Stocks Turn Lower on Lack of Trade Progress, German Politics

Stocks

Political

Summary:

Global stocks dropped on Tuesday as concerns about tariffs and their impact on the economy lingered and as German conservative leader Friedrich Merz unexpectedly failed to secure the parliamentary votes required to become chancellor.

Markets were processing the surprise from the Bundestag where Merz failed to garner the votes required, dealing a major blow to his proposed government that has promised to revive economic growth at a time of global uncertainty.

"I didn't expect what happened today to have happened at all," said George Lagarias, chief economist at Forvis Mazars.

"Markets are going to be extremely negatively surprised if Merz fails to be elected as chancellor and Germany falls into disarray."

Merz now has 14 days to try and win parliamentary support, and while this is not seen as a fatal setback, his failure to win parliamentary backing at the first time is a first for post-war Germany.

Germany's DAX (.GDAXI), opens new tab fell by as much as 2% but was last down about 1.3%. Britain's FTSE 100 (.FTSE), opens new tab was down 0.3%.

Investor attention remains on the possibility of easing trade tensions between the U.S. and China after Beijing last week said it was evaluating an offer from Washington to hold talks over tariffs.

U.S. President Donald Trump said on Sunday that Washington is meeting with many countries, including China, and that his main priority with China is to secure a fair deal.

"We've seen a backpedalling and the trade risk has become lower," said Lars Skovgaard, senior investment strategist at Danske Bank.

But with few details coming out about trade discussions, investors have been left trying to make sense of headlines coming out of the White House.

"Now we need to see some deals being announced otherwise the rise in stocks will fade again," Skovgaard added.

Europe's STOXX 600 (.STOXX), opens new tab was down 0.7% on Tuesday but remains close to its closing level on April 2, the day Trump announced his tariff proposals.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab, was down 0.1% with Japan closed for a holiday.

Chinese markets returned from an extended holiday with the blue-chip index (.CSI300), opens new tab and Hong Kong's Hang Seng (.HIS), opens new tab both up about 1%.

The Federal Reserve begins its two-day policy meeting on Tuesday, where the central bank is widely expected to keep rates steady but the spotlight will be on how policymakers are likely to navigate a tariff-ridden path.

"The Fed remains caught between a rock and a hard place," said Christian Scherrmann, DWS chief U.S. economist. "We think they will opt for a slightly more hawkish tone, but more in the direction of an extended pause than a potential hike."

Traders are pricing in 75 basis points of easing this year with the first move possible in July, LSEG data showed.

U.S. stock futures were falling on Tuesday, with S&P futures down 0.7%.

DOLLAR SLIPS, RISES VS ASIAN FX

Trump's erratic trade policies have fuelled significant waves of dollar selling since April as investors shifted away from U.S. assets, pushing the euro, yen and Swiss franc higher.

The euro on Tuesday was little changed against the dollar at $1.1315, trimming an earlier rise after Germany's parliamentary vote. The yen was up 0.3% at 143.24 per dollar .

The dollar selling has spread to other Asian FX, underscored by the Taiwan dollar's record surge in recent sessions, which has stoked speculation that a revaluation of regional foreign exchange was possible to win U.S. trade concessions.

The Taiwan dollar was fairly sedate on Tuesday last fetching 30.28 per U.S. dollar, not far from the near three-year high of 29.59 it touched on Monday.

The focus has turned to Hong Kong, where the de facto central bank bought $7.8 billion to stop the local currency from strengthening and breaking its peg to the greenback.

"If these currencies keep strengthening sharply, it could spark fears of a 'reverse Asian currency crisis', with potential ripple effects in the bond market amid fears that Asian institutions reassess their unhedged exposure to Treasury holdings," said Charu Chanana, chief investment strategist at Saxo.

The Hong Kong Monetary Authority said on Tuesday it has been diversifying currency exposure in its investment portfolio to manage risks.

On the mainland, China's yuan strengthened to its highest level since November at 7.2105 per dollar.

In commodities, oil rose after hitting four-year lows in the previous session that was driven by an OPEC+ decision to accelerate output increases. Brent crude futures were last up 2.7% at $61.87 per barrel.

Gold prices rose 1.4% to a two-week high of $3,386/oz on safe-haven demand.

Source: Reuters

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Warren Takunda

Economic

The US greenback — and its relationship with bond yields — has recently given economists much to chew over. The US dollar index, which measures the value of the greenback against six foreign currencies, has dropped more than 8% since January. Last month, it hit its lowest level in three years.

At the same time, US bond yields have been rising, defying a standard economic pattern. In times of uncertainty, investors typically flock to US Treasuries, viewing bonds as a safe place to park their money. As a result, you’ll usually see bond yields fall when stock markets slump, and the dollar typically rises. During the crises of 2008 and 2020, for instance, the value of the greenback increased.

Against a backdrop of unconventional economic policies from US President Donald Trump, markets are now behaving more erratically. A recent rise in bond yields, accompanied by a drop in the dollar, suggests that investors are flying from US assets, losing faith in Treasuries. For those familiar with the UK, the past month carries traces of the bond crisis induced by former Prime Minister Liz Truss in 2022. A spike in gilt yields on the back of a controversial economic package, combined with a plummet in the pound’s value, forced the government into retreat.

High bond yields mean the US government must pay more interest on the debt it is borrowing, constraining spending. Higher debt-servicing costs are particularly unwelcome as the US is already running a heavy budget deficit. This figure grew to around $1.8 trillion for the fiscal year 2024, the third-largest federal deficit in US history, equal to 6.4% of GDP. It’s possible that a spike in bond prices contributed to Trump’s decision to pause so-called “reciprocal” tariffs for 90 days at the start of April.

The dollar’s fall comes after the currency rose around last year’s presidential election. Growth in the US was robust, and when Trump won the election, many hoped that he would continue to boost economic expansion. On the other hand, predictions of an inflationary spike — fuelled by Trump’s promise to impose tariffs — also drove up the dollar. The prospect of higher interest rates and increased returns boosted foreign investor demand for the currency.

Warning signs for investors

“Markets are increasingly nervous about US policy credibility, as seen in a rise in the term premium demanded by investors to own US Treasuries, as well as the downward pressure on the US dollar,” Ranjiv Mann, senior portfolio manager at AllianzGI, told Euronews.

In particular, Mann identified Trump’s pressure on Federal Reserve Chair Jerome Powell as a cause for concern.

“Even though Powell’s term does not end until May 2026 and Trump does not have the constitutional authority to remove Powell before the end of his term, the risk is that the Fed will become more politicised in the coming years, eroding monetary policy credibility and confidence in US assets,” Mann explained.

Trump has recently renewed his criticism of Powell, commenting at a recent rally: "I know much more than he does about interest rates, believe me."

Aside from threats to the Fed, there are other indicators worrying investors — indicative of the breakdown of financial and political order in the US. The cost-slashing bureau DOGE, sudden cuts to foreign aid, withdrawals from international treaties, the prospect of financial deregulation, and Trump’s disregard for Congressional approval are just a few signals shaking market confidence, along with the prospect of an imminent recession. In early April, Congress also approved a budget resolution to slash taxes, set to massively widen the US’ deficit over the next decade.

While demand for US stocks and bonds has fallen, experts say it’s still unlikely that the US will default on its debt obligations.

Dollar supremacy

The dollar cemented its status as the world’s reserve currency in 1944 at the Bretton Woods conference, an event which also brought about the creation of the IMF and the World Bank. Rather than linking world currencies to gold, delegates decided to peg them against the dollar. This means the greenback is now the dominant currency for international transactions and is held in large quantities by central banks around the world. As the dollar’s reserve status bolsters demand, this set-up benefits the US as it lowers its borrowing costs and inflates USD-denominated asset prices.

“It enables the US to run persistent trade and fiscal deficits without immediate pressure, and insulates its economy from the usual constraints of rising leverage,” Vasso Ioannidou, professor of finance at Bayes Business School in London, told Euronews. The supremacy of the dollar also means that US sanctions against foreign nations can be particularly influential.

According to Bernd Kempa, economics professor at the University of Münster, the greenback’s reserve status is “also beneficial to US producers”.

“Capital imports keep US interest rates low and generate additional investments which in turn spur the long-run growth prospects of the US economy. Moreover, the pricing of many internationally traded goods in US dollars saves on hedging and currency conversion costs for US firms.”

Even so, there are some who believe the strength of the dollar is hollowing out US manufacturing — a view expressed by President Trump and Vice President JD Vance. When the greenback is strong, it means that US products become relatively more expensive for foreign customers and overseas products become relatively cheaper for buyers in the US. This is one reason for the US’ large trade deficit with other nations.

A new era?

While Trump is undermining the dollar, it’s difficult to see a contender that could take the greenback’s place as the world’s reserve currency. The Swiss franc, the Chinese yuan or the Japanese yen all have their attractive qualities, although they lack the deep capital markets and stability enjoyed by the dollar.

“We already have stronger investor interest in euro-denominated assets,” Valdis Dombrovskis, the commissioner in charge of the EU’s economy, said at a recent IMF meeting — cited by the New York Times. “We see that our stability, predictability and respect for the rule of law is already proving a strength.”

Since the debt crisis of 2009, the euro has earned back investor confidence. The ECB now takes a more active role in supporting economies through bond-buying programmes, and the EU has shown its willingness to prop up flailing member states. A recent development cheering investors is Germany’s promise to issue around 1 trillion euros in additional government debt. The stimulus is set to boost the eurozone economy while demand for bunds — considered a safe haven asset — has spiked. Despite this, the euro still has a long way to go. A single capital market that allows money to easily cross European borders is not yet a reality, and it will require regulatory harmonisation. Certain debt-laden member states are also continuing to hamper the fiscal attractiveness of the bloc as a whole.

“A shift away from the dollar is theoretically possible but highly unlikely in the near term,” Vasso Ioannidou explained. “That said, recent policy shifts and the US’s retreat from global leadership are prompting other countries to re-evaluate their exposure. Many are already diversifying to reduce risk. If sustained, this trend could gradually erode the dollar’s dominance.”

It doesn’t look like the dollar’s reign will be over soon, although an investor retreat is already in play. The imminent fate of the greenback will heavily depend on choices taken in coming months by President Trump, and whether he walks back some of his more destabilising policies.

Source: Euronews

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Michelle

Forex

Economic

The European Union plans to hit about €100 billion ($113 billion) in US goods with additional tariffs in the event ongoing trade talks fail to yield a satisfactory result for the bloc, according to people familiar with the matter.

The proposed retaliatory measures will be shared with member states as early as Wednesday and consultations will last for a month before the list is finalized, said the people, who spoke on the condition of anonymity because the plans are private. The list could change in that time.

Separately, the European Commission, the bloc’s executive arm that handles trade matters, is expected to share a paper with the US this week to try to kick-start the negotiations, Bloomberg reported earlier. Proposals from the EU are expected to include lowering trade and non-tariff barriers and boosting investments in the US.

Negotiations between the EU and US, which began in earnest last month, have made scant progress and the expectation is that the bulk of the American tariffs will remain in place. The EU said on Tuesday that Trump’s ongoing trade investigations will boost the amount of the bloc’s goods facing tariffs to €549 billion.

A commission spokesperson declined to comment.

The new EU counter-measure list will come on top of the €21 billion of US goods already targeted by EU levies in response to Trump’s 25% duty on steel and aluminum exports. The EU agreed earlier this month to delay for 90 days the implementation of those measures after the US lowered his so-called reciprocal rate on most EU exports to 10% from 20% while the negotiations are taking place.

Trump has also imposed a 25% duty on cars as well as some car parts and has initiated investigations that could result in duties on the imports of lumber, pharmaceuticals, semiconductors, critical minerals and trucks.

The commission has said all options are on the table in response to Trump’s levies and future measures could target services and restrict exports, Bloomberg previously reported.

Source: Bloomberg Europe

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Glendon

Cryptocurrency

As the crypto market begins a slight pullback at the start of this week, bitcoin records a moderate decline to 94,132 dollars. A technical correction occurring after a peak near 98,000 dollars last Friday. Should this be seen as a simple temporary slowdown or a deeper warning signal?

In brief

Bitcoin falls to 94,132 dollars after peaking at 98,000 dollars.
Uncertainties around Fed decisions and geopolitical tensions increase investor caution.
Michael Saylor strengthens his positions, signaling persistent institutional confidence despite BTC’s drop.

Bitcoin takes a step back

After flirting with 98,000 dollars last Friday, bitcoin (BTC) begins a technical correction this Monday by falling back to 94,132 dollars, a 1.45% decrease over 24 hours. The overall crypto market also falls by 1.06%, reaching a capitalization of 2.93 trillion dollars, while stock markets remain generally stable.

This BTC pullback comes after a week marked by a strong rebound driven by good U.S. employment figures for April. However, uncertainties related to Donald Trump’s tariff policies seem to weigh on risk appetite. As a result, investors turn to safe havens like gold — up 2.38% to 3,320.60 dollars per ounce — or bitcoin, despite its volatility.

Slowdown or warning signal?

This bitcoin decline happens in a context where several factors could significantly influence its development this week.

First, the decision of the U.S. Federal Reserve (Fed) on interest rates, expected on May 7, is being closely watched. Jerome Powell’s comments could cause significant market movements and investors are likely withdrawing their bitcoin as a precaution.
Next, recession fears are fueling demand for bitcoin, especially amidst trade tensions between the United States and China. In this environment, BTC attracts investors seeking protection against economic risks. In this specific case, this drop below 94,000 dollars would be only temporary.

Furthermore, this correction does not discourage institutional players, as Michael Saylor announced the purchase of 1,895 BTC for about 180 million dollars. His company now holds 555,450 BTC, a strong signal of confidence in bitcoin’s long-term value.

Despite an apparent correction, bitcoin therefore retains the confidence of major investors and remains supported by an uncertain macroeconomic context. The 94,000 dollar threshold could well be just a step before a new upward momentum, provided the Fed does not deliver an unexpected chill, given that Jerome Powell refuses to lower rates.

Source: CryptoSlate

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Gerik

Economic

Industrial Output and Employment Grow Steadily

Vietnam's Index of Industrial Production (IIP) rose by 8.4% year-on-year in the January–April period, with manufacturing contributing the most (+10.1%). In April alone, the IIP climbed 8.9% compared to the same month last year. Employment in the industrial sector increased by 5.1%, signaling growing production demand.

Vietnam recorded over 89,900 newly established and reactivated enterprises in the first four months of 2025, up 9.9% year-on-year. However, more than 96,500 businesses exited the market during the same period, indicating persistent challenges in the domestic business environment.

FDI Inflows and Disbursement Hit Five-Year High

FDI disbursement reached $6.74 billion — the highest four-month figure in five years — rising 7.3% compared to the same period in 2024. Total registered FDI (including new, adjusted capital, and share acquisitions) reached $13.82 billion, up nearly 40%. Notably, 1,204 new projects were licensed, although total registered capital in these projects declined by 23.8%.

Total retail sales of goods and services reached approximately 2.29 quadrillion VND ($90.7 billion), rising 9.9% year-on-year. Adjusted for inflation, this translates to a 7.7% increase. The boost was supported by rising consumer demand during national holidays and stronger inbound tourism.

Trade Surplus Nears $3.8 Billion Despite U.S. Tariff Pressures

Vietnam’s total trade volume in the first four months stood at $276.89 billion, growing 15.7% year-on-year. Exports rose by 13% to $140.34 billion, while imports increased 18.6% to $136.55 billion, leading to a trade surplus of $3.79 billion. The U.S. remained Vietnam’s largest export market with $43.4 billion in goods, while China was the top import partner at $53.2 billion.

Consumer Price Index (CPI) in April increased 3.12% year-on-year, with an average inflation rate of 3.2% over four months. Gold prices surged nearly 33% in the same period, reflecting both domestic demand and global market fluctuations. The USD/VND exchange rate also increased by 3.52% year-on-year.

Tourist arrivals reached 1.65 million in April, contributing to a total of 7.67 million visitors in the first four months — a 23.8% increase year-on-year. Favorable visa policies and promotional campaigns supported this growth.

Despite rising global tensions, including U.S. counter-tariff policies and economic uncertainties, Vietnam’s economy has remained resilient in early 2025. Strong industrial performance, robust foreign investment inflows, and growing consumer demand continue to underpin national growth. However, the country must remain vigilant to external shocks and ensure sustainable trade practices amid shifting geopolitical landscapes.

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Gerik

Commodity

Economic

Gold Prices Spike Amid Tariff Uncertainty

Spot gold rose 0.9% to $3,362.69/ounce, hitting its highest level since April 22. U.S. gold futures climbed 1.5% to $3,370.40. The rally came after President Trump revived trade war fears by announcing a 100% tariff on foreign-produced films and hinting at upcoming levies on pharmaceuticals. The lack of clarity surrounding these plans has intensified market anxiety.

Yeap Jun Rong, a market strategist at IG, explained that gold’s rise at the start of the week reflects investors’ shift toward safe-haven assets to hedge against portfolio volatility amid renewed trade tensions.

Fed Meeting in Focus: Status Quo Expected

Investors are closely watching the Fed’s rate decision and Chair Jerome Powell’s comments on May 7. The central bank has kept interest rates between 4.25% and 4.50% since December 2024. According to Reuters, the Fed is widely expected to hold rates steady during this meeting. However, this may be the last “predictable” decision, as Trump’s trade policies begin to cloud economic forecasts.

Goldman Sachs expects the Fed to require more labor market and inflation data before committing to rate cuts, predicting three quarter-point reductions in July, September, and October 2025.

Gold’s gains were mirrored across other precious metals. Spot silver rose 1.5% to $32.98/ounce, platinum climbed 1.4% to $972.25/ounce, and palladium edged up 0.5% to $945.25/ounce. These movements underscore investors' search for alternatives in a landscape defined by policy unpredictability and potential stagflation.

Vietnam Market Response

In Vietnam, Saigon Jewelry Company (SJC) listed gold bar prices at VND 120.8–122.8 million per tael (buy–sell) on the afternoon of May 6, tracking international trends.

Gold’s momentum reflects mounting investor caution as markets brace for the dual impact of U.S. monetary policy uncertainty and aggressive tariff threats from the Trump administration. If the Fed maintains its current stance while economic risks escalate, gold may continue to benefit from its role as a hedge against inflation, currency devaluation, and geopolitical instability.

Source: Reuters

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Gerik

Economic

China–U.S. Trade War

China’s Exporters Turn to Third-Party Loopholes

Amid record-breaking tariffs imposed by President Donald Trump’s administration, Chinese companies are aggressively exploiting trade loopholes to avoid duties. On Chinese social media platforms like Xiaohongshu, a growing number of logistics services openly advertise "origin-washing" routes, promising to transform “Made in China” labels into Malaysian or Southeast Asian ones.

Sellers boast of being able to reroute products through ports like Klang (Malaysia), repackage them, and even obtain certificates of origin from local factories. A quoted service charges only 5 yuan (approximately $0.70) per kilogram to reclassify Chinese goods for U.S. entry.

Booming Grey Market Puts Neighbors at Risk

Countries across Asia are increasingly worried about becoming unwitting accomplices to trade fraud. South Korea recently reported $21 million worth of falsely declared Chinese goods in Q1 2025 alone. Vietnam’s Ministry of Industry and Trade has also urged domestic businesses to strengthen scrutiny over certificates of origin. Thailand followed suit with stricter controls on exports headed to the U.S.

A salesperson from Baitai Lighting in Zhongshan, Guangdong province, admitted: “We just sell to neighboring countries — they export to the U.S. instead. That way, the tariffs are much lower.” The company uses FOB shipping terms to avoid liability once goods leave Chinese ports.

Fake Documentation, Real Exposure

Many companies disguise goods through container relabeling, paperwork forgery, or blending high-value items with low-cost ones to understate declared value — all to manipulate customs duties. One unnamed logistics company claimed ties to Malaysian factories that can issue origin certificates, while another insider admitted that U.S. Customs “probably knows” but is limited in enforcement capacity.

Amid the fallout, Malaysia’s Ministry of Investment, Trade and Industry announced it would investigate the claims and cooperate with U.S. Customs if evidence emerges. “Falsifying origin or value is a serious offense,” the ministry emphasized in a statement.

Global Retailers Grow Wary

U.S. buyers are increasingly cautious. A senior executive from a top 10 Amazon seller revealed concerns about receiving shipments with suspicious origins. “We no longer allow Chinese suppliers to act as importers of record. There’s too much risk they’ll understate the value — and Customs could seize the shipment,” the executive warned.

A consumer goods producer in Dongguan recounted being introduced to brokers by industry associations who promised hassle-free access to the U.S. market. “I just deliver to a Chinese port — they handle the rest,” she said. “They say small businesses like mine can slip through the cracks. I really hope that’s true. The U.S. market is too big to lose.”

The rampant circumvention of U.S. tariffs via Southeast Asia has created a parallel trade ecosystem that is undermining regional trust and prompting regulatory crackdowns. While Chinese firms fight to preserve their U.S. market share, neighboring countries now face the dual burden of economic scrutiny and reputational risk.