InvestMacro

At the end of Thursday, the Dow Jones index (US30) was virtually unchanged. The S&P500 Index (US500) was down 0.04%. The Nasdaq Technology Index (US100) closed higher by 0.15%. Wall Street remained cautious as a bill to cut taxes and increase defense spending now heads to the Senate and could add trillions to the $36 trillion national debt. The US Congressional Budget Office estimates spending at nearly $4 trillion, raising concerns about budget instability. Bond markets reflected this concern, with 30-year Treasury yields briefly hitting 5.14%, the highest level since 2023.

The US initial jobless claims fell 2,000 from the previous week to 227,000 for the period ended May 17, the lowest in four weeks and below market expectations for a rise to 230,000. The result extended a period of relative strength in the US labor market.

Bitcoin surpassed the $110,800 mark for the first time in history as the US government’s deregulation of cryptocurrencies reinforced the positive momentum since mid-April. Democrats in Congress dropped their opposition to a bill aimed at regulating stable cryptocurrencies, paving the way for legislation by the end of the week. The move reinforced expectations that government regulation of cryptocurrencies tied to the US dollar could spur the adoption of the asset class.

European stocks closed significantly lower on Thursday, following declines in global equities amid concerns over rising US debt and risks to European growth. Germany’s DAX (DE40) fell by 0.51%, France’s CAC 40 (FR40) closed down 0.58%, Spain’s IBEX35 (ES35) lost 0.25%, and the UK’s FTSE 100 (UK100) closed 0.54% yesterday. In Germany, the Ifo Business Climate Index rose to 87.5 in May, the highest reading since June 2024 and slightly above market expectations of 87.4, indicating some easing of recent uncertainty among companies. However, PMI data pointed to a renewed and sharper-than-expected contraction in the Eurozone’s private sector — the strongest in six months — driven by a moderate decline in service sector activity. Output declined in Germany and France, while the rest of the Eurozone continued to show positive growth.

WTI crude prices fell by 0.6% to settle at $61.2 a barrel on Thursday, pressured by reports that OPEC+ is considering increasing production in July, raising concerns about a potential supply glut. A production increase of 411,000 barrels per day is reportedly being discussed, although a final decision has yet to be made. Prices were further impacted by an unexpected 1.3 million barrel increase in US crude inventories last week, driven by higher imports and lower demand for the fuel.

The US natural gas prices (XNG/USD) fell more than 3% to $3.25/MMBtu after the EIA reported a larger-than-expected increase in storage inventories. Inventories rose by 120 billion cubic feet last week, exceeding forecasts of 115 Bcf and well above last year’s 78 Bcf and the five-year average of 87 Bcf. The growth was driven by mild weather that limited heating and cooling demand.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) fell by 0.84%, China’s FTSE China A50 (CHA50) added 0.09%, Hong Kong’s Hang Seng (HK50) lost 1.19%, and Australia’s ASX 200 (AU200) was negative 0.45%.

On May 23, the People’s Bank of China (PBOC) injected CNY500 billion into financial institutions under a one-year medium-term credit line (MTL) to maintain sufficient liquidity in the country’s banking system. This month’s net injection of MLF was down from CNY600 billion in the previous month.

New Zealand retail sales in the three months to March 2025 rose 0.8% quarter-on-quarter, following an upwardly revised 1% increase, and beat market expectations for a 0.1% increase. On a year-on-year basis, retail sales rose 0.7%, the second increase since Q3 2022, following an upwardly revised 0.3% increase in the previous quarter.

Singapore’s annual inflation rate in April 2025 was 0.9%, unchanged from the previous two months but slightly above market expectations of 0.8%. The rate remained at its lowest level since February 2021. Singapore’s core consumer prices rose 0.7% year-on-year in April 2025, accelerating from a four-year low of 0.5% in the previous month and exceeding market forecasts of 0.5%. This was the highest core inflation rate since January, mainly driven by higher inflation in services and food.

At the end of Wednesday, the Dow Jones Index (US30) decreased by 1.91%. The S&P 500 Index (US500) was down 1.61%. The Nasdaq Technology Index (US100) closed lower by 1.34%. The US stocks fell on Wednesday as a sharp rise in Treasury yields and renewed fiscal concerns weighed heavily on investor sentiment. Long-term bond yields rose after a weak $16 billion auction of 20-year Treasuries, and 30-year yields jumped to 5.08%, the highest level since 2023, amid heightened concerns that Washington’s proposed tax-and-spending bill could further widen the federal budget deficit.

Bitcoin surpassed the $109,500 mark for the first time ever, extending a rally since mid-April, as the advancement of legislation to regulate stablecoins in the US supported the outlook for digital assets. Democrats in Congress dropped their opposition to a bill aimed at regulating stablecoins, paving the way for its passage by the end of the week. The move reinforced expectations that government regulation of digital assets tied to the US dollar could spur adoption of the asset class.

Equity markets in Europe traded flat on Wednesday. Germany’s DAX (DE40) was up 0.36%. France’s CAC 40 (FR40) closed down 0.40%, Spain’s IBEX35 (ES35) fell by 0.11%, and the UK’s FTSE 100 (UK100) closed positive 0.06%. European equities closed unchanged, holding near two-month highs hit in the previous session, as a lack of new catalysts kept hopes alive that rising government spending in Europe would lead to increased investment among corporate giants.

Silver (XAG/USD) prices climbed above $33.1 an ounce on Wednesday, testing the highest level in three weeks, amid a weaker dollar and evidence of heavy buying by the industry. The dollar came under pressure despite a fresh rise in long-dated Treasury yields, reflecting lingering doubts about the exclusivity of US assets and consistent with the recent rush into precious metals in search of safety.

WTI crude oil prices reversed previous gains and are trading below $62 a barrel after an unexpected increase in US crude inventories. The EIA reported a 1.328 million barrel increase in crude inventories, contradicting expectations of a 1.85 million barrel decline.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) fell by 0.61%, China’s FTSE China A50 (CHA50) gained 0.69%, Hong Kong’s Hang Seng (HK50) rose by 0.62%, and Australia’s ASX 200 (AU200) gained 0.52%. Japanese stocks hit a two-week low and followed a sharp sell-off on Wall Street overnight. Japan’s Core Machinery Orders, a key leading indicator of capital investment, unexpectedly rose 13% in March, well above expectations of a 1.6% decline. Despite the upbeat data, sentiment was dampened by weak economic signals elsewhere: manufacturing activity remained in contractionary territory in May, while growth in the services sector also slowed.

Malaysia’s annual inflation rate for April 2025 was 1.4%, unchanged from March and in line with market expectations. It remained the lowest since February 2021, with food prices rising the least in six months (2.3% vs. 2.5% in March). Core consumer prices, excluding volatile fresh food and administrative expenses, rose to 2.0% y/y in April after increasing 1.9% in the previous two months, the sharpest pace since November 2023.

Singapore could slip into a technical recession this year, a government official warned after final GDP data confirmed the economy shrank in the first quarter of 2025, even before US tariffs take effect. The country’s trade-dependent economy grew 3.9% y/y but contracted 0.6% q/q.

At the end of Tuesday, the Dow Jones Index (US30) was down 0.27%. The S&P 500 Index (US500) decreased by 0.39%. The Nasdaq Technology Index (US100) closed lower by 0.38%. Sentiment turned cautious amid renewed uncertainty surrounding trade negotiations and political resistance to the tax plan. An extensive tech sell-off pressured markets, with Alphabet (-1.5%) falling after the Google I/O event, while Nvidia (-0.9%), Meta (-0.5%) and Apple (-0.9%) shares also declined. Additional pressure came from new warnings from JPMorgan and Fed officials, including St. Louis Fed President Alberto Musalem, who said tariffs could hamper economic growth and dampen inflation expectations.

The Canadian dollar strengthened at 1.39 per dollar, rebounding from a one-month low of 1.398 hit on May 14, as markets weighed inflation data for April and a weaker US currency. Canada’s Core Consumer Price Index slowed to a 1.7% annualized rate, the slowest pace in seven months, thanks to a 12.7% drop in energy costs following the repeal of a carbon tax and OPEC supply increases. However, the Bank of Canada’s preferred benchmark rate unexpectedly rose to 3.1%, the highest level in thirteen months, indicating continued underlying price pressures and speaking against imminent policy easing. Simultaneously, talks between US Vice President Vance and Prime Minister Carney bolstered hopes for a comprehensive trade agreement, reducing bilateral uncertainty.

Equity markets in Europe were mostly up on Tuesday. Germany’s DAX (DE40) was up 0.42%. France’s CAC 40 (FR40) closed 0.75% higher, Spain’s IBEX35 (ES35) gained 1.16%, and the UK’s FTSE 100 (UK100) closed positive 0.94%. Frankfurt’s DAX Index rose for the first time to surpass the 24,000 mark and set a new record high. The rally was fueled by strong performances from BMW, Infineon and Merck, which rose over 1.5%, while Bayer, RWE, and Fresenius Medical Care were up 2-4%. On the macroeconomic front, investor sentiment was supported by better-than-expected Eurozone consumer confidence data for May. In addition, producer prices in Germany fell for the second month in a row, and at a faster pace than expected.

WTI crude oil prices jumped above $63 a barrel on Wednesday following reports that Israel plans to strike Iranian nuclear facilities. While it is still unclear whether Israel has made a final decision, the news has already raised fears of possible supply disruptions in the key oil-producing region of the Middle East. There are growing fears that Iran may retaliate by closing the strategically important Strait of Hormuz, a key route for oil and fuel exports from major Gulf countries including Saudi Arabia, Kuwait, Iraq, and the UAE.

The US natural gas (XNG/USD) prices jumped more than 6% on Tuesday, topping $3.325/MMBtu, thanks to lower daily production and higher demand expectations for next week.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) rose by 0.08%, China’s FTSE China A50 (CHA50) gained 0.56%, Hong Kong’s Hang Seng (HK50) added 1.49%, and Australia’s ASX 200 (AU200) posted a positive 0.58%. Hong Kong’s seasonally adjusted unemployment rate rose to 3.4% for the three months ending April 2025 from 3.2% in the previous period, remaining at the highest level in more than two years. The number of unemployed rose by about 6.6 thousand from the previous month to 124,900, the highest since November 2022.

The New Zealand dollar rose to around US$0.593 on Wednesday, helped by a weaker US dollar amid growing concerns about the US economy. Sentiment was boosted by encouraging domestic data. New Zealand posted a trade surplus of $1.43 billion in April, reversing a deficit of $0.01 billion in the same month last year. This was helped by double-digit export growth (25%), which outpaced import growth (1.8%). On the monetary policy front, the Reserve Bank of New Zealand is expected to cut the official money rate by 25 bps next week, but some investors suspect the central bank’s easing cycle is nearing an end, with rates hitting 2.83% by the end of the year.

At the end of Monday, the Dow Jones Index (US30) was up 0.32%. The S&P 500 Index (US500) added 0.09%. The Nasdaq Technology Index (US100) closed higher by 0.09%. Surprisingly, markets digested positively the downgrade of the US credit rating by Moody’s to Aa1. Treasury Secretary Scott Bessent downplayed the move and urged trading partners to engage during the 90-day tariff pause.

The Mexican peso rose to 19.40 per dollar, nearing a seven-month peak of 19.38 reached on May 14, as Moody’s downgrade of the US sovereign debt rating to Aa1 on May 16 and rising bets on an imminent Federal Reserve rate cut reduced the dollar’s appeal. The Bank of Mexico’s unanimous 50 basis point rate cut to 8.50% on May 15 amid core and core inflation at 3.9% and Q1 GDP growth of just 0.2% drove down yields in Mexico, but a weaker dollar largely supported the peso’s rise.

The Canadian dollar is holding near 1.40 per dollar, remaining near the one-month low of 1.398 hit on May 14, amid US dollar softness offsetting dovish expectations for the Bank of Canada. However, longs remain constrained by expectations of a dovish Bank of Canada rate after disappointing April jobs growth and a rise in the unemployment rate to 6.9% fueled speculation of a rate cut in June, dampening investor appetite for Canadian assets. Canada’s inflation report will be released today, where the same reading as last month is expected.

Equity markets in Europe were mostly up on Monday. Germany’s DAX (DE40) was up 0.70%. France’s CAC 40 (FR40) closed down 0.04%, Spain’s IBEX35 (ES35) gained 0.25%, and the UK’s FTSE 100 (UK100) closed higher 0.17%. The positive sentiment was boosted by a landmark agreement between the UK and the European Union, which calls for closer cooperation in key areas such as energy, trade, defense, travel, and fisheries. The Eurozone’s annual inflation rate for April 2025 was confirmed at 2.2%, just above the European Central Bank’s target of 2.0%.

The US natural gas (XNG/USD) prices fell more than 6% to below $3.10/MMBtu, the lowest since April 25, and extended last week’s decline of more than 12%, driven by weaker near-term demand and lower LNG exports. Warmer-than-normal weather in late May is expected to curb heating demand.

Asian markets were mostly falling yesterday. Japan’s Nikkei 225 (JP225) fell by 0.68%, China’s FTSE China A50 (CHA50) lost 0.42%, Hong Kong’s Hang Seng (HK50) decreased by 0.05%, and Australia’s ASX 200 (AU200) was negative 0.58%.

The People’s Bank of China (PBOC) cut key lending rates to a record low during its May meeting, matching market expectations and marking the first cut since October. The move followed wide-ranging monetary easing measures announced by Beijing earlier this month to support a sluggish economy and mitigate the potential impact of ongoing trade tensions with the US. The one-year prime rate (LPR), the benchmark for most corporate and household loans, was cut by 10 basis points to 3.0%, while the five-year LPR, which determines mortgage rates, was cut by the same amount to 3.5%. The offshore yuan fell to around 7.22 per dollar, posting a third straight session of losses and hitting a one-week low.

The Australian dollar slipped to $0.643 on Tuesday, rebounding from the previous session’s gains, after the Reserve Bank of Australia cut its key interest rate by 25 bps, as expected, and signaled that risks to the economy were diminishing. Policymakers noted that data for the March quarter confirmed further easing in inflation and pointed to reduced upside risks to inflation. Updated expectations indicated that core inflation is likely to remain near the middle of the 2-3% target range. The RBA also pointed to developments in global trade as a potential impediment to growth, which strengthened the case for additional rate cuts and put pressure on the Australian dollar.

At the end of Friday, the Dow Jones Index (US30) increased by 0.78% (for the week +1.80%). The S&P 500 Index (US500) was down 0.70% (for the week +2.60%). The Nasdaq Technology Index (US100) closed higher by 0.43% (for the week +2.93%). Wall Street ended the week on a high note, with all three major indices posting solid weekly gains, helped by easing trade tensions between the US and China. However, soft consumer sentiment data somewhat dampened the rally: the University of Michigan Index fell to 50.8, the second lowest ever recorded, while annual inflation expectations jumped to 7.3%.

Moody’s Credit Ratings downgraded the US credit rating by one notch to Aa1 from Aaa amid concerns about rising debt and interest payments. The agency said it expects federal debt to increase to about 134% of GDP by 2035, up from 98% last year. At the same time, the federal budget deficit is expected to widen to nearly 9% of GDP by 2035, up from 6.4% in 2024, due to higher interest payments on debt, higher social spending, and lower government revenues from tax cuts.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 0.30% (for the week +0.04%), setting a new all-time high. France’s CAC 40 (FR40) closed 0.42% higher (for the week +1.11%), Spain’s IBEX35 (ES35) gained 0.96% (+3.10% for the week), and the UK’s FTSE 100 (UK100) closed 0.59% higher (+1.52% for the week). The EU bloc is pushing for a more comprehensive deal with the US to reduce tariffs than those currently being discussed with the UK and China, adding that discussions are progressing positively.

WTI crude oil prices rose by 1.4% to settle at $62.5 a barrel on Friday, recording their second consecutive weekly gain of more than 2% as easing trade tensions between the US and China helped boost sentiment. A 90-day tariff truce between the world’s two biggest oil consumers helped ease fears of weakening demand. However, caution remained due to rising US crude inventories and the IEA’s expectations of a supply surplus in 2025 due to increased OPEC+ production. Analysts also lowered long-term oil price projections, citing trade policy uncertainty.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) rose by 0.15%, China’s FTSE China A50 (CHA50) gained 0.74%, Hong Kong’s Hang Seng (HK50) added 0.74%, and Australia’s ASX 200 (AU200) was positive 1.37%. Mainland equities declined for the second consecutive session as concerns over US tariffs continue to dampen sentiment. Market sentiment was further dampened by a sharp drop in Alibaba Group shares, down more than 4% in Hong Kong, after the e-commerce giant reported lower-than-expected quarterly earnings.

The foundation for China’s economic recovery “needs to be further strengthened” amid external uncertainties, the National Bureau of Statistics said in a statement. The remarks followed April activity data that showed mixed figures. China’s industrial production rose 6.1% y/y, beating expectations of 5.5% but slowing from March’s 7.7% growth, the fastest in nearly four years. Meanwhile, retail sales rose less than expected, reflecting weak domestic consumption and sluggish income growth. At the same time, the nation’s urban unemployment rate fell to a four-month low of 5.1% from 5.2% in March. Fixed asset investment for January-April, including real estate and infrastructure, rose 4.0%, below the 4.2% projections. China’s Central Bank is set to revise its benchmark lending rates, which have remained at record lows in recent months, as the economy faces domestic and external pressures. The People’s Bank of China (PBoC) is scheduled to meet tomorrow.

Hong Kong’s economy grew by 3.1% year-on-year in Q1 2025, in line with preliminary estimates and accelerated from an upwardly revised 2.5% in Q4 2024. Growth was mainly driven by strong external demand, especially in exports of goods and services, as businesses increased shipments in advance in anticipation of the upcoming tariff hike in the US. On a seasonally adjusted quarterly basis, GDP grew by 1.9%, the fastest pace in two years and an acceleration from the previous quarter’s upwardly revised 0.9%.