Markets React to US Downgrade, Global Yields, and Gold Surge

Weekly Outlook

What Happened This Week?

1. Moody's downgraded the U.S. credit rating from its last triple-A status last Friday. The downgrade was partially attributed to substantial fiscal deficits and increasing interest costs.
2. The House approved Trump's tax-and-spending bill, a proposal projected to significantly increase the deficit by $3 to $5 trillion over the next decade.
3. The bill will now move to the Republican-led Senate, where further amendments are possible.
4. US bond yields have recently been climbing due to concerns about government deficits and increasing inflation, rather than a strong economy.
5. A weak auction of US bonds worsened these fears.
6. On Wednesday, the 30-year Treasury yield jumped to 5.108%, its highest since 2023.
7. Similarly, 10-year government bond yields increased to 4.595%, and 20-year yields reached 5.126%, also a high since November 2023.
8. Problems in the long-term US Treasury market impacted global government bond markets, with Britain's 30-year yield reaching its highest point since the volatility in April.
9. Japanese Government Bond yields soared to significant new highs earlier this week: the 30-year and 40-year yields surpassed 3% for the first time on record, and the 20-year yield hit its highest point since 2000.
10. As new tariffs loom, European exports to the U.S. surged by 59.5% in March compared to the same month last year, reaching a record high. In contrast, Japan's exports to the U.S. saw their first decline in four months, falling by 1.8% in April.
11. On Tuesday, China lowered its benchmark lending rates for the first time since October, aiming to stimulate consumption and loan growth amidst a softening economy. The one-year rate was cut to 3.0% and the five-year rate to 3.5%, a move designed to boost activity while balancing the need to protect commercial lenders' shrinking profit margins.
12. The UK and EU successfully negotiated a new accord to "reset" their relationship after Brexit. The agreement encompasses key areas such as defense, fishing, food trade, and youth mobility.
13. Gold prices have resumed the rally that previously pushed them to record highs above $3,500 an ounce earlier this year. The key question now is whether they can trade above this key price level and reach a new record high.
14. Energy traders, who initially feared a trade war would trigger a global recession and dampen oil demand, are now primarily worried about supply. The OPEC+ might even be discussing a July production increase.
15. Bitcoin hit a fresh all-time high of over $109,900, as Treasury yields surged and stock markets fell.
16. The Reserve Bank of Australia (RBA) lowered its key interest rate to 3.85%, its lowest level in a year, as Australia's inflation continues its downward trend, with the headline inflation rate reaching 2.4% in the first quarter of 2025, its lowest level in four years.
17. The Office for National Statistics (ONS) reported that the UK's inflation rate rose to 3.5% in April, reaching its highest point since February of last year. Looking ahead, the Bank of England anticipates inflation will peak at 3.7% between July and September 2025 before gradually easing back down to its 2% target.
18. While Canada's inflation rate declined to 1.7% in April, a rise in core inflation measures makes the central bank's policy decisions particularly tricky, as the headline figure might mask underlying price pressures that are still a concern.
19. Business activity unexpectedly contracted this month in the Eurozone and Japan, primarily due to weakness in their service sectors
20. Business activity growth and future output expectations improved in the US, with PMI figures reaching a two-month high.
21. The PMI remained below 50 for a second consecutive month of decline in the UK.

This Week’s Market Movers

Forex

1. ​​The GBP/USD surged to its highest level since February 2022, following the release of a stronger-than-expected UK inflation report.
2. The EUR/USD is up for the first time after 4 weeks down.
3. The EUR/GBP has lost 3.73% from its peak of the year reached in April 2025.
4. Indonesia’s central bank resumed rate cuts, lowering its benchmark seven-day reverse repo rate by 25 basis points to 5.50%, driven by cooling inflation, slower growth, and a relatively stable rupiah.

Commodities

1. Oil prices have fallen by approximately 20% since January 1st.
2. Gold prices have surged around 4% this week, reaching their highest point since the beginning of May.
3. Cocoa prices fell more than 5.80% over the week, after a surge of more than 18% last week.

Indices

1. On Wednesday, both the Dow and S&P 500 slipped back into negative territory for 2025, with the latter closing lower for the first time in seven days.
2. The DAX 40 reached a new record high above 24,000 points.
3. The IBEX 35 reached its highest level above 14,280 points.
4. The China A50 is up for the 7th consecutive week.
5. The Japan 225 index is down for the 1st time after 6 bullish weeks.

Shares

Tops

1. MARFRIG ON NM: +26.41%
2. RAIZEN PNN2: +16.96%
3. VODAFONE GROUP ORD : +15.31%
4. DOLLAR GENERAL CORPORATION : +14.75%
5. DIPLOMA: +14.52%
6. FRESNILLO : +13.79%
7. BAYER : +10.53%

Flops

1. THE AES CORPORATION: -22.46%
2. FAIR ISAAC CORPORATION : -20.53%
3. ENPHASE ENERGY: -19.69%
4. FIRST SOLAR : -17.93%
5. BRAZIL ON: -15.83%
6. FISERV : -14.78%
7. AZUL: -11.57%

This Week’s News to Follow

Monday 26 May

Nothing

Tuesday 27 May

1. 06:00 AM - German GfK Consumer Confidence (June)
2. Previous: -20.6
3. Forecast: -19
4. 06:45 AM - French Inflation Rate YoY Prel (May)
5. Previous: 0.8%
6. Forecast: 1.0%
7. 12:30 PM - American Durable Goods Orders MoM (April)
8. Previous: 7.5%
9. Forecast: -6.8%

Wednesday 28 May

1. 02:00 AM - New-Zealand OCR Rate Decision
2. Previous: 0.8%
3. 06:00 PM - American FOMC Minutes

Thursday 29 May

1. 05:00 AM - Japanese Consumer Confidence (May)
2. Previous: 31.2
3. Forecast: 32.8
4. 12:30 PM - American GDP Growth Rate QoQ 2nd Est (Q1)
5. Previous: 2.4%
6. Forecast: -0.3%

Friday 30 May

1. 12:00 PM - German Inflation Rate YoY Prel (May)
2. Previous: 2.1%
3. Forecast: 2.0%
4. 12:30 PM - Canadian GDP Growth Rate Annualized (Q1)
5. Previous: 2.6%
6. Forecast: 0.6%
7. 12:30 PM - Canadian GDP Growth Rate QoQ (Q1)
8. Previous: 0.6%
9. Forecast: 0.2%
10. 12:30 PM - American Core PCE Price Index MoM (May)
11. Previous: 0.0%
12. Forecast: 0.2%
13. 12:30 PM - American Personal Income MoM (April)
14. Previous: 0.5%
15. Forecast: 0.4%
16. 12:30 PM - American Personal Spending MoM (April)
17. Previous: 0.7%
18. Forecast: -0.1%

Major Earnings Reports to Watch

Monday 26 May

Nothing

Tuesday 28 May

1. Salesforces

Wednesday 29 May

1. NVIDIA
2. Best Buy
3. Dell
4. Costco

Thursday 30 May

Nothing

Friday 31 May

1. Canopy Growth

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