Global markets started the week on a rebound after President Trump delayed new tariffs on European imports. The move, which followed a pattern of threats and backtracks, gave investors a temporary sense of relief. Meanwhile, China took another step toward expanding the global use of the yuan, signaling deeper shifts in international finance. Combined with Japan’s possible reduction in bond issuance, this week is shaping up to be pivotal for currencies, stocks, and cross-border trade.
1. Stocks Rise on Trump’s Tariff Delay; Dollar Wavers: Markets Wrap
European stocks climbed along with US equity futures after President Donald Trump extended a deadline on aggressive euro area tariffs, reinforcing a pattern of leaving markets guessing by making trade threats before backtracking.
The Stoxx Europe 600 index erased Friday’s losses sparked by Trump’s threat of 50% tariffs on the European Union. The US President later said he had agreed to delay the date for the levies to July 9 from June 1. Contracts for the S&P 500 and the Nasdaq 100 advanced more than 1%. A gauge of the dollar hovered near its lowest level in almost two years. Cash Treasuries didn’t trade due to holidays in the UK and US.
The tariff war has returned as the major driver once again after concerns about Trump’s proposed tax cuts, and their impact on the US deficit, churned markets much of last week. Trump’s whiplash moves have increased uncertainty in markets and his broadside against Europe on Friday, followed by a backtrack, was a stark reminder of the president’s volatile policy making.
“The stock market seems to dance to Trump’s tune: first a threat, then a pullback, quickly followed by a rebound as speculative investors anticipate a concession from the U.S. President,” said Jochen Stanzl, chief market analyst at CMC Markets. “This morning’s confirmation of such expectations reinforces the so-called ‘Trump Pattern,’ which is increasingly seen as a successful strategy for risk-tolerant investors.”
Trump’s decision to extend the deadline came after a phone call with European Commission President Ursula von der Leyen.
Von der Leyen, who heads the EU’s executive arm, said earlier Sunday in a post on X that “Europe is ready to advance talks swiftly and decisively,” but “a good deal” will need “time until July 9.” That’s the date on which Trump’s 90-day pause of his so-called reciprocal tariffs had originally been set to end.
“One thing that is starting to concern us a bit is the fact that the rebounds that follow these selloffs are losing strength as we go on,” said Frederic Rozier, a portfolio manager at Mirabaud France. “We can sense investor fatigue about this back-and-forth and there’s a risk sentiment will erode as markets run in circles on tariffs. The only thing we know is that even if there’s an agreement, there will be a cost for European stocks.”
Trump’s tariff threats on Friday also included a 25% levy on smartphones if companies, including Apple Inc. and Samsung Electronics Co. failed to move production to the US.
Among individual movers in Europe, Thyssenkrupp AG jumped more than 7% after a report that the firms chief executive plans to turn it into a holding company, allowing it to cut overhead costs as it divests further units. Volvo Car AB climbed as much as 4.8% after announcing plans to eliminate around 7% of its global workforce to cut costs and protect profits.
The trade tensions and weak demand for US assets are showing up in the dollar. Bloomberg’s dollar spot index was track for its lowest close since July 2023, while the greenback is at or approaching key levels against a host of currencies including the euro, Britsh pound, yen and Swiss franc.
Enthusiasm has faded for the world’s reserve currency this year. Speculative traders remained bearish on the dollar but trimmed their positioning to $12.4 billion in the week ending May 20 from $16.5 billion in the week prior, according to CFTC data reported Friday.
A key event this week will be Nvidia Corp.’s results on Wednesday. The chip-making giant is seen as a bellwether for so called growth stocks and the sustainability of the artificial intelligence boom. It’s outlook will be crucial given macro risks and tariff uncertainty.
Investors are also gearing up for the Federal Reserve’s preferred inflation measure, the US personal consumption expenditures price index excluding food and energy, which will be released Friday. The April reading is forecast to rise 0.1% based on consensus expectations.
Elsewhere, signs of port congestion in northern Europe and other hubs suggests trade wars could lead to maritime disruptions around the world, increasing shipping rates.
Trump on Friday announced a partnershipbetween United States Steel Corp. and Japan’s Nippon Steel Corp., shocking markets with an agreement he said would keep the once-iconic American firm in the US, but otherwise providing no specifics. Nippon Steel shares jumped as much as 7.4% in Tokyo, while shares in US Steel rose 21% Friday.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 1.2% as of 7:49 a.m. New York time
- Nasdaq 100 futures rose 1.4%
- Futures on the Dow Jones Industrial Average rose 1.1%
- The Stoxx Europe 600 rose 1%
- The MSCI World Index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.1375
- The British pound rose 0.1% to $1.3555
- The Japanese yen fell 0.3% to 142.96 per dollar
Cryptocurrencies
- Bitcoin rose 2% to $109,851.34
- Ether rose 1.8% to $2,568.07
Bonds
- Germany’s 10-year yield advanced three basis points to 2.59%
- Britain’s 10-year yield declined seven basis points to 4.68%
Commodities
- West Texas Intermediate crude fell 0.3% to $61.37 a barrel
- Spot gold fell 0.8% to $3,331.28 an ounce
2. China Raises Cross-Border Yuan Use Requirement for Major Banks
China’s central bank asked its major lenders to raise the share of yuan when facilitating cross-border trade, in its latest push for the use of the currency as the world grapples with the onslaught of tariffs by the US.
The People’s Bank of China increased the floor ratio for yuan-denominated trade transactions to 40% from 25% as part of its recent adjustment to the so-called Macro Prudential Assessment, according to people familiar with the matter, who asked not to be identified discussing a private matter. While not mandatory, banks missing the ratio often receive a lower score in regulatory review which will impact their future business expansion.
The central bank didn’t immediately respond to a request for comment.
The sharp increase highlights Beijing’s determination to accelerate the use of the yuan in global trade and may have a significant impact on demand for the currency just as Trump’s sweeping tariffs raised concerns about the international appeal of dollar-based assets.
The move comes amid negotiations between Beijing and Washington after US President Donald Trump sent shock-waves across the global economy and markets by raising tariffs on China to as high as 145%. After China answered with its own increases, the two sides agreed on a 90-day truce earlier this month.
China’s imports and exports of goods amounted to 43.8 trillion yuan ($6.1 trillion) in 2024. The proportion of cross-border yuan payments in goods trade reached 30%, central bank Governor Pan Gongsheng said in January.
China has been actively advancing the cross-border use of the yuan through various initiatives over the past few months. The authorities vowed to further enhance the facilitation of cross-border financial services in Shanghai last month, including improving cross-border settlement efficiency, and optimizing exchange rate hedging services.
Banks can also offer discounted service fees to exporters and importers to stoke their use of the Chinese currency.
The onshore yuan is up 1.57% this year to about 7.187 per dollar.
3. US Assets Get Boost From Japan Debt-Sale Bets: Markets Wrap
US Treasuries, stock futures and the greenback advanced after Japan indicatedit’s considering a reduction in bond issuance, prompting investors to bet on alternatives in dollar-denominated assets.
The yield on 30-Treasuries fell seven basis points to move below 5%. The dollar rose 0.3%, setting the currency on track for its biggest gain in more than two weeks. S&P 500 futures strengthened 1.3%.
Bloomberg News reported Tuesday that Japan’s finance ministry asked market participants for their views on the appropriate amount of debt issuance. The move suggested it is looking to bring calm to a market where relentless selling had pushed yields to record highs and left demand for fresh supply floundering.
“That potential lower issuance is giving Treasuries a nice helping hand,” said Michael Brown, strategist at Pepperstone Group in London. “For those seeking to buy long-term debt, lower Japanese government-bond supply could force them into the Treasury complex.”
The yield on Japan’s 40-year debt fell about 25 basis points. Bonds roses across Europe as well, where weaker-than-expected French inflation offered an additional boost. European equities climbed 0.2%.
US Treasuries have come under pressure in recent weeks as President Donald Trump’s signature tax legislation and a Moody’s Ratings downgrade put the spotlight on rising debt issuance and a ballooning budget deficit. The dollar has also been hit as shifting US policies and the global trade war weighed on demand for American assets.
The unpredictabililty of Trump’s tariff moves will continue to weigh on the greenback, said Kenneth Broux, a strategist at Societe Generale. The dollar has declined more than 7% this year against a basket of currencies, despite Tuesday’s gains.
When you see these patterns of escalation, de-escalation, sleep, repeat, it’s not going to give investors a lot of confidence about what the administration is trying to do,” Broux said. “There’s still the conversations about the re-balancing from US assets. That’s a multi-week, multi-month process.”
US stocks are set to bounce back after the US long weekend as Trump postponed his June-deadline for 50% tariffs on imports from the European Union, with trade talks between the parties continuing.
Among early movers, Trump Media & Technology Group rose 11% after a report said that the company plans to raise $2 billion in equity and $1 billion via convertible bonds to buy cryptocurrencies. United States Steel Corp. extended gains after rallying about 21% on Friday as Trump announced a partnership between the firm and Japan’s Nippon Steel Corp.
Conclusion
While short-term rallies followed Trump’s tariff delay, underlying uncertainty remains high. Investors are watching closely for the Fed’s inflation data, Nvidia’s earnings, and further shifts in global currency strategies. With markets moving on every headline, staying informed is more important than ever.
Source: Bloomberg
