Daily summary: Return of US-China trade tensions reignites risk-off mood (29.05.2025)

Wall Street indexes closed the week and month with losses. The US500 dropped over 0.6%, while the US100 fell about 1%. 

Sentiment worsened after former President Donald Trump escalated trade rhetoric against China, accusing it of violating Geneva negotiation agreements. It’s important to note that the tariffs previously imposed by Trump remain in effect until a new appellate court ruling is issued. However, the U.S. administration has indicated other possible tariff tools, such as a 15% tariff for 150 days or a 50% tariff increase on current rates if discrimination against U.S. trade is found.

Annual inflation expectations according to the University of Michigan fell to 4.2% for the first time since December 2024. Consumer sentiment also improved (52.2 vs. 51.5 expected and 50.8 previously) but remains near the lows seen in 2021–2022.

U.S. PCE inflation dropped slightly more than expected, registering 2.1% year-over-year versus the anticipated 2.2% and a previous 2.3%. Core inflation fell as expected to 2.5% year-over-year from 2.7%. Inflation remains elevated, which likely won’t change the Fed’s stance at the June monetary policy meeting.

Gap Inc. (GAP.US) shares fell 18% after the company estimated that tariffs would reduce revenues by $250–300 million and cited weakness in demand for its smaller (lower-priced) brands.

The U.S. dollar attempted a rebound during today’s session but tariff uncertainty continues to weigh on it. The EURUSD pair is up for the fourth consecutive month in May. The British pound (GBPUSD: +1.07%) and Antipodean currencies (NZDUSD: +0.64%, AUDUSD: +0.51%) have strengthened the most against the dollar this month.

Gold is fluctuating near break-even in May, currently below $3,300 per ounce, losing 0.8% today despite renewed concerns about U.S.-China trade tensions.

Europe ended the last trading day of the month with mixed results among key indexes. Germany’s DAX rose 0.27%, the UK’s FTSE100 gained 0.64%, and Spain’s IBEX35 added 0.25%, while France’s CAC40 dropped 0.36%.

Cocoa prices rebounded more than 6% today after several days of declines. Prices are up about 12% in May amid uncertainty around supplies and production for the 2025/26 season, approaching the $10,000 level again.

OPEC+ is considering increasing production in July by more than 411,000 barrels per day, adding pressure on prices. Brent crude is down over 1.5% today.

Next week will bring important data releases such as ISM and NFP. The latest Atlanta Fed forecast for Q2 U.S. GDP shows growth of 3.8%, a strong rebound following a weak first quarter.

Cryptocurrencies remain broadly pessimistic: Bitcoin dropped 2.1% to $103,950, Ethereum fell 3.7% to $2,545, and contracts for Graph (-11.8%), Dogecoin (-10.7%), Chainlink (-8.6%), and Solana (-6%) also slid.