US and China reach trade deal

Wall Street Rallies on Trade Optimism

U.S. equity markets extended their upward momentum on Tuesday, buoyed by broad-based sector strength and growing optimism surrounding U.S.-China trade discussions in London. The S&P 500 and Nasdaq each climbed 0.6%, while the Dow posted a more modest gain of 0.3%. Energy and consumer discretionary sectors led the rally, reflecting improved sentiment as trade tensions appeared to ease. Meanwhile, small business optimism saw a welcome uptick in May, breaking a four-month decline and hinting at a stabilising business climate despite lingering policy uncertainty. Bond markets were mixed, with the 10-year Treasury yield edging slightly lower to 4.48%, and the 2-year yield ticking up to 4.03%.

Adding to market confidence, the U.S. and China agreed on a framework to implement the Geneva consensus following two days of high-level talks in London, helping to calm recent tensions over reciprocal tariffs. The agreement includes a potential easing of U.S. technology export restrictions in exchange for China lifting its curbs on rare earth exports, with final approval pending from President Trump. Looking ahead, investor focus is shifting to key inflation data, with May’s CPI report due Wednesday. Consensus forecasts suggest a steady 0.2% monthly rise in headline inflation and a 2.5% annual increase, while core CPI is expected to gain 0.3% month-on-month. Although recent inflation trends have been soft, there are concerns that tariffs may trigger a one-off bump in goods prices. However, analysts generally view this as a temporary effect rather than the start of a sustained inflationary trend. As such, the Federal Reserve’s anticipated rate-cutting path appears delayed but not derailed. Meanwhile, global growth concerns persist, with the World Bank trimming its outlook amid ongoing trade frictions and heightened uncertainty, reinforcing the case for a cautious but equity-favouring investment stance.

Latest market and economic update

Most Asian shares rose on Wednesday, led by Chinese markets buoyed by optimism over a US-China trade framework agreement, though investors remained cautious awaiting more details. Technology shares, particularly in the chip sector, gained on hopes of eased US export curbs, while broader market gains were limited by uncertainty and mixed performances across the region.

US equity futures edged lower overnight as investors remained cautious ahead of the Consumer Price Index report and awaited further clarity on U.S.–China trade talks. Focus is also on earnings from Chewy and Oracle, due later in the day, which could provide insight into consumer and corporate spending.

European markets ended flat yesterday as investors awaited further US-China trade talks, with optimism but no major breakthroughs. UBS and other banks dropped on concerns over new Swiss capital rules, while Novo Nordisk rose 6% after reports of activist hedge fund Parvus building a stake.

The US dollar remains subdued, with the dollar index hovering around 99, reflecting investor caution ahead of key inflation data and ongoing US–China trade negotiations. Against the euro, the greenback is trading near its weakest levels since early 2022, with the EUR/USD pair at 1.1414, as concerns over U.S. trade and fiscal policy continue to weigh on sentiment.

Oil prices slipped from a seven-week high amid growing demand concerns and cautious investor sentiment, despite optimism over a US-China trade framework easing export controls. US crude inventories fell unexpectedly, while the EIA cut global demand forecasts and expects significantly lower US output next year due to reduced drilling activity.

The World Bank has downgraded its global growth forecasts for 2025 to 2.3%, the weakest level in 17 years outside of recession periods, citing rising trade barriers and policy uncertainty. The US GDP projection was cut to 1.4%, while growth forecasts for the Eurozone, Japan, India, and Mexico were also revised lower, with China’s outlook remaining unchanged at 4.5%.

A federal appeals court has allowed President Trump’s trade tariffs to remain in place, prioritising trade negotiation concerns despite challenges from small businesses. The ruling mainly affects emergency tariffs, excluding those on steel and aluminium, while the court continues reviewing Trump’s authority.

Equities on the move

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

Tesla plans to begin offering public rides on its self-driving robotaxis in Austin, Texas, on June 22, with initial operations involving 10-20 Model Y SUVs under remote human supervision. CEO Elon Musk emphasised a strong focus on safety, noting the date could change, and said the service will expand to other states later, including California, despite ongoing regulatory and safety challenges.

Meta Platforms has agreed to acquire a 49% stake in AI startup Scale AI for $14.8 billion, with Scale’s CEO Alexandr Wang set to lead a new “superintelligence” lab within Meta. The deal aims to strengthen Meta’s AI capabilities amid competition and regulatory scrutiny, while Scale AI, valued at $13.8 billion, expects revenue to exceed $2 billion this year.

Salesforce-owned Slack has restricted other software firms from searching or storing Slack messages long-term, allowing only temporary use before data must be deleted, reportedly to protect customer privacy. This move suggests Salesforce aims to leverage Slack data for its own AI development ambitions amid growing scrutiny of how AI firms handle personal data.

Nintendo’s Switch 2 sold over 3.5 million units worldwide within four days of its June 5 launch, making it the company’s fastest-selling console and already covering over 20% of its 15 million unit sales target for the first year. However, concerns over supply shortages persist due to trade tariff disruptions, and Nintendo’s shares fell over 3% in Tokyo following the announcement.

Snap plans to launch its first consumer-ready augmented reality smart glasses, called Specs, next year, intensifying competition with Meta in the wearable technology market. The company has invested over $3 billion in AR development and will collaborate with Niantic Spatial to enhance its AR Lens Studio platform for creators.

UBS shares fell sharply amid concerns over Swiss government proposals requiring an extra $26 billion in capital, casting doubt on future share buybacks and capital returns. While some analysts expect buybacks to be cut, UBS and others argue the bank can manage the requirements without impacting dividends, though the rules may change during consultation.

TSMC’s May sales rose 39.6% year-on-year to T$320.52 billion, driven by strong AI demand despite an 8.3% fall from April’s record revenue and US restrictions on sales to China. While a stronger Taiwan dollar weighed on international revenues, demand outside China remains robust, with hopes that US-China trade talks may ease export limits.

GameStop reported a 17% fall in first-quarter revenue to $732.4 million as customers shifted to digital downloads, leading to more store closures despite ecommerce expansion. The company posted a net profit of $44.8 million but faced a $10.8 million operating loss including restructuring charges and purchased 4,710 bitcoins for its treasury reserve.

Duolingo faces significant competition from Apple’s new Live Translation feature, unveiled at WWDC 2025, which offers real-time translation across Messages, FaceTime, and phone calls. This integration of seamless, on-the-fly translation within Apple’s ecosystem could impact Duolingo’s market position as users may prefer built-in, instant translation over standalone apps.

Bank of America downgraded German defence supplier Renk Group from Buy to Underperform, citing a full valuation despite strong growth prospects and a 329% year-to-date share surge. While BofA raised earnings estimates and target multiples, it warned the market will favour defence firms with greater exposure to electronics and missile capabilities over Renk’s land-focused assets.

Citi downgraded Safran to neutral from buy, stating that the current share price already reflects the company’s profitable growth and premium market position, despite a high price-to-earnings ratio. Safran reported strong first-quarter sales with a 16.7% revenue increase and maintained full-year forecasts, while managing uncertainty around global trade tariffs.

DA Davidson reiterated an Underperform rating on CoreWeave, citing risks from its financing structure, high debt costs, and overestimated asset values that could hurt shareholder returns. Without significant equity raises, heavy debt reliance and falling GPU prices may reduce equity value to under $5 per share long-term.

Upcoming data and events

Today’s market focus centres on the Consumer Price Index (CPI), Core CPI, and EIA Crude Oil Inventories, which could impact market sentiment and Federal Reserve policy. Additionally, investors will be watching earnings reports from major companies such as Oracle Corporation and Chewy, which may further influence trading activity.

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