May 23 Financial Breakfast: U.S. debt turmoil eases, Bitcoin continues to hit historical highs, gold falls below 3300

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The U.S. House of Representatives passed the tax reform bill by a narrow margin of one vote, which will be submitted to the Senate for discussion next week. U.S. Treasury yields fell across the board, indicating that recent turmoil regarding U.S. debt has temporarily eased, coupled with positive U.S. economic data, leading to a slight recovery in market risk sentiment. Bitcoin hit a new historical high for two consecutive days, reaching $112,000. The three major U.S. stock indices showed mixed results, with the Dow Jones slightly down by 1 point; the S&P 500 fell by 0.04%, marking its third consecutive day of decline; the Nasdaq rose by 0.28%, while the China Golden Dragon Index retreated by 1.18%.

In terms of popular stocks, Alphabet's share price rose by 1.4%, while Microsoft, Meta, and Tesla increased by 0.5%, 0.2%, and 1.9%, respectively. Trump stated he is seriously considering allowing the two major mortgage institutions, Fannie Mae and Freddie Mac, to relist, causing their stocks to surge by 50.6% and 42%, respectively. The "Beautiful America Act" significantly cuts green energy subsidies, leading to a 37.05% drop in shares of Sunrun, the largest rooftop solar company in the U.S., on Thursday; equipment supplier SolarEdge Technologies fell by 24.67%.

The U.S. dollar index ended a three-day decline, rebounding to challenge the 100 mark; the USD/JPY rose by 0.24%, ending a seven-day drop; the EUR/USD fell by 0.45%; gold dropped by 0.67%, falling below the $3,300 mark; WTI crude oil fell by 0.86%; Bitcoin rose by 1.45% to $112,000, continuing to set a new historical high.

Macro News

U.S. House passes tax reform bill, IMF says U.S. debt market remains orderly

After an overnight debate, the U.S. House of Representatives passed Trump's proposed tax reform and budget bill on Thursday morning with 215 votes in favor, 214 against, and 1 abstention, which will be submitted to the Senate for a vote. Two Republican members, aligned with Trump, voted against the bill alongside Democrats, arguing that the cuts to the fiscal deficit were insufficient.

To gain support from lawmakers demanding spending cuts, the bill was amended at the last minute to advance the date for introducing work hour requirements for government-funded health insurance from 2029 to December 2026; it also moved the expiration date for tax exemptions on wind and solar energy from 2031 to 2028.

To secure support from lawmakers in states with higher local taxes, the bill raised the cap on state and local tax deductions from the original $30,000 per year to $40,000.

International Monetary Fund (IMF) spokesperson Julie Kozack stated that although there have been fluctuations in financial markets recently, the operations of markets such as U.S. Treasury bonds remain orderly, and U.S. debt continues to be a liquid safe-haven asset.

Federal Reserve Governor: Possible interest rate cuts in the second half if tariffs are not increased

In an interview with Fox Business, Federal Reserve Governor Christopher Waller expressed a much more optimistic view on tariffs compared to last month. He stated that if the "reciprocal tariffs" are maintained at an overall average rate of around 10% after the expiration of the suspension period in July, the U.S. economy will remain robust in the second half of the year. Companies are currently only pausing, not canceling, investment plans, and inflation is not expected to persistently rise, which would give the Federal Reserve room to cut interest rates However, he warned that if tariffs return to high levels, the impact on inflation will be much greater, and the Federal Reserve may be "handcuffed" and unable to adjust interest rates.

The G7 reportedly committed to addressing extreme imbalances in the global economy and discussed tariff issues.

The finance ministers and central bank governors of the Group of Seven (G7) will issue a joint statement committing to address the extreme imbalances in the global economy. The G7 will also assess market concentration and the robustness of international supply chains. Countries agreed on the importance of fair competition and will work together to address behaviors that harm the market or violate rules and lack transparency. The statement did not mention China but indicated that they would address the issue of small tax-exempt parcels. Additionally, the G7 will consider strengthening sanctions against Russia if there is no progress in ceasefire negotiations in Ukraine.

After the finance ministers' meeting, the joint statement agreed upon by member countries only lightly touched on tax matters. The representative of the rotating chair country, Shun Pengfei, stated that it was inevitable for member countries to discuss tariff issues during the meeting, but they hoped the statement would reflect their unity.

The U.S. May services PMI reached its highest level since February, while initial jobless claims fell to 227,000 last week.

S&P Global announced that the U.S. May services Purchasing Managers' Index (PMI) preliminary value was 52.3, the highest since February; the new orders sub-index preliminary value rose to 53.3, the highest since February 2024, expanding for five consecutive months. The manufacturing PMI preliminary value was 52.3, the highest in three months, with market expectations at 49.9 and a previous value of 50.2. The U.S. May Markit manufacturing, services, and composite PMI preliminary values all exceeded expectations and recorded expansion, as trade-related concerns eased.

The U.S. Department of Labor announced that initial jobless claims last week were 227,000, a decrease of 2,000 from the previous week, with market expectations at 230,000; the previous value was revised to 229,000. The four-week moving average of initial jobless claims in the U.S. was 231,500, an increase of 1,000 from the previous week.

ECB Governing Council member states that monetary policy must remain cautious, Eurozone composite PMI unexpectedly contracts.

Joachim Nagel, a member of the European Central Bank (ECB) Governing Council and President of the German Central Bank, stated that although inflation is close to falling back to the target level of 2%, the ECB must remain vigilant due to the ongoing high uncertainty. The ECB has cut interest rates seven times in a row, bringing the deposit rate down to 2.25%. He stated that the current level of borrowing costs can no longer be considered restrictive.

The Eurozone composite Purchasing Managers' Index (PMI) for May had a preliminary value of 49.5, with market expectations at 50.7 and a previous value of 50.4, marking the first drop below the 50 mark this year. The services PMI preliminary value was 48.9, the lowest in 16 months; the manufacturing PMI preliminary value was 49.4, the highest in nearly three years; business confidence hit a low not seen in over a year and a half, and new orders also weakened.

OPEC+ reportedly discusses a significant production increase of over 410,000 barrels per day in July.

According to reports, members of the Organization of the Petroleum Exporting Countries and its allies, including Russia (OPEC+), are discussing whether to significantly increase production again in July, with one option being an increase of 411,000 barrels per day, the same as in May and June, but no final decision has been made OPEC+ will hold a meeting on June 1 to decide on the production target for July. If production is increased by 410,000 barrels per day, OPEC+ will have cumulatively lifted over 50% of its production cut target of 2.2 million barrels per day since 2022.

John Kilduff, a partner at Again Capital, stated that the news of increased production has led to a decline in oil prices, with the reason for the increase being Kazakhstan's insistence on not cutting production, leaving OPEC+ with no choice but to take action to increase production.

Market Overview

U.S. Stocks: The three major U.S. stock indices were mixed. The Dow Jones remained flat, the S&P 500 fell by 0.04%, and the Nasdaq rose by 0.28%.

European Stocks: European stock markets generally declined, with the German DAX 30 index down by 0.51%. The French CAC 40 index fell by 0.58%. The UK FTSE 100 index dropped by 0.54%.

Bond Market: The yield on the U.S. 10-year benchmark government bond is approximately 4.53%, down 7 basis points from the previous trading session.

Commodities: Gold rose by 0.67%, priced at $3,294.6 per ounce. WTI crude oil fell by 0.86%, priced at $60.81 per barrel.

Foreign Exchange: The U.S. dollar index rose by 0.21%, priced at 99.89. The USD/JPY rose by 0.24%, while the EUR/USD fell by 0.45%.

Cryptocurrency: Bitcoin rose by 1.88% in the past 24 hours, currently priced at $111,585. Ethereum rose by 4.45% in the past 24 hours, currently priced at $2,657.

Hong Kong Stocks: The Hang Seng Index night market futures closed at 23,492 points, down 10 points, compared to yesterday's Hang Seng Index closing at 23,544 points, a discount of 52 points, with a turnover of 10,557 contracts. The Hang Seng China Enterprises Index night market futures closed at 8,558 points, flat compared to yesterday's closing.

Global Company News

Kraken plans to issue U.S. stocks and ETF tokens

According to The Wall Street Journal, cryptocurrency exchange platform Kraken plans to tokenize over 50 stocks and exchange-traded funds (ETFs). The report cites a statement from Kraken, indicating that the tokenized stocks include technology giants such as Apple, Tesla, and Nvidia.

Tokenization means that investors can buy tokens of related companies issued by the platform, equivalent to holding stocks, allowing non-U.S. residents to trade U.S. stocks through relevant channels. According to the statement, tokenized stocks will be available for trading 24/7. Kraken has not responded to media inquiries.

Apple plans to launch smart glasses in 2026 to capture the AI device market

According to Bloomberg, Apple plans to release smart glasses by the end of next year, aiming to further capture the augmented reality device market. However, the company has shelved plans to develop a smartwatch equipped with a built-in camera to analyze the surrounding environment. Apple engineers are accelerating the development of these glasses, aiming for a release by the end of 2026, which will compete with Meta's popular Ray-Ban smart glasses. OpenAI announced on Wednesday that it will collaborate with Apple's former Chief Design Officer Jony Ive to launch hardware products starting next year U.S. and Japanese companies collaborate with UAE firms to build AI data center

American tech giants OpenAI, Oracle, Nvidia, Cisco, and UAE company G42 will collaborate with Japan's SoftBank to construct a large AI data center in Abu Dhabi's artificial intelligence (AI) park, known as "Stargate UAE."

The companies announced on Thursday that they have reached an agreement to build a data center with 1 gigawatt of AI computing power within the park. The project will be managed by OpenAI and Oracle, with AI chips supplied by Nvidia. Cisco will provide security products. The project is set to enter full construction phase in 2026, with the first 200 megawatts expected to be operational in the same year.

Today's news preview

Japan's April core CPI year-on-year

UK's April seasonally adjusted retail sales month-on-month

Canada's March retail sales month-on-month

Federal Reserve's Musalem and Schmidt participate in speaking events

U.S. April new home sales total annualized

Federal Reserve Governor Lisa Cook delivers a speech