Global Markets
US Yield Curve & Fed Rate
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Market Commentary
·
Last few weeks
have been unchanged with USD Index -1.2% amd biggest mover being $/CAD and
$/CHF which dropped 2.7% and 2.4%. MSCI World and SPX haven’t moved much either
with both +0.7% and +0.2% respectively and it seems the relief rally since Apr
2025 losing some steam. 4H DI+ line keeps falling and there might possiblity of
a death cross in coming weeks.
·
Within equity
space, the biggest mover has been Russian Index -4.6 with energy sector via XLE
+4.4% whlist financials XLF has pulled back -3.2% Unsurprisingly, VIX, OVX and GVZ receded 7.6%, 13.6% and 10.8% but
VIX, SKEWX and VVIX jumped 10.1 – 17%.
·
Fixed income generally
steady whilst REITs were mixed with SPG -4.6% whilst PREI +9.4% respectively. Commodity
markets saw more action Baltic Dry Index +46.1% whilst XAG/$ and XPT/$ both
rallying 12.5% and 22.4% with the latter trading within the congestion channel
circa 760 – 1184 since 2014. Finally, crypto hardly moved with SOL/$, SHIB/$
and DOGE/$ pulling back 13.8%, 17% and 21.9%.
·
On 08/06, UBS
sees global growth to slow in the 2nd half but European private
credit spreads are tipped to remain rangebound. The OECD flagged ealirer this
week that the growth outlook is increasingly challegnging due to potential
headwinds from sweeping tariffs denting the US economy. It slashed its
projection for global GDP growth for 2025 to 2.9% from prior estimate 3.1%
·
On 07/06, Morgan
Stanley weighed in that Trump’s decision to double tariffs on aluminium imports
to 50% ealirer will likely drive up prices of the metal and costs for its
users. Earlier, the US Midwest duty-paid aluminimum premium reached $1,279/
metric ton, representing a 54% spike from 06/06 when Trump announced his plans
to hike alumnium and steel tariffs from 05/06. The measure has soared more than
160% so far YTD
·
On 02/06, China
highlighted that the US has “severly violated” their trade truce and will take
strong measures to defend its interests. Beijing said voliations include
stopping sales of computer chip design software to Chinese companies, warnings
against using chip made by Huawei and cancelling visa for Chinese students.
Also, the China prefers that agreements be done at a lower level first before
they reach the desk of the US president.
·
As such, its
seems the relief rally since May 2025 has shaky foundations on both the
China-US trade deal and stagflation/ recessionary fears. From recent
experience, the apparent market strength could disappear on the slightest
developments or change in perceptions.
·
On 07/06, Trump
said his relationship with Elon is over and warned there would be “serious
consequencies” if Musk funds US Democrats running against Republicans who vote
for the president’s sweeping tax and spending bill. Musk has denounced Trump’s
bill as a “disgusting abomination” with said bill narrowly passing the House
last month and is new before the Senate, where Trumps’s fellow Republicans are
considering making changes. Non-partisan analysts estimate thae measure would
add $2.4T to the $36.2T US debt over 10 years which worry fiscal hawk
lawmakers. Musk also declared it time for a new political party in US the to
“represent the 80% in the middle”.
·
On 26/05,
Minneapolis Fed Kashkari warned that supply shocks stemming from Trump’s trade
tariffs stood to underpin inflation and dampen growth – presenting a stagflationary
scenario. Speaking on the recent increase in Treasury ields, Kashkari noted
that investors were beginning to reassess investing in the US and shifting
yields could represent a new global paradigm.
·
On 25/05, Chicago
Fed Austan Goolsbee also highlighted stagflation risk due to Trump’s policies
and said Fed likely to be putting off any changes to interest rates. Many
market, economic and financial experts have begun publically warning of a
recession within few months if stagflation doesn’t happen. Markets expect the
Fed will cut twice this year with the next move not happening until Sep 2025.
·
On 24/05, the
Supreme Court’s latest move in Trump v. Wilcos is sharpening market focus on
the growing implication of expanded executive authority in the US. Strategist
Aniket Shah flagged that a broader shift toward the “Unitary Executive Theory”
a legal doctrine embraced by the Trump administration could materially reshape
US governance and inject higher policy risk into financial markets. The theory
posits that the president has sole contorl over the executive branch, including
the power to fire leaders of independent agencies and override congressional
spending decisions. Jefferies argues that if this intepretation gains further
legal traction, it could empower Trump to more freely implement tariffs,
deregulate sectors without the usual adminstrative checks and replace head of
agnecies traditionally shielded from political pressure.
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