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What’s happening: Gold prices rose sharply on Monday, reaching their strongest level in more than three weeks.
What happened: Uncertainties around the impact of tariffs on the US economy exerted pressure on the greenback.
Investors flocked to safe-haven assets on continued concerned over geopolitical and economic risks.
Why it matters: On Thursday, US Treasury Secretary Scott Bessent said that trade negotiations with China were “a bit stalled.” He later signalled that a call between the two countries might take place soon to resolve trade issues. By Friday, US President Donald Trump said that China had violated an ongoing deal on tariffs.
Investor concerns were further fuelled by Trump announcing plans to increase tariffs on steel and aluminium from 25% to 50%.
The US dollar, which has lost close to 9% year to date versus its closest peers, remained under pressure, despite the Federal Reserve’s reluctance to cut interest rates as tariffs are expected to trigger higher inflation.
Downbeat economic data added further pressure on the US dollar. The ISM manufacturing PMI signalled a bigger-than-anticipated contraction in the manufacturing sector and represented the third straight month of decline.
Weakness in the US dollar lent support to gold, as a lower greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, briefly breached the 98.6 support level on Monday, falling close to three-year lows.
US gold futures jumped 2.5% to close at $3,397.20 an ounce on Monday amid continued trade tensions and rising concerns around global economic growth.
In other metals trading, silver gained sharply to reach $34.694 an ounce, copper prices jumped to $4.8585, platinum rose to $1,063.20 and palladium to $993.60.
What to watch: Investors will continue monitoring talks between the US and China regarding tariffs. Speeches by various Fed Chairman Jerome Powell and other members will remain in focus today.
Data on job openings (1800 UAE Time) and factory orders (1800 UAE Time) from the US will be released today. Job openings in the US, which declined by 288,000 to 7.192 million in March, are expected to fall further to 7.10 million in April. Analysts expect new orders for US manufactured goods to decline by 3% in April, following a 3.4% gain in March.
Context: Equity markets in Europe closed mostly lower on Monday amid renewed trade concerns.
Details: The European equity markets started the new month on a cautious note due to renewed trade concerns.
US President Donald Trump announced plans to double the rate of tariffs on steel and aluminium to 50%, igniting further concerns over another trade war. The European Union warned to retaliate against the hike, which exerted pressure on auto stocks. Stellantis’ stock tumbled 5%, while shares of Mercedes and BMW declined more than 2% each. Luxury and media shares also moved lower on Monday.
Oil stocks bucked the trend, rising around 1.4%, amid a surge in crude prices following a lower-than-expected increase in the OPEC+ output.
Data released on Monday showed the HCOB Eurozone manufacturing PMI rose to 49.4 in May, from 49.0 in the previous month. The latest reading indicated the weakest pace of contraction in the region’s manufacturing activity since August 2022.
The STOXX Europe 600 Index fell 0.14% to close at 547.92 on Monday. Germany’s DAX 40 and France’s CAC 40 lost 0.28% and 0.19%, respectively, during the session. Amid this wider downturn, the FTSE 100 index gained 0.02% to settle at 8,774.26.
What to watch: Investors await the release of economic data on Eurozone’s inflation rate (1300 UAE Time) and unemployment rate (1300 UAE Time) today. The annual inflation rate in the Eurozone is expected to ease to 2% in May, from 2.2% in April, while the unemployment rate is expected to remain at 6.2% in April, unchanged from the previous month.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.08%, 0.41% and 0.71%, respectively.
The White House said Donald Trump is “open” to three-way peace talks in Turkey with Russia’s President Vladimir Putin and Ukraine’s President Zelenskyy. The news sent the RUB/USD slightly higher in forex trading this morning.
Australia’s current account deficit shrank to A$14.7 billion in the first quarter, from A$16.3 billion gap in the fourth quarter. However, the negative gap being wider than market expectations of A$12 billion exerted pressure on the AUD/USD forex pair.
China’s Caixin general manufacturing PMI dipped to 48.3 in May, from 50.4 in the previous month. The latest reading also missed market estimates of 50.6, sending the CNY/USD pair lower in forex trading this morning.
Malaysia’s S&P Global manufacturing PMI increased to 48.8 in May, from 48.6 in April, lending support to the MYR/USD forex pair.
New Zealand’s merchandise terms of trade rose 1.9% in the first quarter, decelerating from 3.1% in the fourth quarter. The latest reading also missed market estimates of 3.1%, which sent the NZD/USD pair lower in forex trading this morning.
Brazil’s IPC-Fipe inflation (1200 UAE Time) and industrial production (1600 UAE Time), Italy’s unemployment rate (1200 UAE Time), Spain’s 12-month Letras auction (1240 UAE Time) and 6-month Letras auction (1240 UAE Time), UK’s 40-year Treasury Gilt auction (1300 UAE Time), Germany’s 2-year Schatz auction (1330 UAE Time), South Africa’s GDP growth rate (1330 UAE Time), as well as US Redbook index (1655 UAE Time), JOLTs job quits (1800 UAE Time) and RCM/TIPP economic optimism index (1810 UAE Time).
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