice” but to enact “meaningful retaliatory measures” against the United States.
💰 According to Bloomberg, the proposed 50% tariff by the US would hit $321 billion worth of US-EU goods trade, lowering US GDP by close to 0.6% and boosting prices by more than 0.3%. However, once again, estimates of the impact this would have on a Europe in serious economic trouble, with France and Germany in economic contraction according to the latest estimates from their central banks, are omitted.
📉 Based on New York Times, Europe will face up to 0.8% GDP decline in 2025 if negotiations collapse and retaliatory tariffs escalate, surpassing the European Commission’s baseline forecast of 0.3%. Over 200,000 EU jobs directly at risk in automotive manufacturing alone, with Germany accounting for ~40% of these losses. 50% tariffs on EU cars (25% of EU auto exports go to the US) could erase €18 billion in annual trade, crippling German manufacturers like Volkswagen and BMW which were already in serious trouble due to green regulations and competition from China. Tariffs could add 0.5–1.2% to EU inflation via higher import costs and supply chain bottlenecks, complicating ECB rate-cut plans.
📜 It appears that Trump’s tax reform could impose taxes on the wealthy after all, at least on foreign fortunes in the United States from countries that Trump considers to have harmed the interests of US companies: The US tax bill that passed the House aims to target countries that impose “digital services taxes” on large tech companies, as well as those using provisions in a global minimum corporate tax deal.
📈 The so-called “Section 899” provision would increase the federal income tax rate on passive US income (dividends, interest, royalties) earned by people and institutions based in the targeted countries. The tax increase would start at 5 percentage points and rise by another 5 points each year, up to a maximum of 20 points above the statutory rate.
🚗 Another long-standing car manufacturer facing closures and cutbacks in Europe. Volvo Cars, the Sweden-based automaker owned by China’s Geely Holding, will cut around 3,000 jobs as part of a major cost-cutting drive. The job cuts will primarily impact office-based positions in Sweden and represent around 15% of Volvo’s total office-based workforce. The redundancies will include the reduction of around 1,000 consultant positions, mostly in Sweden, as well as 1,200 employees in Sweden and the remaining in other global markets. Volvo withdrew its financial guidance for 2025 and 2026, citing tariff pressure on the automotive sector, particularly from the threat of 50% tariffs on EU imports by the U.S. Despite the job cuts, Volvo remains committed to its long-term strategy of becoming a fully electric car company, though it has recently dropped its near-term goal of selling only EVs.
🌐 Chinese Premier Li Qiang has stated that the international economic and trade order is “under severe impact” and that China is weighing new policy tools to address the situation. Li said the fragmentation of industrial and supply chains has deepened, and trade barriers have increased, which has greatly impacted the economic development of all countries. Li stated that China will continue strengthening economic cooperation with more countries to support the overseas business development of Chinese enterprises. The remarks were made during a symposium with Chinese firms in Jakarta, which was attended by companies like Huawei, SAIC Motor, and New Hope Group. The comments reflect China’s concerns about the fragmentation of global supply chains and the increasing trade barriers, which are impacting the country’s economic development.
🌍 Geopolitics:
🇺🇸 In a recent conversation with journalists, Donald Trump expressed his dissatisfaction with Vladimir Putin, criticising the missile attacks on Kiev and other cities, which have caused numerous deaths. However, when pointed out by a reporter that Volodymyr Zelensky attempted to attack Putin’s helicopter with drones in an apparent assassination attempt, Trump replied: ‘That could be a reason.’ He then criticised Zelensky’s recurring pattern of provoking Russia, playing the victim and requesting more economic resources and weapons.
🔥 The games with the fire of World War III are not disappearing despite Trump’s attempts to reach a peace agreement. A Europe that has staked its economic recovery on war and fiscal expansion in military spending is raising its bet on war.
🎯 German Chancellor Friedrich Merz has announced a significant policy shift, stating that Germany and its key Western allies—the US, UK, and France—have lifted all range restrictions on weapons supplied to Ukraine. This decision allows Ukraine to use Western-supplied long-range weapons to strike military targets inside Russian territory, a move that was previously prohibited due to concerns about escalating the conflict with nuclear-armed Russia.
⚠️ This represents a significant escalation of the conflict, in direct contrast to previous statements made by President Putin in September 2024: “If the decision to permit long-range artillery strikes deep inside Russian territory is taken, it will mean nothing other than the direct participation of NATO countries, the USA, and Europe in the war in Ukraine. This, of course, will fundamentally change the nature of the conflict. It will mean that NATO countries are at war with Russia.”
🗳️ Telegram’s CEO, Pavel Durov, highlighted allegations of foreign interference in Romania’s presidential elections, citing reports that France’s foreign intelligence chief, Lerner, visited the country just two days before the vote. Durov referenced statements by MEP Valérie Hayer, a close ally of Macron, who reportedly promised that “everything would be done” to ensure Romania’s next president would be pro-European. He suggested Romania’s strategic importance lies in its potential use for shipping weapons to Ukraine and as a future proxy against Russia.
📱 Durov also claims that he was pressured by French officials to block content that could be favourable to the nationalist candidate on his social media platform, stating that he was willing to testify in court.
📊 Market View:
📈 The markets experienced a recovery during yesterday’s session following Friday’s scare, which was caused by another tariff threat against Europe. The Mini S&P 500 futures, which had fallen below 5,800 points last Friday, opened today’s session approaching 5,900 points. Similarly, the Nasdaq 100 futures reacted in the same way, managing to trade above 21,230 points.
💵 The dollar fell sharply once again after Trump’s tariff threats and has struggled to recover, currently trading at 99 points on the DXY dollar index. This has caused currency pairs such as EUR/USD to momentarily surpass 1.14 during yesterday’s session and now hover around levels close to 1.1385. In the case of the pound, the GBP/USD pair has seen a spectacular rise, approaching the 1.36 zone and is currently trading at 1.3565.
📉 The DAX 40 futures, which began losing more than 3% during last Friday’s session, have started this week recovering to the 24,050-point zone, but remain static at these levels due to fears of advancing further. The Eurostoxx 50 futures have shown similar behaviour, although they appear slightly weaker than the DAX, currently trading at 5,400 points.
🛢️ Oil continues fluctuating between $63.50 and $65.30, with current trading at $64.20 as the market awaits the OPEC+ meeting on 31 May, whose decisions could impact the global crude oil supply.
🥇 Surprisingly, gold has retreated despite the dollar’s weakness and global tensions. Gold futures have dropped from last Friday’s highs of $3,350 to the current level of $3,317.
₿ Bitcoin surpassed $110,000 during yesterday’s session before retreating to approximately $107,550 and is now trading at $109,260. This confirms the patterns we identified at the beginning of last week, allowing us to anticipate this price movement.
