Indexes in Japan and Australia opened lower. US equity-index futures slipped 0.3% after President Donald Trump ratcheted up trade tensions saying he would double tariffs on steel and aluminum imports and accusing China of violating an agreement with the US to ease tariffs. Treasuries dropped, with the yield on the 10-year rising 1 basis point. Gold advanced 0.7% after retreating last week.
A gauge of the dollar edged lower after China urged the US to safeguard the consensus reached in the talks with the US in Geneva. The yen strengthened. Crude oil climbed even after OPEC+ agreed to lift output by less than some investors had expected.
Tariff headlines are once again dominating markets after a legal back-and-forth last week on the status of Trump’s century-high levies, which investors say will push the US into an economic recession. Amid all the uncertainty about the US trade policy and negotiations with countries including China, market participants are also monitoring with a sweeping tax bill that threatens to burgeon US deficit.
“The end of May is a precursor to the larger risks for June and the end of the second quarter,” Bob Savage, head of markets macro strategy at BNY, wrote in a note. “The shift in mood this month highlights how markets have gone from unpredictable to merely uncertain, as concerns about trade, fiscal spending and monetary policy continue to drive prices.”
Trump said China “violated a big part of the agreement we made” in Geneva. The dust-up threatened to again upend trade relations between the world’s two largest economies, which have been held together by a fragile, weeks-old tariff truce.China responded in a statement urging the US to promote stable trade relations. China will take resolute and forceful measures to safeguard its legitimate rights if the US continues to undermine China’s interests, it said.Asian steel and aluminum shares mostly declined after Trump said he would hike tariffs on steel and aluminum to 50% from 25%.
Traders in Asia will soon shift focus to Hong Kong shares after Chinese factory activity data contracted at a slower pace in May than the month prior. Mainland markets are closed for a holiday.
US Treasuries delivered their first monthly loss this year in May, buffeted by renewed tariff uncertainty and growing anxiety over mounting levels of government debt. The 30-year yield rose for a third consecutive month, its longest losing streak since 2023, as Trump wrestles with Congress over a bill that promises to cut taxes.
Treasury Secretary Scott Bessent at the weekend said the US “is never going to default” as the deadline for increasing the federal debt ceiling gets closer.
“Shares are at high risk of renewed falls given the ongoing tariff uncertainties, concerns about US debt, likely weaker growth and profits and the risk of a US/Israeli strike on Iran’s nuclear capability if diplomacy doesn’t work,” Shane Oliver, head of investment strategy and chief economist at AMP Ltd., wrote in a note.
