Daily Brief | June 2 2025

Top News

·     In China, the May PMIs showed that industrial activity contracted for a second consecutive month despite the trade truce with the U.S.

·     The Chinese government accused President Donald Trump of escalating the trade war and announced it would take strong measures if the U.S. proceeds with new tariffs, further raising bilateral tensions.

·     U.S. Treasury Secretary Scott Bessent stated that the U.S. will never default on its debt, as Congress enters a critical phase to raise the debt ceiling before funds run out.

·     The European Central Bank is preparing for one final rate cut amid signs of easing inflation, though the new U.S. tariffs complicate the bloc’s economic outlook.

·     A massive drone attack launched by Ukraine against Russia’s nuclear-capable strategic bombers overshadowed the start of a new round of peace talks that began Monday in Istanbul. 

Economic Outlook

In China, May’s PMIs revealed that industrial activity shrank for a second consecutive month, despite the temporary trade truce with the U.S. China’s composite PMI stood at 50.4 points in May, slightly up from 50.2 in April. The non-manufacturing PMI came in at 50.3, showing a minor deterioration from April’s 50.4. Meanwhile, the manufacturing PMI rose from 49.0 in April to 49.5 in May, though it remained below the critical 50-point threshold that separates contraction from expansion. Within the manufacturing index, mixed signals emerged: production rebounded thanks to the tariff pause and domestic stimulus, and new orders and exports slightly improved, although exports remained in contraction territory. Employment declined at a slower pace, and delivery times stabilized. However, both input and selling prices dropped sharply, reflecting growing deflationary pressures. Overall, China’s industrial sector continued to contract in May, even amid the temporary easing of trade tensions with the U.S.

Markets and Stocks

U.S. equity markets began June with losses after May closed on a positive note despite volatility. Investors are closely monitoring the evolution of global trade tensions. Market jitters intensified after Beijing rejected U.S. accusations of breaching a temporary agreement, instead claiming that Washington failed to honor its commitments. This breakdown came just days after Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng agreed in Geneva to a 90-day suspension of most tariffs. Tensions also extended to Europe, where negotiations between the U.S. and the European Union became more strained following President Trump’s announcement of doubling steel tariffs to 50%, a move Brussels described as “harmful” to ongoing talks. Asian and European markets were trading lower. This week, in addition to trade developments, markets are focused on Federal Reserve Chair Jerome Powell’s speech today and the upcoming U.S. employment data due Friday.

In the fixed-income market, U.S. Treasury yields climbed: the 10-year yield stood at 4.43%, the 2-year yield edged up to 3.92%, and the 30-year yield reached 4.96%. These movements reflect investor concerns over escalating trade tensions.

In commodities, gold prices surged to their highest level in a week, fueled by safe-haven demand amid renewed U.S. tariff threats and rising geopolitical tensions between Russia and Ukraine. Meanwhile, oil prices advanced after OPEC announced a steady pace of production increases, easing investor fears that the group might accelerate supply even further.

Corporate News

• Alpek announced its decision to suspend operations at its Cedar Creek plant in Fayetteville, North Carolina, effective July 31, 2025. Acquired in 2001, the site has an installed capacity of 170,000 tons of PET resin and produces approximately 35,000 tons of recycled PET flakes.

• Tesla shares fell about 2% after Chinese electric vehicle makers like XPeng reported strong sales growth. Tesla has struggled in 2025, facing intensifying competition from Chinese domestic players.

• Steel company stocks surged after President Trump doubled steel tariffs, raising them from 25% to 50%.

• Moderna rose 3% after the U.S. Food and Drug Administration approved its next-generation Covid vaccine for adults aged 65 and older.