As we begin a new week, let’s review the major economic and market developments around the world, with a focus on the U.S., Europe, and Asia-Pacific regions.
U.S. Market Overview: Tariff Tensions and Bond Market Shocks
U.S. equity markets ended the week in negative territory, with widespread losses across major indexes.
The Dow Jones Industrial Average and S&P 500 both reversed recent gains and closed down 2.21% and 1.34% respectively, while the Nasdaq Composite declined 2.97%. Small- and mid-cap stocks were hit the hardest, reflecting broad investor caution.
Midweek volatility was sparked by a disappointing auction of 20-year Treasury bonds, which drove long-term yields to their highest levels since 2023.
This came on the heels of Moody’s downgrade of U.S. sovereign credit ratings, citing concerns over rising federal debt and growing deficits. The situation was further inflamed when the House passed President Donald Trump’s tax bill — seen by some analysts as likely to worsen fiscal pressures.
Investor sentiment deteriorated further after President Trump announced a 50% tariff on European Union imports, starting June 1, and threatened additional tariffs on Apple products unless manufacturing is relocated to the U.S. These developments weighed heavily on tech shares, with Apple losing more than 3% on Friday.
Despite market turbulence, economic data offered mixed signals. The S&P Global Flash PMI for May showed an encouraging rebound in both manufacturing and services activity, each registering a reading of 52.3 — comfortably above the threshold for expansion. However, prices rose at the fastest pace since August 2022, largely attributed to tariffs, while export orders fell and supply chains tightened.
In housing, the market sent conflicting messages. Existing home sales fell to a post-2009 low, even as median prices climbed for the 22nd straight month. Yet new home sales surged to 743,000 units annualized in April, well above expectations, suggesting resilience in demand despite high mortgage rates.
European Markets: Growth Headwinds and Political Risks
European equity markets also faced headwinds, ending a five-week winning streak. The pan-European STOXX 600 fell 0.75%, with national indexes in Germany, France, and Italy posting steeper losses. Only the UK’s FTSE 100 managed a modest gain of 0.38%. The primary catalyst was President Trump’s tariff threat, which reignited fears of a broader trade conflict.
Business activity across the eurozone showed signs of contraction. The Eurozone Composite PMI dropped to 49.5 in May from 50.4 in April, dragged down by weaker services performance and ongoing softness in French and German output. The European Commission revised its 2025 GDP growth forecast down to 0.9% from 1.3%, citing rising global trade tensions. However, the outlook for inflation was upgraded, with the EC now expecting it to reach the ECB’s 2% target by mid-2025.
Germany offered a rare bright spot, as first-quarter GDP growth was revised upward to 0.4%, led by strong consumer spending and exports. It marked the country’s best quarterly performance since late 2022.
In the UK, inflation accelerated to 3.5% in April due to rising utility and housing costs — higher than the 3.3% expected. Retail sales, on the other hand, grew strongly, and consumer confidence picked up. However, the UK’s composite PMI signaled a second month of contraction, with weakness in manufacturing outweighing modest services growth.
Global Insights: Asia-Pacific in Focus
In Asia, Japan’s equity markets fell amid rising expectations of monetary tightening. The Nikkei 225 declined 1.57%, while the 10-year government bond yield climbed to its highest level since 2008. Inflation remained elevated, with a core CPI reaching 3.5%, its highest over two years. Core machinery orders surprised to the upside, jumping 13% in March. Still, business surveys showed declining momentum in both manufacturing and services.
China’s economic picture was also mixed. Although the Shanghai Composite and CSI 300 posted modest declines, Hong Kong’s Hang Seng gained over 1%. Industrial production in China rose a better-than-expected 6.1% year-over-year, suggesting resilience amid rising U.S. trade pressure. However, retail sales growth slowed, and fixed asset investment underperformed — highlighting fragile domestic demand. Analysts now anticipate a wave of targeted stimulus to support consumption and offset tariff-related shocks.
In summary, global markets are navigating a fragile landscape marked by geopolitical tensions, evolving trade policies, and uneven economic data. Investors should remain vigilant as fiscal, monetary, and political dynamics continue to shape the road ahead
