Written by Jimmy McGiv
Orlando, Florida (Reuters) – Trading Day
Understand the forces that lead global markets
Written by Jimmy McGiv, a column writer on the market
I am pleased to announce that I am now part of Reuters open interest (ROI), a new main source of expert comment on data on the market and economy. You can find ROI on Reuters, and you can follow us on LinkedIn and X.
The United States and China reached a commercial deal, or at least agreed on the framework of a deal, which with the inflation data in the United States was amazing, gave the markets an elevator on Wednesday. But Wall Street’s gains were moderate, and were later eliminated through the growing tensions in the Middle East.
In today’s pillars, I look at the “stock risk installment” and other standards that indicate that the equity and relative stocks in the United States expand. More about it below, but first, the main market round moves.
If you have more time to read, here are some of the articles I recommend to help you understand what happened in the market today.
1. The dollar continues to lose its share in the market, but Euro is slow Tobenefit: ECB Study 3. American importers resort to intermediaries to move
Main market movements today
* Wall Street ends in red, after it was struck earlier in the Highlast seen in February Mars. S&P 500 decreases by 0.3 %, and Nasdaqloss 0.5 %. The consumer circuits sector decreases by 1 %, and energy is the best performance sector by 1.5 %. * US stock market fluctuations, as measured by Vixindex, decrease to their lowest levels in nearly four months in Theday. * The cabinet collects, also supported by soft inflation and delicate auction for 10 years. The returns end up up to 7 bits per second, and the curve is slightly slope. * Oil strikes an increase for two months, as more than 4 % of the performance increased, the United States says that the United States is preparing to evacuate its Iraqi embassy to increasing security interests in the region. Brent Crudreaches $ 69.77/BBL, WTI rises above $ 68/BBL. * Precious metals, led by an increase in platinum, rises to a year higher than $ 1,280/ounces. Platinum increased up to 5 % and more than 20 % in June, which will be its best month since 2008.
Good vibrations turn
It is a “Tam” deal, according to US President Donald Trump, although he and Chinese leader Xi Jinping still have to finish drafting the trade agreement between the great powers and signing them.
The main points of the deal seem to be: China will remove export restrictions on rare ground minerals and other major industrial components; The total American definitions on Chinese goods will 55 %. The total Chinese definitions on American goods will be 10 %.
Trump could not have been more enthusiastic in his praise to the agreement on Wednesday, and Trade Minister Howard Lootnick said that “the deal after the deal” would follow it in the coming weeks.
However, based on the relatively silent market reaction, investors are less enthusiastic. Given an unpredictable chaotic nature of the Trump administration tariff advertisements, Scott Bessent’s Displacement Secretary of Treasury invites China to be a “reliable partner” in commercial negotiations that will not be lost on some observers. Especially, one of the suspects, in Beijing.
Based on these proposed Chinese graphics, the United States is expected to conclude with more commercial deals in the coming weeks, the effective tariff in the United States will be less than fear two months ago. This is relief.
However, the effective tariff rate of about 15 % is expected by many economists will remain much higher than the average of 2.5 % at the end of last year, and will be the highest in the 1930s. Also, as the inflation numbers in May, the customs tariff has not yet been made.
Investors – and the discovery of policies, who meet next week – are forgetful. How will the profits of companies and consumer spending be affected? What is the percentage of definitions that companies “swallow” companies do, and how much will they be transferred to their customers?
By zooming, inflation appears to be cooling around the world, although this trend is expected to be reflected as soon as the definitions begin to fuel the high prices of goods.
The figures showed on Wednesday that consumers in the United States and the Japanese sentence enlarged were less than expected in May. These reports follow similar numbers from Europe recently, and China is still stuck in its contraction.
Next is India, which launches consumer enlargement numbers on Thursday, which is expected to show annual inflation that slows down to 3.0 % in May, which is the lowest level in more than six years. Another focus for investors on Thursday is the auction of the US Treasury for 30 years.
Warnings of the US shares of the ward again
Calm fell to the American markets after the “liberation day” tariff turned in early April. But the Wall Street Rally has revived the questions about American stocks, as the stocks again seem expensive compared to bonds.
Since chaotic days in early April, American stocks have been frequently recovered, with S&P 500 by 25 %, and the rate of periodic prices (CAPE) of the index in the 94th centenary that dates back to the fifties of the last century, according to Bond Giant Pimco.
Arrows appear expensive with absolute conditions, and with regard to bonds. The stock risk premium (ERP), and the difference between stock revenues and bond returns, is near historically low levels.
According to analysts in Pimco, ERP is now zero. The previous two times decreased to scratch or below in 1987 and 1996-2001. Either way, low -low Erp hass a decrease in stocks and a sharp decrease in long -term bond returns.
“The premium of American stock risk … is exceptionally low according to historical standards,” they wrote in their five -year outlook on Tuesday. “The average bounce to the higher stock risk allowance is usually involved in the gathering of bonds or the sale of shares or both.”
But the bounce to the middle does not only happen with magic. A catalyst is needed. The stocks have largely recovered because they were in the sale in April, and commercial tensions were contacted, and investors remain confident that the major technology will lead a strong growth in profits.
Therefore, although huge economic, commercial and political risks continue to suspend the markets, there is no sign of an imminent catalyst that would cause the stock market to be sold.
Cheap for some reason
The other side of the arrows is very expensive, that the bonds look like a deal.
In fact, the relative difference between stocks and bonds is, so that the origins of fixed income in the United States are cheaper for stocks in more than half a century.
Using the national flow data of the Federal Reserve, retired strategic expert Jim Polsen calculates that the total market value of American bonds as a percentage of the total market value of American stocks is the lowest since the early 1970s.
“Since the US total portfolio at the present time, investors may have a much greater ability and a desire to enhance bond holding in the coming years more than more estimated,” Polsen wrote last week.
But bonds are “cheap” for some reason. PROFLIGY in Washington-the reason that made the MOODY classification agency recently stripped of the United States of its tripartite credit rating-and kept the fears of inflation high returns. The term Premium-and it asks for excellent investors for risks to keep debt in the long run instead of rolling on short loans-is the highest in more than a decade, reflecting concerns about the long-term financial health of Sam.
The diagnosis here does not show any signs of improvement. Trump’s Big Beautiful Bill will add 2.4 trillion dollars for US debt over the next decade, according to the Non -party Congress budget office, which is likely to put more rising pressure on the returns.
Of course, the stock investors seem to be in a very pink scenario, and the past few months have shown how quickly the market scene changes. The American economy can weaken more than expected, or that the trade war may escalate, or there may be a geopolitical surprise that causes low bond yields and stock prices.
Therefore, investors should be aware of the warnings that are sent by ERPS and other absolute and relative evaluation standards. However, they should also remember that extended assessments can get more extension. As the famous proverb says, markets can remain longer than investors can remain solvents.
What can the markets move tomorrow?
* Inflation in India in India (May) * UK Trade (April) * Industrial Production UK (April) * Jose Luis Skarifa from the European Central Bank and Frank Erson talking about Brazilian events of retail sales (May * 22 billion US dollars to marry the treasury for 30 years * *
The views expressed are the views of the author. It does not reflect the opinions of Reuters news, which, according to the principles of confidence, is committed to integrity, independence and liberation from bias.
(By Jimmy McGiv; Liberation by Deba Babington)
