Market drivers and catalysts
Equities: Steel stocks surge on tariffs; autos and EU cautious; tech leads US
Volatility: VIX eases; mild contango; options volume high but no panic
Digital assets: Bitcoin, ETH rebound; IBIT inflows steady; ETHA sees record demand
Fixed Income: Strong demand at 10-year JGB auction, US treasuries await key US data
Currencies: JPY weakened overnight on BoJ comments, AUD lower on RBA minutes
Commodities: Gold and silver breaks key levels, short covering led rally in crude oil
Macro events: Eurozone CPI, US April JOLTS Job Openings
Macro data and headlines
Australia’s Reserve Bank discussed a larger 50-basis point move at its May 20 meeting on concerns that global trade developments might negatively impact the Australia economy, but decided to go with the expected 25 basis point rate reduction while maintaining a willingness to accelerate policy if conditions warrant.
- China May Caixin Manufacturing PMI out at 48.3 vs. 50.7 expected and 50.4 in April.
US factory activity contracted in May for the third month, with the ISM manufacturing index dropping to 48.5. Imports hit a 16-year low, and exports fell to a five-year low, possibly due to retaliatory tariffs. The report highlighted uncertainty from uneven and changing tariffs, complicating supply sourcing.
As the Senate grapples with Trump’s “big, beautiful-“ tax and spending bill, Senate Republicans plan to make temporary tax cuts permanent, potentially increasing the deficit and alienating fiscal hawks. Proposed changes include business tax cuts, state and local tax revisions, and adjustments to green energy, Medicaid, and food stamps. The bill faces uncertainty due to regulatory disputes and a deadline before the Treasury's borrowing authority ends in August or September.
Senate majority leader John Thune said that Senate Republicans would examine the potential impact of what some have dubbed a “revenge tax” in Section 899 of the House version of the bill, which would tax foreign individuals and entities from countries that have enacted policies deemed “discriminatory”.
- White House sources claimed yesterday that Trump and Xi will “likely” speak this week.
Macro calendar highlights (times in GMT)
0630 – Switzerland May CPI
0750 – Japan Bank of Japan’s Ueda to speak
0900 – Eurozone May Flash CPI
1400 – US Apr. Factory Orders
1400 – US Apr. JOLTS Job Openings
Earnings events
Today: Crowdstrike, Ferguson Enterprises, Hewlett Packard Enterprise
Thursday: Broadcom, Lululemon, Samsara
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
US: US equities closed higher, with the S&P 500 up 0.4%, Nasdaq +0.7%, and Dow +0.1% as optimism over potential Trump-Xi trade talks offset tariff concerns. Steel stocks surged—Cleveland-Cliffs +23%, Nucor +10%, Steel Dynamics +10%—on news of 50% US steel/aluminum tariffs. Automakers fell: Ford and GM -3.8% after weak EU sales data. Tesla slipped 1.1%. US ISM manufacturing PMI showed continued contraction (48.5), but investors anticipate further jobs and factory data this week. Energy outperformed on OPEC+ output news; Nvidia and Meta led tech gains.
Europe: European markets began June on a cautious note. The Stoxx 50 fell 0.3%, DAX -0.28%, CAC 40 -0.19% amid tariff escalation fears after Trump’s new 50% metals tariffs. Autos led losses—Stellantis -5%, Mercedes/BMW/VW down up to 2.7%. Oil stocks gained 1.4% on crude price rises. Manufacturing PMI showed stabilisation but Germany remained weak. Focus shifts to the ECB’s expected rate cut decision on Thursday.
UK: FTSE 100 ended flat (+0.02%) as gains in defense (Babcock +8.2%, BAE +1%) and energy (Shell +0.8%, BP +0.9%) offset staples and healthcare declines. Gold miners also rallied as prices rose. UK house prices grew 0.5% in May. British manufacturing PMI improved to 46.4, a three-month high. Vodafone and GSK advanced on positive corporate news.
Asia: Asia equities were mixed. Hong Kong’s HSI rebounded 1.5% on hopes for Trump-Xi talks; China indices traded flat amid renewed tariff tension and weak PMI data. Japan’s Nikkei was steady. Tech and EV stocks outperformed—Li Auto +6.5%, BYD +2%. Australia’s ASX 200 rose 0.3% on dovish RBA minutes, but economic signals stayed soft.
Volatility
Volatility eased as trade optimism steadied nerves. VIX dropped to 18.36 (-1.1 pts), VIX1D to 13.26, and VIX9D to 17.64. VIX futures remain above spot, showing mild hedging demand but no panic. Options activity is elevated in mega-caps ahead of US ISM services and Friday’s NFP, but skew flattened, suggesting traders are selling puts to finance call spreads rather than aggressively buying downside protection.
Digital Assets
Crypto markets steadied after weekend losses. Bitcoin bounced 0.5% to $105.3K; Ethereum jumped 4.8% to $2.61K. IBIT ETF dipped 0.1% to $59.36 after last week’s $409M inflow; ETHA fell 1.6% despite a record $48.4M net subscription. Solana and XRP saw mixed moves as funding normalized and on-chain activity cooled. MSTR and crypto stocks traded firmer; market positioning suggests a reset rather than risk aversion.
Fixed Income
US treasury yields recontinue to bob up and down ahead of key US employment data this week, with a small rise in yields at the long end of the US yield curve tamed yesterday as the 10-year benchmark yield remains just above 4.40%
An auction of 10-year Japanese Government Bonds overnight saw strong demand, helping ease some nervousness about the state of the market for longer maturity JGB’s. The 10-year benchmark yield fell 2.5 basis points to 1.49% after the auction. A 30-year bond auction set for Thursday may offer a better sense of the status of demand for even longer-term bonds.
Commodities
The commodities sector began June with strong gains, primarily driven by energy and precious metal strength. However, it experienced a slight decline overnight as traders booked profits. Despite this, prices remain supported by factors such as a softer dollar, geopolitical tensions, tariff issues, and concerns over US fiscal debt. The agriculture sector is currently the only area negatively impacting the overall return.
US aluminum and steel futures surged after President Trump announced increased tariffs, with aluminum contracts rising 54% on the Comex exchange, reaching their highest level since 2013. Import levies are set to increase to 50% starting Wednesday.
HG copper saw its premium to London widen as traders speculated on the eventual US import tariff levels and their impact on the US copper market, only to deflate overnight as prices dropped in response to weaker-than-expected Chinese economic data.
Gold and silver rallied through key technical resistance levels, now offering support at $3325 and $33.70 respectively. This move is bolstered by a weaker dollar and renewed demand for alternative investments amid rising geopolitical and tariff tensions.
Crude prices jumped on Monday, driven by geopolitical tensions and strengthened by short covering after hedge funds were caught holding one of the largest gross short positions in WTI and Brent futures in the past five years.
Currencies
The US dollar weakness yesterday saw some modest follow-though lower still overnight before comments from Bank of Japan Governor Ueda boosted USDJPY from a low of 142.38 to as high as 143.27 before easing back below 143.00 in early European hours. Ueda hinted that the BoJ would keep its existing plan for the reduction of bond purchases (JPY 400 billion per quarter) for the financial year through next March, with an official decision on that point set for later this month. He also said that the Bank had no interest in raising interest rates purely to have the ability to cut rates down the road, with rate moves dependent on the economy and inflation.
The Australian dollar weakened as the RBA minutes of the recent meeting revealed that the central bank considered a 50 basis point cut before going with the expected 25 basis point. The bank is concerned on global trade policy and indicated it is ready to move more quickly with further policy accommodation if conditions warrant. AUDUSD touched 0.6500 at its highs overnight before retreating back to 0.6455.
For a global look at markets – go to Inspiration.
