Global Markets End Month Mixed Amid Tariff Uncertainty and Inflation Watch
London – As May concluded, world stocks were on track for their best monthly performance since late 2023, while the U.S. dollar was narrowly poised for its first monthly gain of the year. Traders spent Friday balancing anticipation for key inflation data against the ongoing saga of Washington’s tariff policies.
Markets have been particularly volatile throughout the week, reacting sharply to a rollercoaster of news regarding President Donald Trump’s tariffs. This included a U.S. court blocking most of his duties, only for a federal appeals court to temporarily reinstate them shortly after.
On Friday, European stocks initially dipped but rebounded to post 0.3%-1% gains, despite an unexpected drop in German retail sales. Meanwhile, Wall Street futures began to sag again in anticipation of the upcoming U.S. Personal Consumption Expenditures (PCE) inflation data. Overall, MSCI’s main world index climbed over 5% for the month, and the dollar, up 0.3% on Friday, was close to securing its first positive month of 2025. The dollar’s strength was partly supported by a slight rise in benchmark 10-year U.S. Treasury yields, which serve as a proxy for U.S. borrowing costs.
Adding to investor jitters is a less-publicized provision within Trump’s budget bill. This clause could allow the government to impose taxes of up to 20% on foreign investment. Brown Brothers Harriman strategist Elias Haddad called this “alarming” and warned that such uncertainty raises the risk of the U.S. entering a period of “stagflation.”
Oil prices were headed for their second consecutive weekly drop, influenced by expectations of another OPEC+ output hike, though they did rise on Friday and were up for the month as a whole.
In Asia, Japan’s Nikkei saw some profit-taking after its nearly 2% rally the previous day, with investors also concerned about Japanese debt levels and the impact of tariffs. The yen notably appreciated by as much as 2% from its Thursday low, trading around 144 per dollar in London. The euro and pound, however, edged down against the dollar. Hong Kong’s Hang Seng index dropped 1.2%, with Apple suppliers particularly hit by the U.S. tariff reversal. Mainland Chinese blue chips also dipped, though both Asian indices still registered solid monthly gains. Korean stocks performed even better, achieving their best month since November 2023. An index tracking emerging market currencies also gained about 2% for the month, matching its best performance since November 2023, with soaring gold prices helping Ghana’s cedi surge nearly 40% this month.
“Trump’s trade agenda remains alive and kicking, with the legal battle adding yet another layer of uncertainty,” commented Rodrigo Catril, senior FX strategist at National Australia Bank, concluding that “The only thing that looks more certain is more uncertainty.” Despite the courtroom drama, the Trump administration stated that negotiations with key trading partners were continuing. Treasury Secretary Scott Bessent confirmed scheduled talks with a high-level Japanese delegation, though he noted that discussions with China were “a bit stalled.”
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