May 9th Financial News

Daily News

Summary:

The US and the UK reached a trade agreement, although specifics remain pending; Despite the Bank of England's rate cut, underlying challenges are evident; Modi speaks out after India-Pakistan conflict escalates…

[Quick Facts]

The US and the UK reached a trade agreement, although specifics remain pending

Trump seeks to raise taxes on wealthy people earning US$2.5 million or more a year

U.S. consumers' medium-term inflation expectations rise to a nearly three-year high

Despite the Bank of England's rate cut, underlying challenges are evident

Three major U.S. automakers are dissatisfied with lower tariffs on U.K. imports

Trump calls for a 30-day unconditional ceasefire in the Russia-Ukraine conflict, signaling the potential for additional sanctions

Modi speaks out after India-Pakistan conflict escalates

[News Details]

The US and the UK reached a trade agreement, although specifics remain pending

President Trump announced at the White House on the 8th that the US and the UK have reached a new trade agreement, partially retracting tariffs in specific sectors and broadening market access for products from both nations. However, numerous details of the agreement are still under negotiation, and the 10% "reciprocal tariffs" previously imposed by the U.S. have not been eliminated.

Trump stated to the media at the White House that the final details of the agreement would be determined in the coming weeks. According to a White House document, the first 100,000 vehicles exported annually from the UK to the US will be subject to an additional 10% tariff, with any excess subject to a 25% tariff. The UK will reduce or eliminate non-tariff barriers, expanding market access for U.S. products such as beef, ethanol, grains, and certain industrial goods.

The UK government announced on its official website that the UK and the US would mutually reduce tariffs. Tariffs on UK exports of steel and aluminum to the US will be eliminated. Tariffs on automobiles imported from the US will be reduced from the current 27.5% to 10%. Furthermore, zero tariffs will be applied to UK agricultural exports to the US within certain quotas. The UK will also reduce tariffs on ethanol imports from the US to zero. In addition, the White House emphasized that the 10% "reciprocal tariffs" previously imposed by the US on its trading partners would remain in place. Trump stated to the media that the 10% tariff rate for the UK was not a template for other countries, and it could be the lowest rate, with other countries potentially facing higher tariffs.

Trump seeks to raise taxes on wealthy people earning US$2.5 million or more a year

U.S. President Trump is advocating for a tax increase on a segment of the wealthiest Americans to offset other tax cuts within his proposed economic plan. According to sources familiar with the matter, Trump's proposal includes a new 39.6% tax bracket for individuals earning at least US$2.5 million annually, or couples with a combined income of US$5 million. The current top individual tax rate is 37%.

According to a source, Trump presented this demand during a Wednesday phone call with House Speaker Mike Johnson, reiterating his desire to eliminate the carried interest tax break enjoyed by venture capital and private equity fund managers. Trump's signals on the issue of raising taxes on the wealthy have been mixed. He has previously stated that such taxes could prompt wealthy individuals to relocate and potentially disadvantage the Republican Party in elections. However, this proposal arises as lawmakers seek to finance what Trump calls a "big and beautiful bill," a multi-trillion dollar package that plans to extend the tax cuts from Trump's first term.

U.S. consumers' medium-term inflation expectations rise to a nearly three-year high

According to the New York Federal Reserve's monthly survey, U.S. consumers' medium-term inflation expectations surged to a nearly three-year high in April, while their views on the labor market deteriorated. The survey indicated that the median expectation for inflation over the next three years rose to 3.2% in April, the highest level since July 2022. However, expectations for inflation over the next year remained stable, and long-term inflation expectations slightly decreased to 2.7%. Federal Reserve officials are closely monitoring U.S. consumers' expectations of future price pressures to assess whether changes in U.S. presidential policies, particularly adjustments to trade policies, will trigger sustained inflation. The scope and duration of tariffs remain uncertain, potentially increasing consumer uncertainty about future inflation. The Federal Reserve announced on Wednesday that it would hold interest rates steady, noting that the economy remains robust but that uncertainty in the outlook has increased. Recent surveys show a sharp deterioration in household confidence.

Despite the Bank of England's rate cut, underlying challenges are evident

On May 8, the Bank of England (BOE) reduced its base rate by 25 basis points, lowering it from 4.5% to 4.25%. Interestingly, market consensus had anticipated an 8:1 vote, with one Monetary Policy Committee (MPC) member favoring a 50-basis-point cut and the remaining eight supporting a 25-basis-point reduction. However, the actual outcome revealed that two of the nine MPC members voted for a 50-basis-point cut, two favored holding rates steady, and only five supported the 25-basis-point reduction.

This divergence underscores the BOE's current predicament, balancing concerns over rising inflation with the potential for downside risks to the UK economy stemming from global developments.

In an interview following the Monetary Policy Committee's decision to cut the base rate by 25 basis points, a move that saw internal divisions and a more hawkish-than-anticipated vote, Governor Andrew Bailey addressed the market's near-certainty of no further rate cuts in June. When questioned on this, Bailey stated, "I think the only thing we can be certain of is that there's going to be a lot happening in the next six weeks or so in the world in which we are." He added, "So I have to be frank with you. You know, I'm very open-minded on every meeting, and it's dynamic for us. That's the philosophy. It's not changing, it's a permanent philosophy. So, frankly, I'm very open-minded about that." Bailey indicated that more information on both international and domestic developments, including wage settlements that continue to exert upward pressure on underlying inflation, would be available by the June meeting.

Three major U.S. automakers are dissatisfied with lower tariffs on U.K. imports

The American Automotive Policy Council, representing General Motors, Ford, and Stellantis, has voiced criticism of the trade agreement between the Trump administration and the UK, citing potential adverse effects on the US automotive industry. According to the terms of the trade agreement, the UK automotive sector is permitted to export 100,000 vehicles to the US at a 10% tariff rate. This quota aligns with the volume of vehicles the UK imported from the US in the preceding year. The industry group has highlighted that this arrangement effectively imposes a 10% tariff on vehicle imports from the UK, contrasting with the 25% tariffs applied to imports from Canada and Mexico, despite the latter's reliance on US-sourced components. Labor unions have expressed concerns that this agreement could set a precedent, potentially allowing other nations to adopt similar import standards, thereby disadvantaging the three major automakers' vehicle imports from Mexico or Canada.

Trump calls for a 30-day unconditional ceasefire in the Russia-Ukraine conflict, signaling the potential for additional sanctions

On Thursday, U.S. President Trump advocated for a 30-day unconditional ceasefire between Russia and Ukraine, cautioning that the US and its allies would impose additional sanctions if the ceasefire terms were not honored. Ukraine has signaled its willingness to accept the US proposal for an immediate 30-day ceasefire, whereas Russia has only proposed a three-day ceasefire, coinciding with the 80th-anniversary commemorations of the end of World War II on Thursday. Trump stated on social media, "If the (30-day) ceasefire is not observed, the US and its partners will implement further sanctions." Trump has expressed his desire to end the war in Ukraine, but his administration has also indicated that it would abandon efforts to broker an agreement if Russia and Ukraine fail to make progress.

Modi speaks out after India-Pakistan conflict escalates

According to reports from Indian media outlets, following the recent escalation of military tensions with Pakistan, Indian Prime Minister Modi convened a meeting of government ministers on the 8th, local time. He characterized the situation as a "sensitive period," urging all departments to "maintain constant vigilance" and "ensure clear communication." Modi reiterated the Indian government's commitment to safeguarding national security, operational readiness, and the safety of its citizens. The escalation follows a shooting incident on April 22 in the Indian-administered Kashmir region, targeting tourists and resulting in significant casualties. India has attributed the incident to Pakistan. Both nations have since adopted assertive measures, contributing to the heightened tensions. On the 7th, Pakistani officials reported that India launched airstrikes against targets within Pakistan and Pakistan-administered Kashmir earlier that day. The Indian Ministry of Defence subsequently issued a statement confirming that the Indian armed forces had targeted "terrorist infrastructure" at nine locations.

[Today's Focus]

UTC+8 16:40 BOE Governor Bailey Speaks

UTC+8 18:15 New York Fed President Williams Delivers Keynote Remarks

UTC+8 22:00 Fed Governor Kugler Speaks

UTC+8 22:00 Chicago Fed President Goolsbee Speaks

UTC+8 22:40 Fed Governor Barr Speaks

UTC+8 23:30 New York Fed President Williams and Fed Governor Waller Speak

Risk Warnings and Disclaimers

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Gerik

Cryptocurrency

A Symbolic Comeback for Bitcoin

Bitcoin’s price jumped 4.7% on Thursday, trading at $101,329.97 by midday in New York, its highest level since early February. The climb reflects renewed confidence among investors as a key trade agreement between the United States and United Kingdom suggests a softening of global economic tensions ignited by U.S. President Donald Trump’s aggressive tariff policies.

The rebound is significant, marking bitcoin’s return to positive territory for the year after months of selling pressure that saw prices drop to around $74,000 in April. Though still below its January peak of over $109,000, the momentum indicates a potential rally may be underway.

Trade Deal Restores Confidence in Risk Assets

The catalyst for the rebound was the announcement of a trade agreement between Trump and British Prime Minister Keir Starmer. While the U.S. maintained a 10% tariff on U.K. imports, Britain agreed to cut its own tariffs from 5.1% to 1.8% and expand market access for U.S. goods. This “breakthrough” deal, the first since Trump reignited trade wars, was viewed by markets as a symbolic easing of protectionism that has rattled global supply chains for months.

According to Antoni Trenchev, co-founder of crypto platform Nexo, the sharp recovery in bitcoin underscores the rewards of “buying peak fear.” He emphasized that the surge past $100,000 was largely fueled by long-term holders absorbing short-term sell-offs, which is often interpreted as a bullish sign of underlying confidence.

Institutional Inflows, Geopolitics, and Stimulus Fueling the Rally

Joel Kruger of LMAX Group highlighted a confluence of factors behind bitcoin’s rally: strong institutional inflows into bitcoin ETFs, de-escalating geopolitical risks, and China’s expanded monetary stimulus. These factors have supported a rebound in risk appetite more broadly, with cryptocurrencies benefiting alongside tech stocks and emerging market assets.

While bitcoin’s recovery has been notable, the broader crypto space remains under strain. Ether, for instance, rose more than 14% to $2,050.46 but remains 50% below its highs from late 2024. Other altcoins have also struggled to keep pace, reinforcing bitcoin’s dominance in this current cycle.

A Glimpse Ahead: Resistance and Momentum

Analysts now see the $109,000 record as a near-term target if bullish sentiment continues. The fact that long-term holders—defined as those holding for more than 155 days—are increasing their positions reinforces the likelihood of a sustained uptrend. However, the market still faces macro headwinds, especially if Trump’s policy trajectory remains unpredictable or global financial conditions tighten.

The next few weeks will be critical in determining whether bitcoin can extend its gains or whether this breakout is merely a temporary relief rally fueled by a headline-driven bounce in risk sentiment.

Source: Reuters

Risk Warnings and Disclaimers

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Gerik

Economic

Commodity

Optimism Reignites as U.S. and China Resume Trade Talks

Oil prices climbed sharply after the U.S. Treasury confirmed that Secretary Scott Bessent will meet with China’s top economic officials in Switzerland on May 10 to discuss trade and tariff tensions. With the world’s two largest oil consumers back at the negotiation table, investor sentiment improved dramatically. Brent crude for June delivery rose $1.72, or 2.8%, closing at $62.84 per barrel, while U.S. West Texas Intermediate (WTI) jumped $1.84, or 3.2%, to settle at $59.91.

According to Ole Hvalbye of SEB Bank, the surge is rooted in renewed diplomatic momentum. “Markets are pricing in the possibility of easing tensions and stabilization of trade flows,” he noted, though cautioning that any breakthrough remains speculative at this point.

Tariffs Overtake Geopolitical Conflict as Key Price Catalyst

Traditionally, oil prices react most strongly to supply-side shocks or geopolitical instability. However, the trade war launched under President Donald Trump has introduced a new layer of volatility driven by tariff policy. Jim Ritterbusch of Ritterbusch & Associates observed that “risks that once came from the Middle East or Russian supply issues are now replaced by tariff announcements that can sway markets in real time.”

The unpredictability of Trump’s tariff policy—most recently exemplified by his sweeping “Liberation Day” duties—has left both investors and producers struggling to anticipate market direction. Many analysts agree that oil's price stability now depends as much on trade diplomacy as it does on physical supply-demand fundamentals.

Other Trade Deals and Supply Trends Add Complexity

In a parallel development, the U.S. and U.K. announced a “breakthrough” trade agreement that, while retaining a 10% U.S. import duty on British goods, includes tariff reductions from the U.K. side and improved market access for U.S. exports. This agreement, though smaller in scope, is a positive signal for global trade relationships and could aid U.S. oil and gas exporters if broader trade conditions improve.

On the supply front, OPEC and its allies (OPEC+) have signaled an intention to increase output. However, a Reuters survey revealed that actual OPEC production fell slightly in April due to reduced flows from Venezuela—hampered by renewed U.S. sanctions—and minor reductions in Iraq and Libya. The result is a short-term tightening of global supply, which may have amplified the recent price bounce.

Citi Adjusts Outlook, Highlights Risks from Iran and Demand Recovery

Citi Research revised its three-month Brent crude forecast downward from $60 to $55 per barrel, citing risks of oversupply amid uneven demand recovery and ongoing policy uncertainty. However, the firm maintained its full-year average forecast at $60 per barrel. Analysts warned that if a new U.S.-Iran nuclear deal materializes, it could significantly boost global crude supply, pushing Brent as low as $50. Conversely, without a deal, tensions could keep prices above $70 per barrel.

Adding to the geopolitical complexity, the U.S. recently imposed sanctions on two Chinese refineries for purchasing Iranian crude, forcing them to reroute and relabel products—a reflection of how sanctions enforcement is tightening and complicating trade flows in Asia.

Asian Markets, Renewables, and Strategic Adjustments

Beyond fossil fuel markets, ripple effects are being felt in renewables. Danish energy giant Orsted announced it would scrap a major offshore wind farm project in the UK, citing unfavorable regulatory and financial conditions. The cancellation underscores the broader uncertainty across the energy landscape, with traditional and renewable players both responding to global headwinds.

Meanwhile, Asian currencies have surged amid speculation of regional monetary cooperation, contributing to U.S. dollar weakness and offering additional support to oil prices in local currency terms. These FX dynamics, combined with the demand-side optimism from potential trade deals, are creating a fragile but positive short-term outlook.

Markets Buoyed, but Uncertainty Persists

While the current rally in crude prices reflects growing hope that diplomacy can ease trade tensions and re-anchor global growth, structural risks remain. Tariff policies continue to evolve unpredictably, OPEC production plans are inconsistent, and renewed geopolitical risks from Iran or Venezuela could shift the balance again.

The market’s direction now hinges on whether the upcoming U.S.-China talks in Switzerland produce tangible de-escalation. If not, today’s optimism could quickly turn to disappointment, bringing with it renewed price volatility.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Patricia Franklin

Economic

President Donald Trump is pushing lawmakers to increase tax rates on some of the wealthiest Americans as a way to offset other cuts in his signature economic package.

The president’s proposal calls for creating a new 39.6% tax bracket for individuals earning at least $2.5 million, or couples making $5 million, according to people familiar with the discussion.

The president made the request in a Wednesday phone call to House Speaker Mike Johnson. He also reiterated his desire to eliminate the carried interest tax break claimed by venture capital and private equity fund managers, one person said.

Representative Jason Smith, the chairman of the House tax committee, is expected to meet with Trump on Friday and tell him the tax bill will deliver on the president’s priorities, a congressional aide said.

It remains unclear if the proposal would be accompanied by an expansion of the existing exemption for some small business income paid through the individual code.

If Congress approves Trump’s plan for a 39.6% rate, that would bring the top bracket to a level not seen since before Trump’s 2017 tax cut. The current top rate for individuals is 37%.

Trump has sent mixed signals on raising taxes on the wealthy. He has mused that such a levy could spur rich Americans to relocate to other countries and that it could harm Republicans at the ballot box.

But the proposal comes as lawmakers are struggling to find a way to pay for a multi-trillion-dollar package that Trump has dubbed the “one big beautiful bill” to extend his first-term tax cuts.

Republicans are under increasing pressure to limit the cost of the overall bill because they are struggling to find agreement on cuts to entitlement programs, including Medicaid health coverage for low-income Americans.

Increasing taxes on top-earners gives Republicans more wiggle room to make Trump’s 2017 tax cuts for households permanent and enact some of his campaign pledges, including eliminating levies on tips and overtime pay.

Creating a new tax rate on millionaires would raise $67.3 billion over ten years, according to a preliminary estimate provided to Bloomberg News by the non-partisan Tax Foundation. The group has previously projected that eliminating tax preferences for carried interest would raise $6.7 billion over a decade.

Raising taxes goes against long-standing Republican orthodoxy. Trump’s willingness to propose a tax hike for millionaires demonstrates how much he has remade the GOP in his own populist image.

Commerce Secretary Howard Lutnick told Bloomberg Television that higher taxes on the wealthy is a “smart” move to free up more money to pay for Trump’s campaign proposals to cut taxes for hospitality workers and seniors.

However, top Republicans have balked at other proposals that would raise levies on affluent households.

Representative Kevin Hern, an Oklahoma Republican on the House tax committee, said increasing the top rate and eliminating carried interest are under discussion but there is no agreement yet.

“Anytime the president asks for something, we will consider it,” he said.

Senator Mike Crapo, who leads the Senate Finance Committee, told conservative radio host Hugh Hewitt on Thursday that he’s “not excited” about the proposal to raise taxes, but there are a “number of people in both the House and the Senate who are.”

“If the president weighs in in favor of it, then that’s going to be a big factor that we have to take into consideration,” Crapo said.

Source: Bloomberg Europe

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Alice Winters

Investing.com - The Bank of England reduced interest rates by 25 basis points Thursday, as widely expected, in an attempt to boost the country’s sluggish growth in the face of elevated uncertainty.

The U.K. central bank cut its benchmark Bank Rate to 4.25% from 4.50%, with seven members of the Monetary Policy Committee voting for the cut and two seeking no reduction this month.

This cut is the fourth rate reduction from last year’s peak of 5.25%, and the second this year, after the MPC authorised an easing of monetary policy in February.

The announcement was delayed by two minutes in order to accommodate a two-minute silence to commemorate Victory in Europe Day this week.

The U.K. economy grew by just 0.9% in 2024, and at the February BOE policy meeting, the policymakers cut growth forecasts for 2025 by half to just 0.7%.

The National Institute of Economic and Social Research has warned U.K. economic growth is on track to be weaker than previously expected this year, and thus investors will also be paying close attention to the Bank’s forecasts for inflation and economic growth.

Much has changed since the February monetary policy report, including U.S. President Donald Trump’s proposals for global tariffs, embroiling the U.K. and other major trading partners in a trade war.

That said, Trump has just announced a trade deal between the U.S. and Britain would be "full and comprehensive," as the two countries were tipped to soon sign an agreement, which could remove some immediate uncertainty. And U.K. inflation remains elevated.

The latest data shows an inflation rate of 2.6% in the 12 months to March, although a series of bill increases at the start of April - including domestic energy prices - mean the rate is expected to climb.

Inflation is seen reaching 3.7% later this year, according to BOE estimates released in February.

Investors have almost fully priced in three additional rate cuts by the end of the year, which would take the benchmark rate to 3.50%.

Source: Investing

Risk Warnings and Disclaimers

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Michelle Reid

Economic

China–U.S. Trade War

Key Points:

● 10% US tariff on UK imports sustained, strategic impact on markets.

● First 100,000 UK vehicles taxed at 10% annually.

● Rolls Royce engines exempt, US-UK relationship strengthened.

US-UK Trade Agreement: 10% Tariff Remains Amid New Deal

US-UK trade agreement retains 10% tariff, impacting auto imports and cementing new economic relations.

Donald Trump announces a new trade agreement with the UK, which retains a 10% tariff on imports, emphasizing strategic economic collaboration.

Trump's Tariff Strategy to Generate $6 Billion Annually

The US-UK trade agreement announced on May 8, 2025, keeps the 10% US tariff on UK imports. Key figures include US President Donald Trump and UK Prime Minister Keir Starmer. The deal, described as "very special," anticipates raising $6 billion for the US. Howard Lutnick, US Commerce Secretary, noted significant financial benefits from the tariff. The agreement also solidifies the UK's imports structure, specifically the automotive sector, with the first 100,000 vehicles subject to the 10% tariff annually. Vehicles beyond this quota will encounter a 25% rate, though Rolls Royce engines stand exempted.

UK Prime Minister Starmer highlighted the deal’s potential to boost trade and protect jobs. The retention of tariffs leaves exporters facing higher levies than previously experienced, according to Jonathan Portes, economics professor at King's College, London. Deutsche Bank analyst Jim Reid views this as a framework rather than a full trade deal. Market watchers observed strategic shifts, seeing the accord as possibly initiating broader trade policy discussions.

"It's going to be something very special for the U.K. and special for the United States," Donald Trump stated.

The agreement reflects Trump's broader trade strategy following his "Liberation Day" tariffs imposed in April 2025, establishing a precedent for new deals. Many industries anticipate changes in market dynamics and import strategies based on this agreement’s outcomes. The trade framework could influence future negotiations, shaping both regulatory landscapes and cross-Atlantic economic relations.

Source: CryptoSlate

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Manuel

Economic

Forex

Japanese real wages decreased for a third consecutive month in March against the background of relentless inflation, while overtime salaries fell at the fastest pace in almost a year, government data showed on Friday.

The pay data will add to worries over Japan's growth outlook, alongside tariff threats and uncertainty over monetary policy, ahead of a first-quarter gross domestic product announcement next week. Economists are expecting a contraction.

Inflation-adjusted real wages, a key determinant of households' purchasing power, dropped 2.1% in March from a year earlier following a revised 1.5% fall in February and a 2.8% decline in January, labour ministry data showed.

The consumer inflation rate the ministry uses to calculate real wages, which includes fresh food prices but not rent costs, rose 4.2% year-on-year in March, slightly easing from February's 4.3% gain but still at elevated levels due to rising food costs.

Regular pay, or base salary, grew 1.3% in March, the same pace as in February after a downward revision. But overtime pay fell 1.1%, following February's revised 2.4% growth, indicating a potential softening in business activity.

It marked the first dip in overtime pay since September, and the decrease was the sharpest since April last year.

Total average cash earnings, or nominal pay, increased 2.1% to 308,572 yen ($2,132) in March, which was slower than a revised 2.7% rise in the previous month.

In March, major Japanese firms on average agreed to more than 5% pay hikes during annual spring wage talks, but the effect of such raises typically begins to show up in the government's wage data for April or later.