President Trump Delays EU Tariffs

Yield curve flattens on news out of Japan. Following the recent surge in long-term global bond yields, Japan is considering an adjustment to sovereign debt sales. Japan’s finance ministry sent a questionnaire to market participants today about issuance, suggesting that the nation may curb sales. The potential for reduced supply pushed the Japanese 30-year yield down ~20 bps, which contributed to a 7-9 bp decline at the long-end of the U.S. yield curve today. Meanwhile, equities rallied on U.S.-EU tariff delays and stronger-than-expected US consumer sentiment. The S&P 500 and NASDAQ rose 2.05% and 2.47%, respectively.

U.S. and EU ease tensions. The latest signs of trade war de-escalation came this morning from the U.S. and the EU, following a phone call between President Trump and European Commission President Leyen. President Trump announced that he will delay his previously announced 50% tariff on the EU until July 9th, only a short time after saying they would take effect on June 1st. President Trump pivoted away from harsher language regarding the EU’s trade practices, saying, “I have just been informed that the EU has called to quickly establish meeting dates…this is a positive event…” Still, specifics of any planned trade discussions remain unknown, and U.S. trade priorities are unclear. The EU is also continuing to plan retaliatory measures in the event negotiations fail, highlighting significant uncertainty that lies ahead.

Consumer confidence spikes on trade deals. The Conference Board’s gauge for consumer confidence soared 12.3 points to 98 in May, the largest monthly gain in four years. The spike follows a near five-year low reached in April, which was largely driven by concerns about trade wars and a global economic slowdown. Improved confidence was evident across income and age groups, and consumers were more optimistic about business conditions and job availability. Stephanie Guichard, senior economist at The Conference Board, said, “The rebound was already visible before the May 12 US-China trade deal but gained momentum afterwards.”