FROM AAA to the 'BBB'
Global equities fell last week, snapping their recent winning streak. Investors, already mindful of America losing its' AAA rating from Moodys last Sunday, took a negative view on Trump's 'Big Beautiful (tax) Bill' and what it might mean for the long term US fiscal outlook. Lower taxes = less income for government. US bond yields rose.
On Friday, Trump announced that he was planning to implement a 50% across-the-board tariff on all EU goods from June 1st, expressing his frustrations that negotiations with the bloc were going nowhere. Today, he postponed the imposition to July.
This week is fairly quiet on the economic calendar and the US markets are closed today for Memorial day. Investors will be watching closely for developments in EU/US trade negotiations, minutes from the recent US Fed rate setting meeting will be released on Wednesday, US GDP is out on Thursday and Poland will vote for its next President on Sunday.
US 30yr Bond yields rose to their highest rates in 18 years (Bond yields rise as their price falls) following concerns over Trump's proposed tax bill ( the Big Beautiful Bill) and what it might mean for the US' growing debt pile - especially in light of the recent Moody's downgrade. A weak demand for 30yr Treasuries at auction caused concern amongst investors.
On Friday, the announcement of a 50% across the board tariff on EU goods imported into the US added to investor woes. A 50% tariff represents 2.5 times the 'liberation day' rate which had subsequently been postponed for 90 days. It now seems as though Trump may be operating tariffs as a dial and not a switch - turning them down when markets contract only to dial them back up when optimism returns.
US equities snapped the recent winning streak with the S&P 500 closing the week down 2.6% and the Stoxx600 in Europe down -0.8% following a sharp sell-off late on Friday.
US Government bond yields rose (bond prices fall as yields rise) on the back of increasing concerns about US debt levels, in the face of proposed tax cuts by the Trump administration. US 10-yr yields finished the week at 4.52% whilst the 30-yr yield rose sharply to breach the 5% mark and close in on all time highs.
In Europe, bond yields fall as investors, fearing for weaker economic growth in the face of heavy US tariffs moved to favour safer assets. The 10-yr German Bund finished the week lower to end at 2.57%
- Mon 26th - US & UK Markets closed
- Tue 27th US - Durable goods, consumer confidence • Germany - GfK consumer confidence
- Wed 28th US - Fed meeting minutes • Germany - Labour-market data
- Thu 29th US - Initial jobless claims
- Fri 30th US - PCE inflation
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.