June 5 Financial Breakfast: Trump urges for interest rate cuts again! The dollar and U.S. Treasury yields both fall, and the Nasdaq rises for three consecutive days

The U.S. ADP employment numbers and ISM non-manufacturing index performed poorly, Trump once again urged Powell to cut interest rates. Coupled with no progress in U.S.-China trade negotiations, the 10-year U.S. Treasury yield, the dollar, and oil prices all fell, reviving the "recession trade." With no significant progress in U.S.-China trade talks, U.S. tech stocks continued their upward momentum. The three major U.S. stock indices had mixed results, with the Dow Jones down 0.22%, ending a four-day rise; the S&P 500 up 0.01 points; and the Nasdaq up 0.32%, marking a three-day increase; the China Golden Dragon Index rebounded 2.04%.

In terms of popular stocks, Broadcom rose 1.7%, Meta increased 3.2%, Microsoft slightly rose 0.2%, and Nvidia gained 0.5%. Tesla fell 3.6%. Wells Fargo had its asset cap lifted after more than seven years, with its stock price briefly soaring 4.2%, but closed down 0.3%. Dollar Tree warned of impacts from tariff-related costs, expecting a 50% year-on-year drop in profits this quarter, dragging its stock price down 8.4%.

The 10-year U.S. Treasury yield fell 2.27%, marking the largest single-day drop in three weeks since May 15. The dollar index dropped 0.43%, falling below 99.0; gold rose 0.62%, temporarily recovering above $3,360; WTI crude oil fell 0.95%, again constrained at $64.0; the dollar/yen fell 0.86%, dropping below 143.0, while the euro/dollar rose 0.42%; Bitcoin fell 0.65%, marking two consecutive days of decline.

Macro News

Economic data performs poorly, Trump again urges Powell to cut rates

The U.S. ADP employment numbers, known as the small non-farm payroll, increased by 37,000 last month, far below the expected 114,000, marking the lowest growth in two years and highlighting signs of weakness in the U.S. labor market. Additionally, the ISM reported that the May non-manufacturing index was 49.9, with market expectations at 52 and a previous value of 51.6, marking the first drop below the 50 threshold in a year. These two data points reflect a weak economic situation. After the data was released, Trump posted on social media that the ADP employment report was out, stating, "It's too late, Mr. Powell, the Fed must lower interest rates now; the European Central Bank has already cut rates nine times." Bill Pulte, director of the Federal Housing Finance Agency (FHFA), also stated on social media the same day, "Powell must lower interest rates, do it now, stop dragging it out." Swap traders are betting that the Fed will cut rates twice before the end of the year, possibly as soon as October.

Trade situation: Progress in U.S.-Europe negotiations? Trump says it's extremely difficult to reach an agreement with China

Trump posted on his social media platform Truth Social, stating, "I like the President of China, I always have and always will, but he is very tough, and it is extremely difficult to reach an agreement with him." White House spokesperson Karoline Leavitt stated on Monday that U.S. and Chinese leaders may speak this week to work on resolving differences over the tariff agreement reached in Geneva in May and broader trade issues The U.S. government has recently banned the export of key aircraft engine components to China, restricted Beijing's access to chip design software, imposed new restrictions on Huawei's chips, and plans to begin revoking visas for Chinese students. Reports indicate that China is considering ordering hundreds of Airbus aircraft as early as next month, when European leaders will visit Beijing to celebrate the 50th anniversary of diplomatic relations between China and the European Union. The EU trade chief stated that Brussels and Beijing are working to resolve issues in their trade relationship ahead of the July summit.

EU Trade Commissioner Maros Sefcovic stated after meeting with U.S. Trade Representative Jamieson Greer that the EU and the U.S. are moving in the "right direction" in trade negotiations, with both sides making progress and aiming to maintain this momentum.

CBO: Trump's tariffs expected to reduce U.S. deficit by $2.8 trillion

According to estimates from the nonpartisan Congressional Budget Office (CBO), Trump's tariff policies are expected to help reduce the U.S. fiscal deficit by approximately $2.8 trillion over the next 10 years as of mid-May. Meanwhile, the "Big and Beautiful" bill supported by Trump is projected to increase U.S. national debt by $2.4 trillion over the next decade.

However, CBO Director Phillip Swagel warned in a letter to Democrats that the CBO's estimates carry significant uncertainty, partly because the Trump administration may change the way it implements its tariff policies. Since the U.S. has never implemented such large-scale tariff increases in decades, there is almost no substantial evidence to demonstrate their effects.

Federal Reserve Beige Book: U.S. economy contracting, prices rising, hiring slowing

The Federal Reserve's latest regional economic report indicates that the economy in several U.S. regions has contracted over the past six weeks, with businesses slowing their hiring activities. Both businesses and consumers are concerned that tariff measures will drive up prices. Respondents from 12 regions believe there is uncertainty in the economy and policies, leading businesses to hesitate in making investment or spending decisions. Regarding inflation, the report notes that U.S. prices are rising at a moderate pace.

All regions reported weak job demand, reduced overtime for workers, stalled hiring activities, and some businesses planning layoffs. A few industries in certain regions have begun layoffs, but the actions are not significant.

Respondents from all regions expect tariffs to lead to price increases, with a few regions anticipating significant price rises. Some businesses surveyed are preparing to lower marginal profit margins or only impose temporary surcharges to cope with tariffs, with price increases potentially occurring within three months.

The survey was conducted during the period when Trump announced reciprocal tariffs on April 2, but it does not reflect the impact of Trump's decision to lower tariffs on China in early May.

Trump expects no immediate peace between Russia and Ukraine

Trump stated that he spoke on the phone with Russian President Vladimir Putin for over an hour, discussing Ukraine's recent attacks on Russian aircraft and the Iran nuclear negotiations. It is expected that Russia and Ukraine will not achieve peace "immediately."

During the call, Putin vowed to retaliate against Ukraine for this shocking raid. Kyiv reported that the attack resulted in over 40 Russian bombers being targeted Trump indicated to Putin that Iran cannot possess nuclear weapons, and on this issue, the two are believed to have reached a consensus. Putin stated that he would participate in negotiations seeking to reach a new nuclear agreement with Tehran and may help expedite the resolution of related issues.

Market Overview

U.S. Stocks: All three major U.S. stock indices rose, with the Dow Jones down 0.22%, the S&P 500 up 0.01%, and the Nasdaq up 0.32%.

European Stocks: European stock markets rose, with the German DAX 30 index up 0.77%. The French CAC 40 index rose 0.53%. The UK FTSE 100 index rose 0.16%.

Bond Market: The yield on the U.S. 10-year benchmark treasury bond is about 4.35%, down 10 basis points from the previous trading day.

Commodities: Gold rose 0.62%, priced at $3,374 per ounce. WTI crude oil fell 0.95%, priced at $62.74 per barrel.

Foreign Exchange: The U.S. dollar index fell 0.43%, priced at 98.81. The USD/JPY fell 0.86%, while the EUR/USD rose 0.42%.

Cryptocurrency: Bitcoin fell 0.67% in the last 24 hours, currently priced at $104,738. Ethereum rose 0.54% in the last 24 hours, currently priced at $2,609.

Hong Kong Stocks: The Hang Seng Index night market futures closed at 23,666 points, up 126 points, 12 points higher than yesterday's Hang Seng Index close of 23,654 points, with a turnover of 11,510 contracts. The national index night market futures closed at 8,579 points, 2 points higher than yesterday's national index close.

Global Company News

The first IPO of a stablecoin is born!

Circle and some of its shareholders expanded their initial public offering (IPO) scale on Wednesday Eastern Time, raising nearly $1.1 billion and pricing above the previous market expectations, marking a broader market recognition for stablecoin issuers. This will be the first IPO in the stablecoin sector. The IPO is led by JP Morgan, Citigroup, and Goldman Sachs, with shares expected to be listed on the New York Stock Exchange on Thursday Eastern Time under the ticker symbol CRCL.

Data cited from CoinMarketCap in Circle's filing shows that as of the end of March, its issued USDC stablecoin accounted for about 29% of the market share. According to its official website data, as of May 29, the circulation of USDC was approximately $61 billion. This IPO comes at a time when legislation regarding stablecoins (digital tokens typically pegged to the U.S. dollar or other currencies) is being reviewed by the U.S. Congress, a development that may grant stablecoins higher legitimacy and potentially attract competitors, as several major Wall Street banks are exploring whether to issue their own stablecoins.

Meta invests millions to partner with Hollywood to promote high-end VR headsets to compete with VisionPro

According to The Wall Street Journal, Meta is seeking to collaborate with Hollywood to acquire exclusive content for its high-end virtual reality headsets planned for release next year. According to insiders, the tech company has been in talks with entertainment brands such as Disney and A24, as well as some smaller production companies Meta is willing to invest millions of dollars to purchase a series or independent immersive video content based on well-known intellectual properties. Meta hopes that this content will attract consumers to buy its virtual reality device planned for release next year, which is expected to be priced below $1,000. This price is higher than the starting price of Quest at $300 but lower than the base price of VisionPro at $3,500.

Bank of America: The peak of tariff chaos has passed, and bank stocks will outperform the market.

Bank of America stated that the performance of Wall Street bank stocks is expected to be stronger than the S&P 500 index, as the chaos caused by tariffs may have peaked. Tariffs caught the market off guard, but the peak of chaos may have passed. Despite the uncertain and volatile economic environment, bank earnings have remained robust, and year-to-date, the earnings per share adjustment for bank stocks has outperformed the S&P 500 index.

In 2024, bank stocks are expected to outperform the S&P 500 index, with the KBW Bank Index rising 33%, while the S&P 500 index rose 23% during the same period. However, this year, bank stocks and the benchmark index have shown more consistent trends, with the KBW index rising less than 1% and the S&P 500 index rising 1.7%. Nevertheless, analysts at Bank of America indicated that the situation at the end of this year will be similar to that in 2024, with bank stocks expected to outperform the benchmark. They reaffirmed their judgment since January, despite the market's volatility in recent months.

Today's News Preview

China May Caixin Services PMI

Switzerland May Seasonally Adjusted Unemployment Rate

Eurozone April PPI Month-on-Month

U.S. May Challenger Job Cuts

European Central Bank Interest Rate Decision Announcement

U.S. April Trade Balance

U.S. Initial Jobless Claims for the Week Ending May 31

European Central Bank President Lagarde's Press Conference

U.S. May Global Supply Chain Pressure Index

Federal Reserve Governor Cook's Speech

Federal Reserve Harker's Speech on Economic Outlook

Federal Reserve Schmid's Speech on Banking Policy