US Futures Flat As Global Stocks Hit New All Time High

US equity futures are higher, following European and Asian markets, while the MSCI All-country world index surpassed the February record high: as if April never happened. As of 8:00am, S&P futures are up 0.2%, trading just shy of 6,000 and on the verge of a 20% bull market rebound from the April low even with some negative trade developments overnight: Trump said that China’s Xi is very tough to make a deal with, and signed an order to raise steel and aluminum tariffs to 50% from 25%. Nasdaq 100 futures are up roughly the same, with Mag 7 names mostly higher premarket led by NVDA (+0.9%) and TSLA (+0.8%). Bond yields and USD are flat; Commodities are mostly unchanged as well, although Ags are higher and gold dips. Trump says Xi is “extremely hard” to make a deal with (here); the White House said that they are expecting a Trump-Xi call this week. The 50% steel tariffs will take effect today; key macro data to watch are May ADP employment change (8:15am), S&P Global US services PMI (9:45am) and ISM services index (10am).

In premarket trading, Magnificent Seven stocks are mostly higher (Nvidia +0.7%, Tesla +0.6%, Meta +0.5%, Amazon (+0.5%, Alphabet +0.4%, Microsoft 0%, Apple -0.5%).Here are some other notable premarket movers:

• CrowdStrike shares (CRWD) fall 6.8% in premarket trading after the cybersecurity company posted disappointing first-quarter subscription revenue due to an impact from programs related to its post-outage Customer Commitment Package (CCP). Its second-quarter sales forecast also underwhelmed, while an unchanged view on full-year revenue was seen as negative by some analysts. Evecore ISI and Canaccord downgraded the stock.
• Dollar General shares (DG) rise 0.6% in premarket trading on Wednesday as Oppenheimer & Co raised to outperform from market perform citing a “brighter intermediate-term outlook” for the discount store chain’s stock.
• Guidewire (GWRE) advances 14% in US premarket trading after the software company boosted its revenue guidance for the full year, exceeding analyst estimates.
• Lumentum shares (LITE) are up 6.9% in premarket trading, after the maker of optical and photonic products raised its fourth-quarter forecast. Analysts are positive on the update, and singled out margins as an area of strength.
• Snowflake (SNOW) rises 2.4% in premarket trading on Wednesday UBS raised to buy from neutral saying the company is early in a multi-year data investment cycle. .

Overnight, Trump’s comments on social media about Xi in which he said “he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!” cast doubt over their fragile economic truce, while China is also said to be considering placing a major order with Airbus, a blow for America’s biggest exporter, Boeing. There’s also wrangling over Trump’s massive tax bill. Elon Musk slammed the bill as a budget-busting “abomination,” while Senate Majority Leader Thune said the House SALT deal will have to change.

“It’s really getting complicated for investors to position themselves given the lack of visibility, the uncertainty and with markets fully valued,” said Roland Kaloyan, head of equity strategy at Societe Generale SA.

While some economists fear a notable weakening in US employment in the coming months under the weight of tariffs, that hasn’t shown up in the data yet. The muted impact has lifted optimism and helped offset concerns over President Donald Trump’s trade policies, which economists have warned could lead to an economic slowdown. Investors will follow services data and ADP’s report on private-sector employment later Wednesday for updated information on the strength of the US economy, ahead of Friday’s nonfarm payrolls report.

Options traders are betting the S&P 500 will post its smallest swing in months following Friday’s employment report, highlighting how the recent data has calmed investor worries over the economic impact of Trump’s tariffs. The S&P is projected to move 0.9% in either direction on Friday, according to data compiled by Piper Sandler. That figure, based on the prices of S&P 500 options straddles as of Tuesday’s close, is the smallest implied swing ahead of a jobs print since February.

“The fact is that everybody was waiting for the US economy to break, but the jobs data from yesterday demonstrates that it’s not,” said Benjamin Melman, chief investment officer at Edmond de Rothschild Asset Management. “As far as institutional investors are concerned, this is the most hated rally in a while.”

Meanwhile, with US futures little changed but on the cusp of a bull market, the MSCI All-Country World Index hit an all-time peak for the first time since February.

Global investors have dry powder to buy dips and this will help the “unloved rally” continue in the absence of strong negative news, according to strategists at Barclays. But no-one seems enthusiastic. “As far as institutional investors are concerned, this is the most hated rally in a while,” said Benjamin Melman, chief investment officer at Edmond de Rothschild Asset Management.

Still, technicals might suggest US equities are poised for a breakout. And with Nvidia reclaiming the title of the world’s largest company, the Mag 7 stock bounce has been greater than the corresponding P/E multiple expansion.

In Europe, the Stoxx 600 is up 0.7%, having extended gains after EU Trade Commissioner Sefcovic said trade talks with the US are “advancing in the right direction at pace” in a post on X. The DAX outperforms its regional peers, rising 1% after the German cabinet approved a package of tax breaks for companies worth an estimated €46 billion. Miners and technology shares lead gains, with chipmakers rallying after US peer ON Semiconductor reported a recovery in demand. Personal-care stocks and autos lag. Among individual movers, Airbus advances following a report that China is considering placing an order for hundreds of aircraft as soon as next month. Here are the biggest European movers:

• European chipmakers rally after US peer ON Semiconductor said it started to see signs of a broad-based recovery in demand. Infineon, STMicro, AMS-Osram, and Nordic Semi are among gainers.
• Airbus shares rise as much as 4.1% after Bloomberg reported that China is considering placing an order for hundreds of the planemaker’s jets as soon as next month.
• Elisa shares gain as much as 3.5% after Morgan Stanley raised its price target on the Finnish telecommunications firm, saying the firm is well-insulated from uncertain macro and geopolitical conditions.
• Camurus shares soar as much as 26%, the most since April 2020, after the Swedish biopharmaceutical company signed a licensing agreement with Eli Lilly allowing the US weight-loss drugmaker to develop and commercialize therapies using Camurus’ FluidCrystal technology.
• B&M shares slide as much as 2.9% after the company issued in-line guidance for the new financial year, causing it to give back some of the gains booked since its last update in March.
• Remy Cointreau shares climb as much as 2.3%, rebounding from an initial slump, after the cognac-maker scrapped its 2029-30 guidance due to the impact of US-China tariffs. Some brokers noted that the withdrawal was expected in the market.
• Paragon Banking Group gains as much as 7.5%, climbing to its highest since April 2007, after the UK lender increased its full-year net interest margin guidance and delivered what analysts view as solid first-half results.
• Thyssenkrupp Nucera rises as much as 12%, the most since April, after the firm was commissioned to carry out a study for a water electrolysis plant in Europe.
• DiscoverIE shares jump as much as 12%, hitting their highest level since January, after the electronics company delivered annual results ahead of expectations and lifted its medium-term margin target.
• S4 Capital shares rise as much as 6.2% as analysts said the media company’s slightly weaker revenue growth guidance is unsurprising and its earnings target is still intact.
• Redcare shares drop as much as 14% after Kepler Cheuvreux cut its rating on the stock to hold from buy, saying the online pharmacy will struggle to sustain momentum for e-scripts when the voluntary digital identification system known as GesundheitsID kicks in.
• Carmila shares fall as much as 8.7% after supermarket operator Carrefour sold a 7% stake in the French real estate group.

“Europe is still cheap but that steep discount is no longer there,” An Do, portfolio manager at Julius Baer, told Bloomberg TV. “There is still room for US assets that are truly unique. The Magnificent 7, or large cap tech, is still growing earnings at high 30% year-on-year.”

Earlier in the session, Asian stocks gained, led by South Korea as investors cheered the presidential election victory of Lee Jae-myung, which is seen potentially driving another leg up for the market. The MSCI Asia Pacific Index rose as much as 0.9%, with TSMC and SK Hynix among the biggest boosts to the benchmark. Korea’s Kospi jumped 2.7% to enter a technical bull market. The outcome of Korea’s election ended a months-long political leadership vacuum, and is fueling bets on further progress in the nation’s corporate reform drive. Hong Kong shares trimmed gains after President Donald Trump called Xi Jinping very tough to make a deal with, underscoring mounting uncertainty over the progress of US-China trade talks. Investors are also digesting the impact of higher US tariffs on steel and aluminum, after Trump officially signed a directive doubling the levy to 50%.

In FX, The Bloomberg Dollar Spot Index falls 0.1%. The Norwegian krone is leading gains versus the greenback, rising 0.5%. The euro adds 0.2% after euro-area composite PMI was revised higher to show a modest expansion rather than a contraction in May. 

In rates, treasury long-end yields are about 1bp richer on the day while front-end is about 1bp cheaper, flattening the yield curve slightly. US 10-year yields are 1bp higher at 4.46% with bunds and gilts in the sector trading slightly cheaper; long end’s slight outperformance flattens 5s30s curve by about 2bp. Price action in European core rates is similarly muted, and US stock and oil futures trade near Tuesday’s highs. Gilts lead a selloff in European government bonds with UK 10-year yields rising 3 bps to 4.67%. Focal points of US session include ADP employment and ISM services gauge and Bank of Canada rate decision. Dollar swap spreads remain near Tuesday’s highs, following a late jolt higher after report that Wells Fargo & Co. has been released from a Federal Reserve asset cap that restricted its size for more than seven years

In commodities, oil prices edge lower after a two-day gain as rains slowed the growth of some blazes that had disrupted Canadian crude production. WTI falls 0.3% to $63.20. Spot gold climbs $10 to around $3,363/oz. 

Looking at today;s US economic data includes May ADP employment change (8:15am), S&P Global US services PMI (9:45am) and ISM services index (10am). Fed releases latest Beige book at 2pm. Bank of Canada rate decision expected at 9:45am. Fed speaker slate includes Bostic and Cook at 8:30am

Market snapshot

• S&P 500 mini +0.2%
• Nasdaq 100 mini +0.1%
• Russell 2000 mini +0.4%
• Stoxx Europe 600 +0.6%
• DAX +1%, CAC 40 +0.8%
• 10-year Treasury yield +1 basis point at 4.46%
• VIX -0.2 points at 17.49
• Bloomberg Dollar Index -0.1% at 1212.2
• euro +0.2% at $1.1392
• WTI crude -0.3% at $63.25/barrel

Top Overnight News

• President Trump said Wednesday that it was “extremely hard” to make a deal with his Chinese counterpart Xi Jinping, at a time when the White House has been suggesting the two leaders could talk this week amid rising trade tensions. CNBC
• US President Trump invited the Senate Financial Committee to the White House with the meeting reportedly to be held at 16:00EDT on Wednesday.
• OMB Director Vought said the rescission package sent on Tuesday is just the start and they chose the easiest DOGE cuts to start rescissions, while he added there are consequences for Congress failing to rescind. Vought said the rescission package will be on the floor next week and they will send many more rescissions once this passes, as well as noted that they have tools to make cuts permanent by the end of the FY.
• BLS said some April jobs data will be corrected on Friday and major measures such as the unemployment rate are unaffected, while it added that many numbers are to be corrected but the impact is ‘negligible’.
• China is considering placing an order for hundreds of Airbus jets as soon as next month, people familiar said, adding to tensions as Beijing keeps Boeing on the sidelines. BBG
• Bank of Japan Governor Kazuo Ueda said the country’s economy can withstand the hit from U.S. tariffs and sustain a cycle of rising inflation accompanied by wage growth, signaling the bank’s readiness to raise interest rates further. CNBC
• Trump’s doubling of steel and aluminum tariffs to 50% took effect with the UK exempt from the increase. Mexico will also seek a reprieve later this week. BBG
• Germany’s new government will seek to pass a 46bn package of corporate tax breaks over the summer in an effort to jolt the Eurozone’s largest economy of stagnation. FT
• Eurozone countries are preparing for a series of difficult negotiations w/Trump over trade, NATO, and Ukraine. FT
• Eurozone’s final services PMI for May came in at 49.7, up from the flash reading of 48.9. BBG
• Wells Fargo stock rose premarket (+2.97%) after the Fed lifted an asset cap that has restricted its size for more than seven years. BBG
• Traders are ramping up hedges against dramatic shifts in the Fed’s rate path. While the swaps market still sees two cuts this year, uncertainty has pushed traders to buy protection for a wider range of outcomes, including no cuts at all. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly higher following the gains on Wall St where sentiment was lifted by better-than-expected JOLTS data and with some slight optimism with US President Trump and Chinese President Xi reportedly set to speak this Friday. ASX 200 was led higher by outperformance in the energy sector and with participants unfazed by recent data releases including the miss on Q1 GDP. Nikkei 225 advanced at the open following recent currency weakness but with further upside capped by a lack of drivers. KOSPI outperformed and is on course for a bull market following the Presidential Election which was won by the DP’s Lee Jae-Myung who was later sworn in. Hang Seng and Shanghai Comp conformed to the positive mood but with gains capped as China remained quiet regarding a potential Trump-Xi call.

Top Asian News

• NIO’s Hong Kong-listed shares advance as much as 4.4% after the Chinese electric-vehicle maker said it aimed to reduce research and development spending to reach its fourth-quarter break-even target. Meanwhile, the company reported first-quarter revenue that missed consensus estimates.
• CGN Mining shares gain as much as 23% in Hong Kong, the most since Oct. 22, as Morgan Stanley analysts note the nuclear energy company’s better-than-expected new pricing formula would improve earnings.
• Innovent Biologics shares surge as much as 18% to the highest since Nov. 2021, after the company presented the latest clinical data of IBI363 in advanced non-small cell lung cancer.

European bourses (STOXX 600 +0.6%) opened modestly firmer across the board and have traded with an upward bias throughout the morning – currently at session highs. Aided by PMIs and potentially the readout from Sefcovic on his call with Greer. European sectors hold a strong positive bias and aside from the top performer, the breadth of the market is fairly narrow.  The European auto sector has been in focus today, with European auto supplier association, Clepa, suggesting production lines and plants have already been shut and the impact will likely grow in the next 3-4 weeks. This sparked some modest pressure in the sector.

Top European News

• European auto supplier association Clepa says production lines and a couple of plants are already shut due to China rare earth export curbs; impact likely to grow in the next 3-4 weeks, and only 1/4 of licence requests have been granted since early April.
• Germany is said to be seeking to pass a package of EUR 46bln in corporate tax breaks, according to FT.
• Germany’s VDMA says April orders -6% Y/Y (domestic -4%, foreign -7%).
• “[UK Chancellor] Rachel Reeves rules out increasing income tax, NI and VAT for ‘working people’ in the autumn Budget, saying she will stick to her manifesto pledges despite tight public finances”, via Jason Groves on X. Will be making changes to the winter fuel payments, so they can be paid this winter (As expected).
• UK Chancellor Reeves says, “I have no intention of raising taxes again on the scale of 2024 budget”.

FX

• DXY is fractionally lower following Tuesday’s session of gains which were in part a bounce back from Monday’s losses and supported by JOLTS data. On the trade front, markets await the call between Trump and Xi on Friday. Ahead of which, Trump has posted that his Chinese counterpart is “very tough, and extremely hard to make a deal with”. Ahead, attention will be on the data slate with ADP due on deck ahead of Friday’s all-important NFP print. Elsewhere, ISM services and the Fed’s Beige Book are also set to be released. DXY currently trading around 99.03.
• EUR is a touch firmer vs. the USD but stuck on a 1.14 handle following a soft EZ inflation release in the run-up to Thursday’s ECB policy announcement (25bps cut is pretty much nailed on). Elsewhere, on the data front; an upward revision to the EZ composite PMI into positive territory has little follow-through into EUR with EUR/USD currently topped out at 1.1396.
• JPY is flat vs. the USD but holding onto most of the prior day’s spoils after returning to the 144.00 territory amid a firmer buck and the positive risk tone. Incremental newsflow out of Japan has been on the light side aside from Japanese Chief Cabinet Secretary Hayashi said they have not received any letter from the US asking to make the best offers on trade talks. USD/JPY had ventured as high as 144.38 overnight before drifting back towards the top end of Tuesday’s 142.37-144.11 range. GBP firmer vs. the USD and flat vs. the EUR with pertinent UK-specific newsflow lacking aside from the White House announcing that US tariffs on UK steel and aluminium will remain at 25% for now, with the UK failing to get the 0% tariffs promised in the US ‘deal’ implemented in time, according to Bloomberg. Elsewhere, an upward revision to UK services PMI had little impact on the GBP.
• Antipodeans are both a touch firmer vs. the slightly softer USD with AUD able to overlook disappointing Australian GDP data which has heightened calls for a looser approach by the RBA. Both currencies will be eyeing the outcome of the Trump-Xi call on Friday given that China is both of their largest trading partners.
• CAD is flat vs. the USD ahead of today’s BoC policy announcement. The BoC is expected to keep rates on hold at 2.75%, although some (6/26 surveyed by Reuters) expect a 25bps rate cut; markets price such an outcome at 30%. USD/CAD is currently tucked within Tuesday’s 1.3701-43 range.
• PBoC set USD/CNY mid-point at 7.1886 vs exp. 7.1977 (Prev. 7.1869).

Fixed Income

• USTs started the day contained. Focus overnight was on the largely as expected implementation of Trump’s 50% steel and aluminium tariff rate for all ex-UK, which is subject to a lower 25% rate, for now. Now focus remains firmly on US-China relations and specifically on Friday’s call which features the Presidents of the two countries. USTs currently hold at the low end of a 110-12+ to 110-18+ band, ahead of ISM Services and ADP National Employment.
• Bunds held a slight bearish bias overnight but not particularly pronounced. This bias accelerated throughout the European morning in the wake of Final PMIs. No overly significant reaction to any one figure, but Bunds fell from 131.30 to an initial 131.04 low across the PMI window. The EZ-wide figure was revised a little higher with the accompanying commentary suggesting that ECB cuts/German fiscal spending should be enough to offset the impact of higher tariffs/uncertainty.
• Most recently, EU Trade Commissioner Sefcovic said he had constructive talks with USTR Greer; are advancing in the correct direction at “pace”; a comment which may have helped push the benchmark to a 130.94 base, alongside European equity bourses picked up slightly at the time.
• Gilts are under pressure throughout the morning in catch-up to the general overnight tone, the above factors (particularly PMIs) and ahead of supply. Additionally, yields pushed higher by the inflationary implications of the UK finding itself subject to 25% tariffs on metals; while better than global peers, the levy is a disappointment for those who hoped the UK-US deal would result in a full exemption.
• UK Chancellor Reeves has been on the wires today, where she ruled out increasing tax for “working people” in the Autumn Budget. UK assets were little moved.
• UK Sells GBP 4.75bln 4.375% 2028 Gilt: b/c 3.08x (prev. 3.48x), average yield 4.062% (prev. 3.834%) & tail 0.3bps (prev. 0.2bps).
• Orders for the new Italian 5yr BTP in excess of EUR 95bln, Green BTP orders in excess of EUR 85bln, via Reuters citing leads.

Commodities

• Crude has been tilting upwards in early European hours after taking a breather in APAC trade after advancing on Tuesday amid the positive risk appetite and ongoing geopolitical tensions, with demand contained overnight following mixed private sector inventory data. Tight parameters are seen across crude futures – WTI Jul resides in a USD 63.07-63.52/bbl range while Brent Aug sits in a USD 65.31-65.77/bbl band.
• Mixed trade across precious metals as traders await the next macro catalyst, with spot gold and silver caged to narrow ranges. XAU/USD currently trades in a USD 3,346.53-3,372.71/oz range and well within Tuesday’s USD 3,333.17-3,392.30/oz.
• Spot palladium narrowly underperforms, potentially with headwinds from the European auto supplier association Clepa who said production lines and a couple of plants are already shut due to China rare earth export curbs.
• Base metals are tilting firmer in tandem with upticks seen across equities, and in broader sentiment, albeit gains are capped ahead of risk events including a slew of Fed speakers, the US Jobs report on Friday, but arguably more importantly for the complex, traders await news on a potential call between US President Trump and Chinese President Xi.
• US Private Inventory Data (bbls): Crude -3.3mln (exp. -1mln), Distillates +0.8 (exp. +1mln), Gasoline +4.7mln (exp. +0.6mln), Cushing +1.0mln.

Geopolitics: Middle East

• Israeli military warned residents of Gaza against moving into areas leading to US-backed aid group distribution centres on Wednesday, deeming them ‘combat zones’.
• Gaza Humanitarian Foundation said it will not distribute any aid on Wednesday and is in talks with the Israeli military to enhance security measures beyond the immediate perimeter of GHF sites.
• Ten elected UN Security Council members asked for a Wednesday vote on a draft resolution on Gaza that demands an immediate, unconditional and permanent ceasefire in Gaza and the release of all hostages held by Hamas, while it also demands immediate lifting of all restrictions on aid into Gaza and safe, unhindered distribution at scale throughout Gaza, according to Reuters citing sources.
• Sirens sounded in Tel Aviv after a rocket fired from Yemen towards Israel and Houthis announced the targeting of Israel’s Ben Gurion Airport with a hypersonic missile, according to Cairo News and Sky News Arabia.
• Syrian Foreign Ministry said reports of launches towards Israel have not been verified yet and it affirmed that Syria will not pose a threat to any party in the region following projectile launches towards Israel. Furthermore, the Syrian Foreign Ministry said Israel’s strike on Daraa caused significant human and material losses, while Syrian security sources also stated that Israel launched a series of strikes on targets in southern Syria.
• US proposed an interim step in Iran nuclear talks allowing some enrichment, according to the NY Times. It was separately reported that White House Press Secretary Leavitt said Witkoff sent a detailed proposal to Iran and hopes Iran will accept the proposal, otherwise, there will be consequences, while the US State Department said the maximum pressure campaign on Iran remains in ‘full force’.
• Iran is open to basing a nuclear deal with the US around the idea of a regional uranium enrichment consortium, as long as it is located within Iran, according to Axios citing an Iranian official.
• Iranian Supreme Leader Khamenei says Iran will increase Iran’s power in all fields. The US nuclear proposal is 100% against “the principle of our power”.

Geopolitics: Ukraine

• Ukraine’s Foreign Minister said Russia made no response to Kyiv’s peace proposals at Istanbul talks and presented ‘old ultimatums’, while the official stated more tangible results were needed. It was separately reported that Russia’s Deputy Foreign Minister said Istanbul will remain the venue for Russia-Ukraine talks, and no other venues are on the table, according to TASS.
• White House Press Secretary Leavitt said President Trump is keeping sanctions on Russia as a tool in the toolbox and Trump remains optimistic about progress in Russia-Ukraine discussions.
• US Secretary of State Rubio spoke with Turkish Foreign Minister Fidan to discuss supporting direct negotiations between Russia and Ukraine.
• US Special Envoy Kellogg believes the Russia Sanctions Act is “ready to drop and said he spoke to Senator Graham about Russia sanctions.
• Russia’s top security official Shoigu is to discuss Ukraine with North Korean leader Kim, according to Russian agencies.
• Russia’s Deputy Foreign Minister said NATO’s planned Baltic drills are part of the alliance’s preparations for a potential military clash with Russia, according to TASS.

Geopolitics: Other

• South Korean President Lee said peace achieved at a high cost is better than war and he will seek dialogue with North Korea to secure peace in the Korean peninsula.
• US Secretary of State Rubio commemorated the bravery of the Chinese people killed in the Tiananmen crackdown in 1989.
• Taiwan’s President Lai posted on Facebook regarding the Tiananmen crackdown anniversary in which he stated that authoritarian governments often choose to silence and forget history, while he added that they cannot ignore the infringement on global democracy and the rule of law caused by the expansion of authoritarianism.

US event Calendar

• 7:00 am: May 30 MBA Mortgage Applications -3.9%, prior -1.2%
• 8:15 am: May ADP Employment Change 37k, est. 113.5k, prior 62k
• 9:45 am: May F S&P Global U.S. Services PMI, est. 52.3, prior 52.3
• 9:45 am: May F S&P Global U.S. Composite PMI, est. 52.05, prior 52.1
• 10:00 am: May ISM Services Index, est. 52, prior 51.6

DB’s Jim Reid concludes the overnight wrap

Sentiment and data haven’t been great so far this week, but ever since the weak US ISM manufacturing data on Monday, markets have steadily climbed with the S&P 500 up +1.86% since the lows after it was released, including another +0.58% gain yesterday as the headline JOLTS data was broadly positive (more below). So the index is now up +19.82% since the closing low after Liberation Day, leaving it just shy of the 20% threshold that would technically mark the start of a bull market. We have the ISM services today so we’ll see if that provides the same market response.

The mood was boosted yesterday by tech and semiconductors stocks, as Meta’s deal to enter a 20yr agreement with the largest US nuclear operator seemed to energise the sector. The deal was said to be cheaper than a similar one powered by Microsoft last year as it used existing facilities. It shows just how much energy demand there will be going forward from AI and the lengths these firms will go to maintain their green credentials as fossil fuels would be cheaper. I ran a “Deep Research” search last week where I uploaded a number of my previous reports and asked it to do a summary of the new World Outlook document in my style. Unfortunately it took 18 hours of processing. When I asked for updates it kept on saying “just give me 45 more minutes, I’m nearly there”. In the end I gave up but I hate to think how much splitting of how many atoms was needed for it to take that long. Maybe my writing style is so chaotic it blew up their servers. I should say Deep Research is incredible but it’s trial and error as to what it does well and what it does less well.
The Philadelphia Semiconductor Index (+2.48%) took the news well, with Nvidia (+2.95%) seeing its market cap narrowly overtake Microsoft to reclaim the position of the world’s most valuable company for the first time since January. That also helped the NASDAQ outperform (+0.85%), though the Mag-7 saw only a modest gain (+0.23%) as Alphabet slid by -1.69% and Meta itself fell by -0.60%. So signs of an ongoing debate over which tech companies will gain from AI. The gains in the US also occurred in Europe, where the STOXX 600 (+0.09%), the FTSE 100 (+0.38%), DAX (+0.67%) and CAC 40 (+0.34%) all rose. On the tech theme, my colleague Marion Laboure published her tech performance review for May, which is highly relevant given the sector’s surprising uplift in recent days. 

One of the most important catalysts for the recovery was that JOLTS report, which showed the US labour market in a more robust position than previously thought. Specifically, job openings unexpectedly rose to 7.391m in April (vs. 7.1m expected), so that push back against fears that companies would dial back hiring after Liberation Day. The quits rate of those voluntarily leaving their jobs did edge down a tenth to 2.0%, but that was also within its range over the last 12 months, so not a cause for alarm. The report coincided with the start of the risk-on move, with bond yields also moving higher after the release. By the close, that meant the 10yr yield (+1.4bps) was up to 4.46%, and the 30yr yield (+1.6bps) rose to 4.98%, edging closer to 5% again. The moves also got momentum from the latest rise in oil prices, with Brent crude (+1.55%) up to $65.63, its highest level in nearly three weeks.

We also had some fresh trade headlines yesterday, as Reuters reported that the Trump administration wanted countries to provide their best offer by today on the trade negotiations. As a reminder, there’s just over a month until the 90-day extension for the reciprocal tariffs runs out on July 9, so the US are trying to negotiate lots of deals before that, and Press Secretary Karoline Leavitt said that “I can confirm the merits in the content of the letter”. Leavitt also suggested that there would be a call between Trump and China’s President Xi “very soon”. Otherwise, Trump also signed the executive order yesterday that imposed the higher 50% tariffs on steel and aluminium announced on Friday, and these took effect overnight. The UK is exempt from the increase until July 9 to allow the two countries to work out new levies or quotas under the framework deal they agreed last month.

Earlier in the day, the initial market plunge seemed to coincide with the collapse of the Dutch government after the far-right Freedom Party (PVV), the largest in the Netherlands’ parliament, withdrew from the ruling coalition. The move came as other parties in the four-party coalition refused to back the PVV’s proposed migration curbs. This marks the second time in two years that a Dutch government has collapsed due to differences over migration policy. Incumbent Prime Minister Dick Schoof will continue in a caretaker role until snap elections are held. There wasn’t too much of an impact on markets however, as even though the country’s main equity index, the AEX, slid -0.75%, it had recovered by the afternoon to close up +0.21%. European bond yields also saw little movement, with 10yr bunds (unch), OATs (+0.2bps) and BTPs (-0.5bps) fairly steady, although gilts (-2.9bps) outperformed.

Elsewhere in Europe, the Euro Area flash CPI print fell to just +1.9% in May (vs. +2.0% expected), marking the first sub-2% headline print in four years (excluding the 1.7% surprise in September 2024). Moreover, core CPI was down to just +2.3%, the lowest since January 2022. The print cemented market expectations that the ECB would deliver another rate cut tomorrow, and showed that the April spike in services inflation was mostly noise associated to strong Easter effects. Underlying services inflation momentum has eased significantly and our European economists believe there’s still scope for further services disinflation.

Overnight in Asia, markets have put in a very strong performance that built on the overnight gains from Wall Street. In particular, South Korea’s KOSPI (+2.45%) has surged after the election of Lee Jae-myung as President, with the index trading at a 10-month high this morning. So if it closes at that level, it would be up more than +20% from its closing low after Liberation Day, marking the technical definition of a bull market. In addition, the country’s headline CPI print also fell to +1.9% in May (vs. +2.1% expected). But there’ve been gains across the board, with the Nikkei (+0.88%), the Hang Seng (+0.72%), the CSI 300 (+0.52%) and the Shanghai Comp (+0.43%) all advancing. Australia’s S&P/ASX 200 (+0.79%) has also risen this morning, despite underwhelming Q1 GDP figures that showed the economy only grew by +0.2% (vs. +0.4% expected). Looking forward however, US equity futures are pointing a bit lower this morning, with those on the S&P 500 down -0.04%.

To the day ahead now, data releases include the US ADP report for May and ISM services, the final services and composite PMIs from the US and Europe, and Canada’s Q1 labor productivity. Central bank speakers include the Fed’s Bostic and Cook, and we’ll also get the BoC’s decision.