Macro Wrap

The DJIA fell 0.2%, the S&P500 was flat, and the Nasdaq Composite Index rose 0.3%. The Eurostoxx 50 rose 0.6%. The Dollar Index fell 0.4% to 98.81. EUR-USD rose 50 pips to 1.1420. The US 2Y yield fell 8.5bp to 3.87% and the 10Y yield dropped 10bp to 4.36%. The German 10Y yield was flat at 2.53% while the UK 10Y yield fell 3bp to 4.61%. Brent crude oil prices fell 1.2% to USD64.86. Gold rose 0.6% to USD3,373.

China's services activity expanded at a slightly faster pace in May at 51.1, with new orders growing more quickly than in April, though new export orders declined due to uncertainty stemming from U.S. tariffs. Sentimentally positive for metals and mining sector.

The US ISM services PMI unexpectedly fell to 49.9 in May (consensus: 52.0; Apr: 51.6), marking its first contraction since June 2024 as new orders and inventories fell while price pressures intensified amid tariff uncertainties. ADP data also indicated weaknesses as private payrolls added only 37k in May (consensus: 115k; April: 60k), its lowest since March 2023, with 30k job losses noted for professional and healthcare services – the same sectors that drove a jump in job openings in JOLTS data for April, suggesting rapid deterioration in labour market conditions in the two sectors. Meanwhile, the nonpartisan Congressional Budget Office (CBO) lowered the estimated cost of Trump’s tax-cut and spending bill, now estimated to add USD2.4tr (prior: USD3.8tr) to the nation’s USD36.2tr debt over the next decade. Negative for USD and US markets

US Fed’s Beige book reported that US economy has contracted over the past six weeks as hiring has slowed and consumers and businesses were worried about tariff-related price increases. Inflation stayed moderated. Growth outlook deviated on a regional basis as Boston, New York and Philadelphia all reported declining economic activity while Richmond, Atlanta and Chicago were among the districts reporting better growth. Overall outlook is negative for USD and broader market.

ECB Previews: The broader consensus is that European Central bank is expected to reduce its main refinance rate by 25bps to 2.15%, with similar cuts to the deposit facility and lending facility rates to 2.00% and 2.40% respectively.

Data watch: The key US data include weekly initial jobless claims, final 1Q nonfarm productivity, 1Q ULC and Apr trade balance. In Europe, the data releases include German Apr factory orders.