Trade conflicts give way to tentative optimism

General market commentary

Equity markets finished higher on Monday, shrugging off earlier losses as investor sentiment improved despite persistent US-China trade tensions. Gains were led by energy and technology sectors, while industrials lagged as the only sector in decline. The S&P 500 climbed 0.4% to close at 5,935.94, the Nasdaq rose 0.7% to 19,242.61, and the Dow Jones eked out a 0.1% gain. Bond yields also moved up, with the 10-year Treasury yield reaching 4.47%, reflecting shifting expectations around inflation and monetary policy. West Texas Intermediate crude oil jumped nearly 4% to $63.13 a barrel following the OPEC+ decision to maintain current output levels, offering further support to energy equities.

On the economic front, manufacturing data offered a mixed picture. The S&P Global Manufacturing PMI rose to 52.0 in May, signalling expansion for a fifth consecutive month, supported by higher new orders and input inventories. Conversely, the ISM Manufacturing PMI dipped to 48.5, marking continued contraction amid weaker production and inventory drawdowns. Trade developments remained front and centre, as President Trump announced plans to double tariffs on steel and aluminium, prompting sharp gains in US steel shares but triggering concerns over escalating tensions. China and the EU pushed back, heightening geopolitical uncertainty. With upcoming talks expected between Presidents Trump and Xi, markets are likely to remain sensitive to any shifts in the global trade narrative.

Latest market and economic update

Most Asian equities rose on Tuesday, led by gains in technology shares, though sentiment remained cautious amid U.S.-China trade tensions and soft economic indicators. Chinese markets were subdued after a long weekend, while Hong Kong tech and EV shares outperformed, but broader regional gains were limited by tariff concerns and slowing global demand.

US equity futures were little changed overnight as investors remained cautious amid ongoing US-China trade tensions and uncertainty over proposed tariff increases. Market participants are focused on upcoming economic data releases and earnings reports, while closely watching for any developments from a potential call between Presidents Trump and Xi Jinping.

European markets opened June cautiously, with the Stoxx 50 falling 0.3% and the Stoxx 600 down 0.1%, as renewed trade tensions weighed on sentiment, particularly hitting auto and luxury shares. Meanwhile, oil shares rose on stronger crude prices, and attention now turns to the ECB’s anticipated rate cut decision later this week amid mixed manufacturing data.

The US dollar index edged higher toward 99 on Tuesday, recovering some losses from the previous session as market sentiment stabilised despite weak economic data and escalating trade tensions. The dollar gained ground against major peers, including the euro, with EUR/USD slipping to 1.1420 as investors awaited further economic indicators for clarity on the US outlook.

Oil prices rose this morning amid concerns over potential supply disruptions caused by worsening tensions between Ukraine and Russia, wildfires in Canada, and uncertainty surrounding the US-Iran nuclear deal. Expectations of tighter supplies were further supported by OPEC+ production decisions and reports of possible stricter US sanctions on Russia’s energy sector.

China’s manufacturing sector contracted unexpectedly in May, with the Caixin PMI falling to 48.3, its first decline in 19 months, as export orders and new demand weakened amid ongoing pressure from high US trade tariffs. The disappointing data underscores the need for further stimulus from Beijing, especially fiscal measures to support private consumption, as US-China trade talks remain stalled and tariffs stay elevated.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Sanofi has agreed to acquire US biotech firm Blueprint Medicines for up to $9.5 billion to strengthen its rare immunology disease portfolio, marking the largest European healthcare deal this year. The acquisition adds Blueprint’s rare disease drug Ayvakit and a promising pipeline to Sanofi’s portfolio, with the deal expected to close in Q3 pending approvals.

Amazon is rapidly expanding its use of robotics across its fulfilment and delivery operations, with Bank of America estimating up to $16 billion in annual savings by 2032 and reduced labour dependence. Automation, including advanced fulfilment centres and drones, is expected to boost efficiency and raise retail margins to 11% over time.

Meta plans to allow brands to fully create and target personalised ads using AI by the end of next year, automating content creation and user targeting across Instagram and Facebook. This initiative is part of a broader push by social media companies to invest heavily in AI amid fierce competition in advertising, despite ongoing concerns about brand safety, creative control, and ad quality.

Adidas continues to outperform in China’s athletic wear market despite overall sluggish industry trends, maintaining strong momentum and reducing promotional discounts to support gross margins. UBS forecasts Adidas’ sales growth in Greater China to reach 14% in 2025, outperforming Nike amid cautious consumer spending and challenging market conditions.

Morgan Stanley reaffirmed its Overweight rating on Nvidia, calling it a unique opportunity in the semiconductor sector despite broader industry concerns, and maintaining it as their top pick. The firm highlighted Nvidia’s strong recent results and expects supply constraints to ease soon, while also showing increased interest in Marvell and Broadcom.

Bank of America upgraded Boeing to Buy and raised its price target to $260, citing strong progress under CEO Kelly Ortberg, production stability, and growing international orders as key drivers of the aerospace company's turnaround. However, the firm warned that trust remains fragile and regulatory challenges, including the FAA’s 737 production cap, still pose risks.

Truist Securities began coverage of the Payments and FinTech sector with a cautious outlook, citing slower growth, rising competition, and macroeconomic challenges slowing revenue in 2025 and 2026. Top buys include Adyen, Mastercard, Toast, and Visa, while PayPal and others face warnings over valuation and growth quality.

BTIG upgraded Doximity Inc to Buy from Neutral, setting a price target of $80, citing strong demand for its digital pharma sales tools and viewing recent macro concerns as overstated. Despite a share pullback to around $52, Doximity’s solid fundamentals, high customer retention, and strong margins position it well for growth amid a recovering biopharma sector.

J.P. Morgan raised price targets for five European defence firms, including Hensoldt, Renk, BAE Systems, Babcock, and Qinetiq, citing stronger financial forecasts and increased government military spending. Germany is expected to see robust growth from a prolonged rearmament cycle, while UK firms will benefit from rising defence budgets and political support despite slower growth.

Berenberg upgraded Hensoldt AG to “overweight,” nearly doubling its price target from €50 to €110, reflecting strong confidence in the company’s long-term growth prospects. Analysts expect at least 15% organic sales CAGR through 2030, improved profitability, and solid free cash flow, with adjusted earnings forecasts showing a mixed but overall positive outlook.

Upcoming data and events

Key economic data due today includes job openings, durable goods orders, and factory orders, which will provide insight into the US economy. Earnings reports from CrowdStrike, Hewlett Packard Enterprise, Dollar General, and NIO are also expected.

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