Start of a Fresh Week and Month Associated with Heightened Trade War Concerns

June 2, 2025

(189) The U.S. president did not let another weekend go by without stirring the tariff pot. He accused Chinese officials of breaking the terms of the recent deal that had mutually lowered each country’s import tariffs against one another, and he separately threatened to double America’s steel-specific tariff to 50%, which would particularly hit exporters in the European Union. Beijing officials are claiming that America also has violated the Sino-U.S. trade deal. In yet another shock to financial markets, OPEC plus confirmed that it will increase production next month.

Overnight market action saw the dollar’s weighted DXY index slump 0.5% and come within 0.75% of its 52-week low. The dollar lost 0.9% against the yen and kiwi, 0.8% relative to the Australian dollar, 0.6% against sterling and 0.5% relative to the Swiss franc and Korean won. In spite of high expectations that ECB interest rates will be sliced further this Thursday, The dollar also fell by 0.6% against the euro.

Selling pressure on bonds sent 10-year sovereign bond yields up by four basis points in France and Italy, three bps in the U.K., Spain and United State, and two bps in Japan and Germany.

Share prices this Monday closed down 1.6% in Taiwan, 1.5% in Indonesia, 1.3% in Japan, 0.5% in Hong Kong and 0.5% in China. New Zealand’s stock market was spared because the first Monday of June is its official day to celebrate the British Monarch’s birthday. Stock exchanges in Europe and in futures trading prior to the U.S. opening bell are also in the red but to a slighter extent than the aforementioned deep drops in Asia.

The price of West Texas Intermediate oil shot up 4.2% overnight, and gold is 1.9% pricier. Bitcoin, however, sank 1.5%.

A slew of May manufacturing purchasing manager survey results have been reported. A score of 50 in these diffusion index represents the dividing line between improving and contracting business conditions. The size of a PMI’s deviation from 50 speaks to how rapidly conditions are improving or deteriorating.

Euroland’s PMI score of 49.4 after 49.0 in April matched a preliminary estimate that represents a 33-month high. Business was buoyed by lower energy costs, interest rate cut hopes and the delayed imposition of Liberation Day tariff hikes. Production growth improved in Germany, France, Italy and Spain, and the one-year outlook evolved favorably.
The country-specific PMI readings among countries using the euro included above-50 scores of 53.2 in Greece and 50.5 in Spain. Sub-50 readings ranged from 48.3 in Germany to 48.4 in Austria, 49.0 in the Netherlands and 49.2 in France. A recovery seems to be coalescing all in all, but tariff uncertainty remains a risk in this process.
Britain‘s manufacturing PMI, which previously had worsened from a 26-month high of 52.5 in August 2024 to a 17-month low of 44.9 in March rose for a second straight time to a 3-month high of 46.4. That score also was better than the preliminary estimate of 45.1.
Japan‘s manufacturing PMI score of 49.4 was below 50 for a third straight month but to a lesser degree than the two earlier readings.
Australia‘s PMI score of 51.0 was its lowest in eight months.
Two-month highs of 49.8, 49.5, 48.6, and 47.4 were experienced last month in Vietnam, China, Taiwan, and South Korea. The Chinese report was the one compiled by the government, which also announced a 4-month low of 50.3 in May’s non-manufacturing purchasing managers index.
India‘s PMI fell from a 10-month high of 58.2 in April to a 3-month low in May of 57.6, which still conveys robust expansion.
Turkey‘s PMI dipped 0.1 point to a 7-month low of 47.2.
The Swiss PMI tumbled 4.7 additional points to a 13-month low of 42.1.
In Nordic Europe, Norway’s PMI rebounded sharply to a 3-month high of 51.2 from the 57-month low in April of 46.2. In Sweden, however, the PMI slipped 0.6 points to a 3-month low of 53.6.
In Eastern Europe, Russia’s PMI printed just above 50 at a 3-month high, having sunk to a 35-month low in March of 48.2; the Czech PMI dropped 0.9 points to a 3-month low of 48.0; Poland’s 47.1 reading constituted an 11-month low; and Hungary’s index edged down another 0.1 point to a 4-month low of 50.1.
The Absa-compiled South African purchasing managers index dropped to a 61-month low of 43.1 in May, having set a 26-month high of 54.0 in April 2024.
Brazil’s manufacturing PMI moved below 50 for the first time since late 2023, dropping to 49.4 in May from 50.3 in the prior month and 54.0 in April 2024.

House price inflation according to the British Nationwide measure rebounded 0.1 percentage point to a 2-month high of 3.5% in May.

Swiss GDP growth in the first quarter has been revised down 0.2 percentage points to a quarterly 0.5% increase, but year-on-year growth of 2.0% was higher than 1.6% in the prior quarter and the calendar year advances of 1.3% in 2024 or 0.7% in 2023.

Consumer price inflation in Indonesia subsided to a 2-month low of 1.2% in May from 1.95% in April. Core inflation of 2.4% was its lowest since January and down from April’s 22-month high of 2.5%.

After dipping 0.2% in the final quarter of 2024, Japanese business investment bounced back to a year-on-year 6.4% last quarter.

Tags: May 2025 manufacturing purchasing manager surveys, Swiss GDP, tariff threats

This entry was posted
on Monday, June 2nd, 2025 at 6:25 am and is filed under New Overnight Developments Abroad – Daily Update.
You can follow any responses to this entry through the RSS 2.0 feed.

You can leave a response, or trackback from your own site.

Source link