On Monday, global shares experienced a significant downturn as trade tensions escalated and the ongoing Russian-Ukraine conflict heightened geopolitical uncertainty. The futures for the S&P 500 dipped by 0.5%, while the Dow Jones Industrial Average saw a decline of 0.4%. In Europe, Germany’s DAX retreated 0.4%, closing at 23,891.11, and the CAC 40 in Paris fell by 0.5% to 7,712.40. Conversely, the British FTSE 100 managed to gain 1%, closing at 8,778.84.
In Asia, Hong Kong’s Hang Seng Index initially plunged over 2% as Beijing and Washington exchanged sharp criticisms regarding trade policies. The announcement by U.S. President Donald Trump to double tariffs on steel and aluminum to 50% added further worries for investors. However, the Hang Seng Index closed just 0.6% lower at 23,157.97, despite the volatile trading session. Meanwhile, markets in mainland China remained closed for a holiday.
The tension escalated as China condemned the U.S. for implementing AI chip export control guidelines, halting the sale of chip design software to Chinese firms, and planning to revoke student visas for Chinese nationals. Adding to the market's unease, a report indicated that China’s factory activity had contracted in May, although the decline was less severe than in April. This news came shortly after China reached a preliminary agreement with the U.S. to reduce Trump’s high tariffs.
In the commodities market, oil prices surged following OPEC+'s decision to implement a modest increase in output starting in July, marking the third consecutive monthly increase. U.S. benchmark crude oil prices rose by $2.08, reaching $62.87 per barrel, while Brent crude, the international benchmark, increased by $1.75 to $64.53 per barrel.
On the geopolitical front, Moscow launched missile and drone attacks on Ukraine just hours before a new round of direct peace talks in Istanbul. Additionally, a Ukrainian drone strike reportedly destroyed over 40 Russian aircraft deep within Russia's territory, as reported by Ukraine’s Security Service. These events contributed to a cloud of uncertainty hanging over global markets.
As a result of these geopolitical tensions, Hong Kong’s Hang Seng Index fell by 0.6% to 23,157.97, with both China and the U.S. accusing each other of violating their recently established tariff agreement. In Japan, the Nikkei 225 index lost 1.3% to close at 37,470.67, while the Kospi in Seoul recorded a modest gain of 0.1% to 2,698.97. Australia’s S&P/ASX 200 retreated 0.2% to 8,414.10, and India’s Sensex decreased by 0.4%. Taiwan's Taiex experienced a significant drop of 1.6%.
In the U.S., Wall Street concluded its best month since 2023 on a mixed note. The S&P 500 saw a minor retreat of less than 0.1%, while the Dow Jones Industrial Average edged up by 0.1%. The Nasdaq composite declined by 0.3%. Investor sentiment had been optimistic, with hopes growing that the worst of the trade tensions had subsided, particularly after Trump paused tariffs on both China and the European Union. A U.S. court ruling on Wednesday further blocked many of Trump’s sweeping tariffs, which had contributed to the S&P 500's first winning month in four, marking its best performance since November.
However, despite these temporary reprieves, the tariffs remain in effect as the White House appeals the ruling, leaving the ultimate outcome uncertain.
In the bond market, Treasury yields eased following a report indicating that a key inflation measure favored by the Federal Reserve was slightly lower in April than anticipated. Additionally, a separate report from the University of Michigan revealed that consumer sentiment in the U.S. improved more than expected in May, particularly in the latter half of the month after Trump announced a pause on many tariffs against China.
In currency trading on early Monday, the U.S. dollar weakened against the Japanese yen, falling to 142.91 from 143.87. The euro also saw a slight increase, rising to $1.1421 from $1.1351. This fluctuation in currency values reflects the ongoing market volatility influenced by geopolitical events and economic reports.
