US Stock Futures Down As Trade Truce Rally Fades, Inflation Data In Focus

Economic

Stocks

Summary:

U.S. stock index futures were down on Tuesday, pulling back after a sharp rally fueled by a U.S.-China trade truce...

U.S. stock index futures were down on Tuesday, pulling back after a sharp rally fueled by a U.S.-China trade truce, as investors turned their focus to a key U.S. inflation reading that could shape the outlook for monetary policy.

April consumer price inflation (CPI) is due at 8:30 a.m. ET, with economists polled by Reuters expecting a 0.3% monthly rise and an annual rate holding steady at 2.4%.

"Today's inflation data is highly anticipated, as higher figures could further diminish the outlook for additional rate cuts — potentially leading to no cuts at all by 2025," said Jochen Stanzl, chief market analyst at CMC Markets.

Traders currently see at least two 25-basis-point rate reduction by the year-end, with the first cut expected in September, according to data compiled by LSEG.

A number of Federal Reserve officials are slated to speak this week, including Chair Jerome Powell on Thursday.

All three main U.S. indexes closed sharply higher on Monday, with the S&P 500 notching its highest closing level since March 5, as a relief rally ensued after the U.S. and China agreed to temporarily slash harsh reciprocal tariffs and cooperate to avoid rupturing the global economy.

The U.S. will cut extra tariffs it imposed on Chinese imports to 30% from 145% for the next three months, while Chinese duties on U.S. imports will fall to 10% from 125%.

A White House executive order said that the U.S. will cut the low value "de minimis" tariff on China shipments.

Following the tariff truce, Goldman Sachs became the first major brokerage to lower its probability of a U.S. recession.

All three major indexes have recouped their losses since April 2 - dubbed "Liberation Day" - when U.S. President Donald Trump announced reciprocal tariffs on almost all trading partners.

A 90-day pause announced on April 9 for countries other than China, along with solid earnings reports and a limited U.S.-UK trade agreement last week, have helped the S&P 500 and tech-heavy Nasdaq regain lost ground.

Still, the S&P 500 remains nearly 5% below its February record high.

At 05:02 a.m. ET, Dow E-minis were down 97 points, or 0.23%, S&P 500 E-minis were down 26.25 points, or 0.45%, and Nasdaq 100 E-minis were down 113.75 points, or 0.54%.

Most megacap and growth stocks inched lower after rallying in the previous session, with Tesla and Nvidia down about 1% each in premarket trading.

Among the early movers were crypto exchange operator Coinbase Global, which jumped 9.3% after being slated to join the S&P 500 on May 19.

The earnings season is winding down, and more than 90% of S&P 500 companies have reported, while results from retail giant Walmart are due later this week.

Source: Yahoo Finance

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Michelle

Economic

Stocks

U.S. PresidentDonald Trumpsigned a broad executive order on Monday directing drugmakers to lower the prices of their prescription drugs to align with what other countries pay.

The order said the Trump administration will give drugmakers price targets within a month and, if they fail to make "significant progress", may pursue regulatory actions or measures like importing medicines -- though analysts and legal experts say such steps would be difficult to implement.

Here is what you need to know:

WHAT IS TRUMP'S STANCE ON PRESCRIPTION DRUG PRICES?

Trump has sharply criticised the pharmaceutical industry for years over the price of medicines in the United States. He has also chided other wealthy nations for "freeloading" on U.S. pharmaceutical innovation.

During his first term, in 2017, he accused the industry of "getting away with murder" in the prices they charge the government for prescription drugs.

Trump's proposed international reference pricing program was blocked by a court in 2020.

During his 2024 presidential campaign, Trump said Americans were being overcharged for medicines compared to other nations and pledged to take action.

On Monday, he said he wants to "equalize" prices with other countries by implementingtariffs.

ARE U.S. DRUG PRICES MORE EXPENSIVE?

Yes. The U.S. pays the most for prescription medicines in the world, often nearly three times that of other developed nations.

Top-selling blood thinner Eliquis from Bristol Myers Squibband Pfizercarries a U.S. list price of $606 for a month's supply. The previous administration of Democratic President Joe Biden negotiated that down to $295 for Medicare, which goes into effect in 2026, but the drug costs $114 in Sweden and just $20 in Japan.

WHAT IS TRUMP GOING TO DO ABOUT IT?

Since taking office in January, Trump has reiterated that he wants to end this inequity. On Sunday, he announced on Truth Social that he would sign an executive order to pursue "most favoured nation" pricing.

Also known as international reference pricing, it seeks to narrow the gap between the U.S. and foreign drug prices. Reuters reported in April such a policy was under consideration.

The executive order on Monday differed from what drugmakers had been expecting. Lobbyist sources had told Reuters ahead of the order's signing on Monday that they expected the "most favored nation" pricing to apply to drugs for Medicare patients. But the order appeared to apply to all medicines.

Separately, Trump has also pushed for drugmakers to boost U.S. manufacturing. His administration is conducting an investigation into imports of pharmaceuticals in a bid to levy tariffs on grounds that reliance on foreign production of medicine threatens national security.

HOW DOES THIS DIFFER FROM PREVIOUS PRICE REDUCTION EFFORTS?

Biden's Inflation Reduction Act allows the government to negotiate the price of its most expensive drugs within Medicare.

The prices for the first 10 prescription drugs it negotiated were still on average more than double, and in some cases five times, what drugmakers had agreed to in four other high-income countries, Reuters previously reported.

WHAT IS THE PHARMA INDUSTRY'S RESPONSE?

The industry is strongly opposed to the prospect of dramatically lower drug prices in the United States, the world's largest pharmaceuticals market.

Two industry sources told Reuters last month that any such policy was more concerning to the industry than other potential government moves such as tariffs on imported medicines.

The main U.S. lobby group for drugmakers, the Pharmaceutical Research and Manufacturers of America, known as PhRMA, said, "to lower costs for Americans, we need to address the real reasons U.S. prices are higher: foreign countries not paying their fair share and middlemen driving up prices for U.S. patients."

"Most favored nation is a deeply flawed proposal that would devastate our nation's small- and mid-size biotech companies," said John Crowley, CEO of BIO, the main U.S. trade group for biotechnology companies, in a statement.

WHAT ARE THE CHALLENGES IN CARRYING OUT THE ORDER?

Experts warn that referencing prices from other countries is complex, as many drugs sold in the U.S. are not available abroad, and some nations do not publish what they pay for drugs or take years to negotiate prices.

The U.S. does not buy drugs directly for a national health system, as countries such as England and Germany do, instead relying on the private sector to manage drug price negotiations for both government and private health plans.

Analysts said implementing the broad order would be difficult.

The executive order is also likely to face legal challenges, particularly for exceeding limits set by U.S. law, including on imports of drugs from abroad, legal experts said.

Source: TradingView

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Diana Wallace

Economic

Cryptocurrency

Key Points:

Bank of America's survey shows highest bearishness on US dollar since 2006.

80% predict global slowdown; 42% foresee recession.

Shift to risk-off assets like gold amid dollar weakness.

Global fund managers, polled by Bank of America, reported the highest bearish sentiment on the US dollar since 2006. The survey conducted in May highlights the impact of U.S. trade policies.

This sentiment signals potential shifts in investment strategy, with broader implications for global markets and risk asset allocations.

Fund Manager Sentiment on US Dollar at 17-Year Low

Bank of America's recent survey indicates a dive in confidence among global fund managers regarding the US dollar, recording the highest bearish sentiment in almost 20 years. Managers have notably cut their dollar holdings, already down to levels last achieved in 2006, marking a critical shift. The survey shows a reduction in cash holdings, reflecting a slightly more robust market sentiment compared to April.

The report shows profound changes in investor strategy, emphasizing political events like President Trump's trade policies. These have led to a substantial movement towards risk-off assets, including gold, now deemed the most crowded trade. Investor sentiment remains low despite a slight improvement over the previous month, indicating potential further reductions in cash and dollar allocations.

Investor sentiment has deteriorated rapidly...the largest monthly increase in pessimism in the survey’s 31-year history. Michael Hartnett, Bank of America's Chief Investment Strategist

Bitcoin and Gold as Potential Hedge Amid Dollar Weakness

Did you know? The last time bearish sentiment on the US dollar was this high, in 2006, major repositioning led to increased investments in alternative assets such as gold, signaling similar possible trends now.

Bitcoin (BTC) experienced a minor dip of -1.71% over 24 hours, trading at $102,692.66. It boasts a market cap of $2.04 trillion, according to CoinMarketCap, dominating 61.93% of the market. Over 60 days, Bitcoin’s price has risen by 24.85%, reflecting strong quarterly gains, influenced by global financial trends.

Bitcoin(BTC), daily chart, screenshot on CoinMarketCap at 07:51 UTC on May 13, 2025. Source: CoinMarketCap

Coincu research suggests significant shifts could impact the regulatory landscape and digital asset appeal. The flow from US equities to asset classes like gold and Bitcoin reflects broader uncertainty in traditional markets, positioning these assets as potential hedges amid weakening investor confidence.

Source: CryptoSlate

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Gerik

Economic

Pandemic Windfall Erased as Household Savings Turn Negative

The once-lauded $2.1 trillion in excess savings accumulated by American households between March 2020 and August 2021—fueled by government stimulus and reduced consumption during COVID-19 lockdowns—has been entirely spent. According to recent data, by the second quarter of 2024, not only has this buffer evaporated, but U.S. households now face a negative net saving position of $900 billion.

This shift marks a historic reversal in household financial health. Once viewed as a cushion to stabilize post-pandemic recovery, the loss of these savings now exposes deep economic vulnerabilities, particularly as consumers continue to spend against a backdrop of rising debt and economic slowdown.

Personal Saving Rates Collapse as Spending Outpaces Income

The personal saving rate—a key measure of how much disposable income households set aside—has declined sharply. From 4.1% in February 2025, it fell to 3.9% in March. This is notably lower than the 5–6% range typical before the pandemic, underscoring how households are dipping into reserves or borrowing to maintain their standard of living.

This erosion of saving habits reflects a broader inability of American consumers to keep pace with economic pressures. Even with stagnant wage growth and signs of economic deceleration, consumption remains elevated—indicating that households are spending just to stay afloat.

Consumer Spending Surges Despite Weakening Growth

In March 2025, consumer spending unexpectedly rose 0.7%, driven in part by a rush to buy vehicles ahead of expected price hikes linked to import tariffs. This followed a stronger-than-anticipated 0.5% increase in February, suggesting that front-loaded demand may be masking deeper signs of economic fatigue.

However, these spending gains appear unsustainable. First-quarter GDP figures revealed a 0.3% contraction on an annualized basis, with increased imports cited as a key drag on growth. The imbalance between strong consumption and weak output raises concerns about the durability of U.S. economic momentum.

Inflation Trends: Mixed Signals, Mounting Risks

The Personal Consumption Expenditures (PCE) price index—a preferred inflation gauge for the Federal Reserve—rose 2.3% year-over-year in March, down from 2.7% in February. Meanwhile, core PCE inflation, which excludes food and energy, held steady month-over-month and registered a 2.6% annual increase.

Despite this moderation, risks remain. Tariff hikes introduced by President Donald Trump’s administration are expected to push consumer prices higher, particularly for imported goods such as electronics, vehicles, and industrial components. Economists warn this could ignite a fresh wave of inflation, undermining recent disinflationary progress.

Further complicating the outlook is consumer psychology: short-term inflation expectations have risen to their highest level since 1981, indicating widespread public concern about persistent cost pressures. If these expectations become entrenched, they could lead to higher wage demands and more durable inflation.

The Disappearance of Savings Signals a Warning

The evaporation of pandemic-era savings is not just a fiscal footnote—it is a structural alarm bell. As Americans exhaust their financial cushions and face growing debt burdens, the economy becomes more exposed to shocks from policy shifts, global volatility, and renewed inflation.

With consumer spending now funded increasingly by credit rather than savings, and fiscal support unlikely to return at prior levels, the U.S. faces a precarious balancing act. Policymakers must now weigh inflation control against the rising financial fragility of households, while ensuring that the path forward does not deepen inequality or push vulnerable consumers into long-term distress.

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Gerik

Economic

Commodity

OPEC+ Faces Production Dilemma as Demand Outlook Weakens

In a note released this week, Goldman Sachs analysts warned that OPEC+ may reconsider its planned oil production hikes as weakening global economic indicators cast doubt on the strength of future demand. While the group is still expected to proceed with a previously announced increase of 411,000 barrels per day (bpd) in July, the investment bank suggests that this could be the final increment for now.

According to Goldman, OPEC+ will likely finalize its decision by July, but signs of economic strain could trigger a policy reversal. Should this prediction come to fruition, it would underscore the growing challenges OPEC+ faces in balancing supply targets with an increasingly uncertain demand environment.

April–June Output Increases Mark Partial Reversal of Previous Cuts

On May 6, OPEC+ announced an output hike of 411,000 bpd for June, following similar increases for April and May. These combined adjustments bring the group’s total production boost for the quarter to 960,000 bpd. This partially offsets the 2.2 million bpd in cuts previously agreed upon, effectively loosening 44% of that restraint.

The move initially triggered a selloff in oil futures, as markets reacted to the prospect of higher supply. However, the real-world impact on oil availability has been muted. Countries like Iraq and Nigeria—historically known for exceeding their production quotas—have already been pumping above official limits. As such, the new targets largely formalize existing production patterns rather than adding significant new supply.

Market Reaction: Oil Prices Rise Despite Supply Concerns

Despite concerns over increased production, oil prices remained resilient. On May 12, Brent crude rose 2% to $65.19 per barrel, while U.S. WTI crude gained 2.05% to $62.27 per barrel. This uptick was driven largely by improving sentiment around U.S.-China trade negotiations, which markets interpreted as a potential catalyst for stronger oil demand from the world’s two largest energy consumers.

The response highlights the oil market’s delicate balance: while supply-side shifts matter, demand expectations—particularly from China and the U.S.—continue to be the dominant force behind price movements.

Uncertain Economic Outlook Puts Pressure on OPEC+ Strategy

Goldman Sachs’ outlook points to a broader challenge for OPEC+. As global manufacturing slows, inflation pressures linger, and monetary policies remain tight across major economies, energy demand forecasts are becoming less certain. The group must now weigh the risks of over-supplying a potentially softening market, which could cap prices and erode member revenues.

At the same time, internal cohesion remains fragile. Some members have been pushing for more aggressive increases to boost revenues, while others remain cautious amid volatile price dynamics and supply-demand imbalances.

Strategic Patience May Prevail

Goldman Sachs' projection that OPEC+ could freeze further output hikes after July reflects a growing consensus that supply discipline may need to be reasserted if macroeconomic conditions continue to weaken. While the group has made calculated moves to test demand elasticity, it may soon face renewed pressure to stabilize prices—especially if anticipated demand rebounds fail to materialize.

For now, oil prices appear supported by geopolitical optimism and cautious supply management. But as the global economy navigates trade uncertainty and monetary tightening, OPEC+ will likely have to remain highly adaptive in its policy approach heading into the second half of 2025.

Source: OP

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Gerik

Economic

KDI Sounds the Alarm: Recession Warnings Reappear

In a significant development, the Korea Development Institute (KDI), a government-backed economic think tank, has used the term “economic recession” in its May 2025 economic trend report—marking the first such usage since February 2023. This declaration is a strong signal that South Korea’s economy is undergoing a downturn as both domestic and external conditions deteriorate rapidly.

According to the KDI report, South Korea’s key growth engines—construction, industrial production, and domestic consumption—remain sluggish. Particularly alarming is the steep drop in daily average exports, which have suffered amid escalating U.S. tariffs and worsening trade conditions. Exports to the U.S., a key market, have been especially affected, compounding concerns over Korea’s export-reliant growth model.

Growth Contracts in Q1, External Conditions Deteriorate

South Korea’s economy contracted by 0.246% in the first quarter of 2025, the weakest among 19 major economies that have reported data, including China and members of the OECD. This weak performance reflects the triple burden of declining global demand, elevated borrowing costs, and limited fiscal flexibility.

The KDI warns that as the global economy slows further, the pressure on South Korea’s trade-driven economy will intensify. Particularly, the sharp rise in protectionist measures—such as the new U.S. tariff regime—adds another layer of risk by shrinking market access and worsening the terms of trade.

Fiscal Strain Mounts: Rising Debt, Weak Tax Revenues

Compounding the macroeconomic malaise is South Korea’s deteriorating fiscal position. With tax revenues falling short and public spending remaining high, the nation’s debt burden is drawing increased scrutiny.

The International Monetary Fund (IMF) estimates that Korea’s debt-to-GDP ratio will rise to 54.5% in 2025, for the first time exceeding the average of 54.3% among 11 advanced economies that do not use reserve currencies. This rising debt load is raising concerns about future fiscal space and Korea’s ability to implement effective counter-cyclical measures if the downturn deepens.

Bleak Forecasts from Global Institutions

In light of these challenges, global economic institutions and investment banks have downgraded their growth forecasts for South Korea. Eight major international investment banks now expect GDP growth of just 0.8% for 2025—well below earlier expectations and significantly underperforming compared to the regional average. Meanwhile, the OECD projects growth to hover slightly above 1%, signaling persistent weakness.

The slowdown is not merely cyclical but appears to be structurally linked to deeper imbalances: overreliance on exports, underperforming domestic demand, and limited stimulus capacity due to demographic pressures and an aging population.

South Korea Enters a Period of Structural and External Vulnerability

South Korea’s economic trajectory is now confronting a critical inflection point. The re-emergence of the word “recession” in KDI’s monthly report reflects not just short-term stagnation, but a growing concern about the country’s vulnerability to global trade shifts and internal demand constraints.

Without decisive policy adjustments—including targeted fiscal support, supply-side reforms, and trade diversification—South Korea risks entering a prolonged low-growth phase. As global uncertainty intensifies and domestic policy tools remain limited, the country’s resilience will increasingly depend on its ability to adapt to a shifting global economic order.

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Glendon

Economic

Forex

The U.K. unemployment rate rose in March, data showed Tuesday, as employers anticipated the impact of higher employment costs, even before the potential impact of U.S. President Donald Trump’s volatile trade policies.

According to the Office for National Statistics, the jobless rate rose to 4.5% in the three months to March, as expected, up from the 4.4% seen in February.

However, pay growth across the whole economy, excluding bonuses, dropped to an annual 5.6% rate in the three months to March, below the 5.9% seen the prior month, and the 5.7% expected. This was the slowest increase since the three months to November last year, the ONS said.

Higher national insurance contributions and the rise in the national living wage, which both came into effect in April, appear to have deterred employers from taking on staff.

"The further softening in employment," said analysts at Capital Economics, in a note, "suggests businesses continued to respond to the rise in business taxes and the minimum wage by reducing headcount."

The Bank of England referenced a cooling labor market as it cut interest rates last week, and the policymakers will have noted a lessening in the strength of wage growth as a source of inflation pressure.

"Overall, the combination of weakening labor activity but still-high wage growth leaves the Bank in a tricky position," added Capital Economics. "If the jobs market remains weak, then underlying price pressures should eventually fade markedly. But sticky wage growth may mean the Bank remains uneasy about inflationary pressures in the near term. As a result, the “gradual” interest rate cutting path will remain the balancing act."

Additionally, the economy will have to cope with the uncertainty created by the U.S. president’s import duties, even though last week’s U.S.-U.K. trade deal may have lessened these concerns.