ONE COURT TO RULE THEM ALL?
Global equities were buoyed by a court ruling last week deeming US tariffs as illegal, with the Trump administration launching an appeal against the decision, and also strong earnings from AI-bellwether Nvidia. A lower likelihood of tariffs being implemented could allow central banks to ease policy, which helped push bond yields lower over the week.
There are numerous datapoints of note this week including the ECB meeting (Thursday) at which a 25bps cut in the deposit rate to 2.00% is expected, as well as the US employment report (Friday) for May. This could help inform expectations around monetary policy in the coming months.
The US Court of International Trade ruled that the Trump tariffs announced on "Liberation Day" are illegal since the president's use of emergency economic powers, which underpins his ability to impose the import taxes, was not justified. For now, the tariffs can remain pending an appeal with the federal court that the Trump administration has launched.
Trade tensions remained, with Trump stating that China had "totally violated its agreement" with the US. American Treasury Secretary stated that US-China talks were "a bit stalled" but that a conversation between President Trump and President Xi was likely in the next few weeks, which may help progress negotiations.
Nvidia continued to exceed expectations with its revenue rising by 69% y/y to $44.1bn for the three months to April 27th, driven by "incredibly strong" demand for its chips that power AI, while it had a gross profit margin of 71%. The company expects to post similar revenue and margin figures for the current quarter.
ISM manufacturing - a survey of business conditions - unexpectedly declined in the US in May mainly due to lower export orders, with this subcomponent falling to the lowest level in five years. However, other components including new orders, production and employment rose from April.
Global equities were buoyed by improved sentiment around tariffs and strong guidance from Nvidia, which supported tech stocks. This helped push up the S&P 500 by 1.9% while the Stoxx Europe 600 rose by 0.7%.
The potential for lower import taxes and a less marked impact on inflation bolstered the case for central-bank rate cuts, which helped lead bond yields lower (bond prices rise as yields fall). US Treasury 10-year yields ended the week down by 12bps at 4.39% while that for the equivalent German bund declined by 6bps to 2.51%.
- Tue 3rd US - Job Openings and Labour Turnover Survey (JOLTS), factory orders • Eurozone - Consumer-price inflation, unemployment rate
- Wed 4th US - ISM services
- Thu 5th US - Initial jobless claims • Eurozone - ECB meeting • Germany - Manufacturing orders
- Fri 6th US - Employment report • Eurozone - Retail sales • Germany - Industrial production
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.