Authored by Simon Watkins via OilPrice.com,

• Saudi Arabia’s past oil price wars in 2014–2016 and 2020 backfired, as U.S. shale producers became leaner and more efficient.

• Riyadh drained hundreds of billions in reserves and faced rising fiscal deficits without achieving its goal of crippling U.S. shale.

• The low breakeven cost resilience of the U.S. shale sector is not quite the same as it was before.

It is highly unlikely that anyone with even a modicum of intelligence has lost money in the past ten years or so by trading against the predictable thinking of those in charge of Saudi Arabia’s oil policy. Quite the reverse, in fact, with enormous profits available from the failures of the enormously well-flagged and exceptionally predictable strategy of the 2014-2016 and 2020 Oil Price Wars — launched by the Kingdom with the intention of destroying or disabling the U.S. shale oil sector, as analysed in full in my latest book on the new global oil market order. As OPEC members and their toxic companion in the OPEC+ formation, Russia, mull keeping oil production on the high side of recent historical averages, the key question for the oil markets is — surely they are not going to launch another oil price war using the same strategy as failed twice before?

It is apposite here to recall the reasons for the failure of the two previous oil price wars since 2014. The first (2014-2016) was based on Saudi Arabia’s belief – shared by many in the oil market at the time, it must be said — that U.S. shale oil producers had a breakeven price point of US$70 per barrel (pb) of for the West Texas Intermediate benchmark. Therefore, the Saudis reasoned, if the price of oil was pushed below that level for long enough — by it and its fellow OPEC members dramatically increasing production while demand in the global market was predicted to remain around the same level for some time — then many of the new U.S. shale oil producers would go bankrupt. Any others would have to cease production at such uneconomic price levels and shelve future investment plans aimed at boosting their production even more. So confident was Saudi Arabia of the success of its strategy that shortly after the onset of the 2014-2016 Oil Price War, senior figures in its government and oil ministry it held a series of private meetings in New York to tell them in detail about the strategy it was to use and how well it would go, as also detailed in full in my latest book. At these meetings, the Saudis revealed that, far from looking to keep prices high – as had also been the usual inclination of OPEC for many years to boost the prosperity of member states – it was willing to tolerate “much lower” Brent prices “of between USD80-90 pb for a period of one to two years or even lower prices if necessary”. According to several sources at the New York meeting exclusively spoken to by OilPrice.com at the time, the Saudis made it clear that it aside from destroying the then-nascent U.S. shale sector, the Oil Price War also aimed to re-impose a degree of supply discipline on other OPEC members.

In terms of the first objective, the initial signs augured well for a Saudi victory. The U.S. oil rig count in January/February 2015 saw its biggest period-on-period fall since 1991, and the gas rig count fell substantially at that time as well. According to industry figures as at the end of the first quarter of 2015, around one third of the 800 oil and gas projects (worth US$500 billion and totalling nearly 60 billion barrels of oil equivalent) scheduled for final investment decisions in that year were unconventional and were subject to possible postponement or cancellation. Over the year as a whole, output from the U.S. shale producers typically fell by by around 50%, forcing them to cut investment to approximately US$60 billion over the year, compared to the US$100 billion or so spent in 2014. Crucially, though, from around that point the U.S. shale sector reorganised into a meaner, leaner, lower-cost production machine that could – at that time – broadly survive and profit at WTI prices above around US$35 pb from above US$70 pb previously. They managed to achieve this mainly through the advancement of technology that enabled them to drill longer laterals, manage the fracking stages closer and maintain the fracks with higher, finer sand to allow for increased recovery for the wells drilled, in conjunction with faster drill times, as industry experts old OilPrice.com back then. These operations gained further cost benefits from multi-pad drilling and well spacing theory and practice. During this period, Saudi Arabia had moved from a budget surplus to a then-record high deficit in 2015 of US$98 billion and it had spent at least US$250 billion of its precious foreign exchange reserves over that period that even senior Saudis said was lost forever. Moreover, according to International Energy Agency estimates, OPEC member states collectively at least US$450 billion in revenues during the 2014-2016 Oil Price War.

The 2020 Oil Price War – using exactly the same overproduction strategy as before — failed less through the long-term effects of misjudging the effectiveness of the U.S. shale producers and more through the direct political intervention of its then first-term President Domald Trump. Given the potentially disastrous economic and political consequences for the U.S. and its sitting president of sharp and sustained rises in oil – and crucially, gasoline – prices, as also analysed in full in my latest book, Trump began by warning Saudi Arabia repeatedly that the U.S. would not tolerate any sustained threat to its shale oil sector (and, by extension, to its economy and its domestic political landscape) – in speeches and tweets and in the increasingly close-run legislative passage of the ‘NOPEC Bill’. He also directly warned Saudi Arabia’s King Salman bin Abdulaziz Al Saud that the U.S. might withdraw U.S. military support for the Al Sauds, and by extension to Saudi Arabia, with the additional observation that: “He [King Salman] would not last in power for two weeks without the backing of the U.S. military.” With no sign by the end of March 2020 that the Saudis were going to cease the war, Trump clearly and specifically told de facto Saudi ruler Crown Prince Mohammed bin Salman over the telephone on 2 April that unless OPEC started cutting oil production – so allowing oil prices to rise above the danger zone for U.S. shale oil producers – that he would be powerless to stop lawmakers from passing legislation to withdraw U.S. troops from the Kingdom, according to a very senior source in the White House exclusively spoken to by OilPrice.com a the time. Oil production consequently came back down again, and the 2020 war had ended.

As of now, the low breakeven cost resilience of the U.S. shale sector is not quite the same as it was before. The recent Dallas Fed Energy Survey suggests that it is around US$65 pb for new wells drilled, although for existing wells it is significantly lower. It is also true that the lifting cost of oil in Saudi Arabia has also risen since 2014 from around US$1-2 pb, but it is still only about US$3-5 pb now. However, the Kingdom’s 2025 fiscal breakeven price per barrel of the Brent crude benchmark is a minimum of US$90.9, according to IMF figures. Consequently, it can no better afford a major, sustained fall in oil prices now than it could in either 2014-2016 or in 2020. With Trump back in the White House, it is also no better off politically either. Indeed, with Republicans majorities in both houses, it is worse positioned to deal with the likely threats and actions that Trump would use against it if it went head-to-head with the U.S. again. Instead, according to a senior energy source who works closely with the U.S. Presidential Administration, Washington believes the Saudis will take a modulated approach to further oil production increases, in tandem with the U.S. “Oil prices at the lower end of recent historical averages suit the U.S. from an inflationary perspective, as long as they don’t go too low, and Washington has made this clear to the Saudis,” he said. In fact, these conversations were part of the dialogue that U.S. officials had with their Saudi counterparts during Trump’s visit to Saudi Arabia on 13 May to sign a broad-based economic agreement between the two countries. “There are longer-term financial and security benefits for the Saudis in taking this softer approach, even if oil is below the number they want for their budget in the shorter-term, and to bridge the gap they will have no problem in borrowing more in the capital markets,” he concluded.

Authored by Arjun Singh via The Epoch Times,

A man from Romania has pleaded guilty to felonies after he made false reports to elicit tactical police responses—known as “swatting”—against a former U.S. president, several members of Congress, federal judges, and state officials.

“Swatting” derives its name from “Special Weapons and Tactics” (SWAT) teams that are organized by police departments across the world, who respond to particularly dangerous emergencies, such as terrorist attacks, mass shootings, and other weapons of mass destruction.

The phenomenon of “swatting”—i.e., falsely reporting such an emergency to elicit a SWAT response—has emerged in recent years as a means of intimidation or to drain national resources.

Several high-profile individuals have been the victims of such “swatting” in recent years, many of them due to Thomas Szabo, a 26-year-old resident of Romania and citizen of that country, who filed many such reports against senior U.S. government officials while outside the United States, which led to an internet group encouraging others to do so.

Szabo was extradited to the United States in 2024 and, on June 2 of this year, the Department of Justice (DOJ) announced that he had pleaded guilty to two felony charges for the acts.

“Beginning on Dec. 24, 2023, and continuing through early January 2024, subordinate members of Szabo’s group perpetrated a spree of swatting and bomb threats that included, as its victims, at least 25 Members of Congress or family members of Members of Congress; at least six then-current or former senior U.S. Executive Branch officials, including multiple cabinet-level officials … multiple members of the federal judiciary; [and] at least 27 then-current or former state government officials,” read a DOJ press release announcing the guilty plea.

The release also noted that Szabo threatened, in January of 2021, to detonate explosives at the U.S. Capitol and kill President-elect Joe Biden. The “former U.S. President” threatened by Szabo was not named in the release, though the phrase likely referred to Biden.

Szabo’s leadership of the unnamed group allegedly led to many subsequent incidents. The press release quotes a message to Szabo from one of his followers: “I did 25+ swattings today … creating massive havoc in [A]merica. $500,000+ in taxpayers [money] wasted in just two days.”

Szabo pleaded guilty to two felony charges: criminal conspiracy and the issuance of threats involving explosives. Both charges carry prison sentences of five and ten years, respectively.

“This defendant’s targeted and ruthless behavior put countless people in danger, including law enforcement, public officials, and ordinary citizens,” U.S. Attorney Jeanine Pirro, the interim U.S. Attorney for the District of Columbia, said.

“Swatting attacks, that is, falsely reporting an ongoing threat of violence at a victims’ home address for the purpose of provoking a police response there, drain precious resources and can result in major injury or even death. Anyone who hijacks police resources for senseless crimes like these will have to answer for their actions.”

The rise in “swatting” has occurred alongside the prominent depiction of such SWAT teams in film and television. A television series named “S.W.A.T.” ran for eight seasons from 2017 to 2025 and was influenced by the popular 2003 film, starring Colin Firth and Samuel L. Jackson, of the same name.

Liberal opposition leader Lee Jae-myung is projected to win South Korea’s presidential election, according to projections by broadcasters in the country on Tuesday. 

In a joint exit poll by KBS, MBC and SBS, Lee is at 51% of the vote, while his conservative rival Kim Moon-soo has just 39.3%. Another broadcaster, JTBC, puts Lee at 50.6%, while Channel A has him winning as well by a similar margin. 

Approximately 78% of South Korean voters participated in the snap ballot, which was called following the outster of former president Yoon Suk Yeol – who attempted to institute martial law on Dec. 3, 2024, only to back down six hours later amid parliamentary opposition and public protests. He is now on trial for insurrection. 

As the Epoch Times notes further, Yoon’s attempted martial law plunged Asia’s fourth-largest economy into months of political turmoil and led to the Constitutional Court eventually relieving him of the presidency in April.

Yoon denies the charges.

The chairman of Lee’s Democratic Party, Park Chan-dae, told broadcaster KBS the people had “passed a judgment like a scolding on the civil war regime,” after the exit polls were revealed.

During his campaign, Lee said he would amend the constitution to make it harder for future presidents to impose martial law, as well as vowing to take steps to tackle the country’s economic issues.

He also called for a special prosecutor to be appointed to investigate the Dec. 3, 2024, martial law incident to bring those responsible to justice; however, he said military officials who were reluctant to follow orders should be granted leniency.

Some 44.3 million South Koreans are eligible to vote in the election.

The election is run on a single-round, first-past-the-post system, with the winner simply being the candidate who gains the most votes.

Whoever is successful can hold the post for a five-year term and is not permitted to stand for reelection.

In South Korea, the president is head of state, head of government, and commander in chief of the nation’s armed forces.

Due to the removal of Yoon, the victor will be immediately sworn in on Wednesday, rather than going through the typical two-month transition period.

Update(1208ET): More details have emerged of what marks the third major Ukrainian sabotage bombing of the key bridge linking the Russian mainland to the Crimean peninsula, as the pace of the war heats up:

Ukraine said it attacked the Crimean Bridge with explosives as Russia closed traffic on the route linking the annexed Black Sea peninsula with the Russian mainland.

Agents planted mines on underwater supports and detonated them on Tuesday, the Ukrainian Security Service, known as the SBU, said in a statement on Telegram. The SBU said the operation took place over several months and left the bridge in an emergency condition, which couldn’t be independently verified.

Ukrainian intelligence over the weekend was busy blowing up other civilian bridges inside Russia as well, resulting in the deaths of seven people, and scores more casualties, as we detailed.

“The bridge was originally shut for more than three hours starting in the morning local time, and then again for almost two-and-a-half hours, the news agency said,” according to Bloomberg. “Maritime passenger transportation was suspended in Sevastopol, the city’s road and transport infrastructure authority said, also without explaining what prompted the interruption, according to Interfax.”

There are emerging reports that unmanned maritime vehicles may have been involved:

Ukrainian USV hit by Russian Lancet during today’s attempted breach near the Crimean Bridge.

The USV lost propulsion after the strike. pic.twitter.com/KBXGIEsdIm

— Clash Report (@clashreport) June 3, 2025

Meanwhile, the million dollar question remains: was all of this sanctioned behind the scenes by the Trump administration, or are we really to believe Washington was kept out of the loop on all this latest escalation which could put the US/NATO on the path to nuclear-armed confrontation with Russia?

Steve Bannon and many others have some questions of the US administration…

It started with a warning.

Ukraine wiped out 40% of Russia’s bombers in a surprise strike—and Steve Bannon says the U.S. is now on the brink of getting dragged into World War III.

But the media shrugs. The public sleeps.

Then Bannon went nuclear—calling for two brutal… pic.twitter.com/xsiW5KjQPx

— The Vigilant Fox 🦊 (@VigilantFox) June 3, 2025

* * * 

For the third time since the Russia-Ukraine war started, a large explosion has damaged the bridge connecting Russia’s mainland to Crimea. 

Ukraine’s security service (SBU) has quickly claimed responsibility, describing that this time it was an underwater explosive attack, possibly facilitated with an unmanned submarine, which left the structure which goes from the Russian city of Krasnodar in the east to Kerch in Crimea “in disrepair”.

Video was soon after published of the explosion of what the SBU called the “badly damaged” bridge after support columns were blown up.

“The Security Service of Ukraine carried out a new unique special operation and struck the Crimean Bridge for the third time – this time underwater!” the SBU declared on Telegram.

“Today, at 4:44 a.m., without any civilian casualties, the first explosive device was detonated,” the statement said. “The underwater support pillars were severely damaged at the seabed level — aided by the equivalent of 1,100 kg of TNT. As a result, the bridge is effectively in an emergency condition.”

BREAKING: Kerch bridge pic.twitter.com/7unanrrzQU

— Pekka Kallioniemi (@P_Kallioniemi) June 3, 2025

Russia since confirmed that traffic on (alternatively called) Crimea Bridge was temporarily suspended as a result of the damage and emergency situation. But the 12-mile bridge, Europe’s longest, was reportedly quickly reopened after hours.

“RIA Novosti, a Russian state news agency, reported that the bridge was briefly closed for several hours on Tuesday,” the NY Times writes. “An app that is widely used in Russia to track traffic on the bridge showed that it was open again as of midafternoon.”

🚨 Russian Lancet drone takes out one of the Ukrainian sea drones near Crimea — per Russian war reporters

Video captures the moment of destruction pic.twitter.com/IRykNjNCc5

— RT (@RT_com) June 3, 2025

Several attacks on the $3.7 billion, iconic bridge have occurred throughout the war, including an October 2022 truck bombing on the bridge, which killed and wounded civilians.

That attack took at least ten months to repair, but there was another attack nearly a year after the first one, which utilized maritime drones hitting support pillars.

This comes two days after Ukraine’s ‘Operation Spider’s Web’ which reportedly took out some forty Russian combat aircraft, among them strategic bombers, in Kiev’s most ambitious and provocative operation to date.

Ukrainian intelligence is really on a roll, but the world awaits a likely devastating ‘shock and awe’ style attack by Moscow, which is apparently exercising patience as it readies the inevitable retaliation. Likely, ‘command HQ’ centers are going to be targeted in the coming days.

Authored by Jack Phillips via The Epoch Times,

President Donald Trump vowed to place “large-scale fines” on California after a transgender athlete competed in a girls’ high school track and field event and won gold.

“A Biological Male competed in California Girls State Finals, WINNING BIG, despite the fact that they were warned by me not to do so,” Trump wrote on the social media platform Truth Social on Tuesday, telling Gov. Gavin Newsom that “large scale fines will be imposed.”

The president did not provide more details about the fine.

The president’s comment was made days after he wrote that he may withhold federal funding if California doesn’t comply with an executive order he signed months ago, which bans transgender athletes from competing in women’s and girls’ sports. The order specifically directs federal agencies to cut off funding to states that refuse to enforce the ban, although some states have yet to comply.

“THIS IS NOT FAIR, AND TOTALLY DEMEANING TO WOMEN AND GIRLS. Please be hereby advised that large scale Federal Funding will be held back, maybe permanently, if the Executive Order on this subject matter is not totally adhered to,” Trump told Newsom and California officials on May 27.

On Feb. 5, Trump signed the Keeping Men Out of Women’s Sports executive order which bars educational institutions that receive federal funding from allowing transgender athletes to compete in women’s and girls’ sports.

“It is the policy of the United States to rescind all funds from educational programs that deprive women and girls of fair athletic opportunities, which results in the endangerment, humiliation, and silencing of women and girls and deprives them of privacy,” the order states.

While Trump’s post on Truth Social did not name anyone in particular, a transgender athlete, AB Hernandez, won gold in the girls’ triple jump and high jump at the California state championships over the past weekend. The California Interscholastic Federation had said that it would allow one extra competitor in three events featuring Hernandez.

Some people in the crowd of the competition wore pink bracelets and held signs that stated, “Save Girls’ Sports” to protest against Hernandez’s participation, according to photos from the event.

Earlier this week, Assistant Attorney General Harmeet Dhillon, who heads the Department of Justice’s Civil Rights Division, said in a letter posted online that public school districts in California must tell the agency they won’t adhere to the California Interscholastic Federation’s rules on “gender identity participation.”

“Knowingly depriving female students of athletic opportunities and benefits on the basis of their sex would constitute unconstitutional sex discrimination under the Equal Protection Clause,” Dhillon said in the letter.

“Scientific evidence shows that upsetting the historical status quo and forcing girls to compete against males would deprive them of athletic opportunities and benefits because of their sex.”

A recent AP-NORC poll found that about seven in 10 U.S. adults think transgender athletes should not be allowed to participate in girls’ and women’s sports at high school, college, or professional levels. That view was shared by about 9 in 10 Republicans and roughly half of Democrats.

The Epoch Times contacted Newsom’s office for comment Tuesday.

Newsom earlier this year told conservative host Charlie Kirk that allowing transgender athletes in girls’ and women’s sports is “deeply unfair,” breaking with much of the Democratic Party.

“I think it’s an issue of fairness. I completely agree with you on that. It is an issue of fairness. It’s deeply unfair,” he said in March. “I’m not wrestling with the fairness issue. I totally agree with you.”

It seems Dmitry Medvedev has once again said the quiet part out loud. The deputy chairman of Russia’s Security Council and former president has said Tuesday that Moscow is engaged in peace talks with Ukraine in order ultimately to ensure a swift and complete Russian victory.

“The Istanbul talks are not for striking a compromise peace on someone else’s delusional terms but for ensuring our swift victory and the complete destruction of the neo-Nazi regime,” the Russian official, who has long been known for his hawkish outspokenness, stated.

“That’s what the Russian Memorandum published yesterday is about” – in reference to the set of demands presented. The Monday Istanbul talks lasted a mere hour, but resulted in agreement for another swap of 1,000 POWs, and the return of some 6,000 deceased bodies recovered from the battlefield.

One key thing that Medvedev also addressed is the coming reprisal for Sunday’s ‘Operation Spider’s Web’ which saw Ukraine penetrate deep inside Russia with drone strikes on five Russian airbases:

Medvedev added, in an apparent response to Ukraine’s weekend strikes on Russian strategic bomber bases, that Moscow would take revenge. “Retribution is inevitable,” he said.

“Our Army is pushing forward and will continue to advance. Everything that needs to be blown up will be blown up, and those who must be eliminated will be.”

In Istanbul, the Russian delegation had handed over a long awaited ceasefire proposal, which contains a full outline for permanent settlement. We earlier featured the following Moscow demands from the document as follows:

• Crimea, Donbass, Kherson, Zaporozhye internationally recognized as Russian 
• Ukraine doesn’t join NATO or any military bloc 
• Ukraine holds elections
• Withdraws troops from new Russian regions 
• BANS Nazi propaganda

Without doubt, the Zelensky government is going to reject these conditions, particularly the sticking point about territorial concessions. Kiev has already rejected the offer of a two or three day short ceasefire.

Sunday’s massive drone attack, which destroyed many advanced, expensive aircraft such as long-range strategic bombers – some parked at airbases very far away from the Ukraine border – was meant to given Zelensky leverage in further negotiations.

President Zelensky’s reaction to the Russian delegation’s stance after Monday’s talks:

“Arrogant people”: Zelensky on the behavior of the Russians during today’s negotiations. pic.twitter.com/TNfeRYJXIJ

— WarTranslated (@wartranslated) June 2, 2025

As geopolitical blog Moon of Alabama lays out, the brazen operation was by design meant to influence talks at a moment Ukrainian losses kept mounting fast:

Days before negotiations towards an and of the conflict the operational tempo of the war in Ukraine has increased.

During the last week of May the Russian forces took 18 settlements and over 200 square kilometer. During the last 24 hours at least another 3 settlements have changed hands. The Ukrainian army is no longer capable to hold its defense lines. Its situation is deteriorating day by day.

On Saturday a Russian missile attack hit a Ukrainian military training camp. It killed or wounded about 100 soldiers. It was the second time the camp had been hit.

Certainly, Ukraine has at least shifted the global conversation in the sense that Europe is again rallying behind Kiev, and now there’s strong pressure on the White House to ‘just go with it’ and allow the Ukrainians to keep up the escalation game on Russia.

‘An epic failure’: Russia reels from surprise Ukrainian attack on bomber fleet

While the effect on Russia’s nuclear capacity is likely to be limited, the attack could affect day-to-day operations in Ukraine, say analysts.
w/ @NastyaStognei @fabrice_deprez
Graphics: @BobHaslett pic.twitter.com/q4pfSRaJ8L

— Christopher Miller (@ChristopherJM) June 3, 2025

Of course, this is highly dangerous, and Putin has never been one to blink first – but is likely to unleash painful retaliation on Ukraine, including the likelihood of bombs away on the capital.

Meanwhile, there’s been uncharacteristic silence out of the White House. Trump has indicated that he’s still open to the possibility of an in-person meeting involving both Zelensky and Putin at the same table, but this scenario is slipping away by the day, as the war tempo picks up pace.

By Michael Every of Rabobank

TACO Tuesday(?)

As always at turning points – more so with under-funded and/or politicized stats services – data show a Mexican stand-off or are a salsa confusion. There was a huge reduction in the US trade deficit for April from $162.3bn to $87.6bn; monthly personal income gains in 2025 so far of 0.5%, 0.8%, 0.7%, and 0.8% vs. 0.4% average in 2024 (0.3% excluding a bumper 1.3% in January that year); the Q2 Atlanta Fed GDPNow forecast is up to 4.6% q-o-q annualised, reversing the Q1 dip…

… yet the US ISM survey saw a weaker 48.5 headline and the import sub-index at 39.9, the lowest since 2009, with export orders 40.1, a five-year low. On the other hand, China’s Caixin manufacturing PMI this morning was 48.3 vs. 50.7 expected. So, who’s el pollo loco?

The latest market acronymic giggle is Trump Always Chickens Out (TACO) on trade wars: so, lay back, enchilada out, and wait for the return of neoliberal business as usual. But don’t burrito your head in the sand like a guacamole – that isn’t going to happen. Neomercantilism is here to stay.

The ‘We ♥ Free Trade’ EU just used its International Procurement Instrument for the first time to freeze Chinese medical devices out of its public procurement markets for five years unless China opens its market to EU equivalents. That’s economic statecraft with muscle, underlining that there are lots of tools in the mercantilist toolkit besides tariffs.

While the US extended its tariff pause on some Chinese goods to August 31 –more restocking is needed– and Trump and Xi will “likely” speak this week, says the White House, China has the US over a barrel on rare earths… for now. Yet that won’t be the case forever because rare earths aren’t rare, and no major economy will stay reliant on a rival: supply chains *will* shift locally or geopolitically. Moreover, Trump posted if the courts rule against his IEEPA tariffs it would threaten US “economic survival.” That puts the “International” and “Economic” and “Emergency Powers” into the IEEP Act which Congress passed to let presidents decide on such matters.

Friday saw under-reported tensions between two Chinese automakers as a BYD executive slammed as “alarmist” comments by the Great Wall Motor chief that the industry was “unhealthy” and drawing a parallel to failed property developer Evergrande without naming names (or talking about 35% price cuts). If you want to shout, “Because markets!” perhaps look in that direction? But, of course, geopolitics will get in the way: Chinese EVs are clearly winning market share globally even if individual companies may not be thriving – so, green light go. 

More broadly on geopolitics and trade, last year’s Israeli pager and walkie-talkie attacks on Hezbollah showed finished goods could be weaponized. Ukraine’s ‘Pearl Harbour’ Operation Spiderweb now shows false cargo containers holding cheap drones can destroy a staggering amount of assets and there’s nothing to prevent it in the current global trading system. 

Are we going to screen every container and every truck? Too slow and expensive. Will we screen those from some countries? That’s still slow and expensive and says geopolitical bifurcation – and note who makes all the containers. Are we going to reinforce critical infrastructure and military assets? With what money? Or are we just going to pivot back to “When rate cuts/When no tariffs?”

Meanwhile the latest Russia-Ukraine peace talks in Turkey lasted an hour and saw an agreed prisoner exchange but no ceasefire or likelihood of peace. 

At the same time, the EU’s Von der Leyen and US Senator Graham discussed an 18th package of sanctions targeting Russia’s energy revenues, banks, and lowering the crude oil price cap – Graham is pushing even more aggressive US sanctions legislation. The tail risks to markets should be clear there as the EU continues to escalate vs Russia on many fronts; though that’s also as Poland’s PM Tusk will call a confidence vote to reassert his authority after an opposition presidential election victory – which won’t stop gridlock ahead; and a German court overruled Chancellor Merz’s recent closure of the border to new asylum seekers, which could see the far right AfD move even higher in the opinion polls.

The UK’s Strategic Defence Review, which PM Starmer claims will bring the country to “war-fighting readiness”, proposes a Kids Army —”closer engagement with school leavers to help retention crisis” as the Telegraph puts it— and is seen full of aspirations not deliverables; as politicians make a last-ditch attempt to block the treaty handing the British Chagos Islands housing the Diego Garcia airbase to Mauritius via first time use of constitutional legislation.

Australia’s former chief of army General Leahy said it must take urgent action vs. global risks being exacerbated by the US-China trade war and called for significantly more funding for defence now and well into the future, adding, “The almost total lack of consideration of defence matters during the recent election campaign and the current focus on a far-off distant, enormously-expensive force demonstrates how willing our politicians are prepared to tolerate risk. This is an abrogation of the primary responsibility of our elected representatives to provide for the defence and security of the nation and the safety of our servicemen and women. Those who wear Australia’s uniform place great trust in those who task and equip them. This trust is not being honoured.” Putting up minimum wages by 3.5%, as the government just announced, and bringing in a 15% tax on unrealised capital gains for superannuation over $3m from July, encouraging people to buy houses to save instead, may not be the ‘what GDP is for’ ticket the General is thinking of. 

Then again, neither are rate cuts that don’t help channel liquidity into the armed forces, but again traditionally flow to already vastly expensive housing. There, the RBA minutes today showed the Bank could have gone 50bps at its last meeting to help protect the economy from tariff fall out –like a rising A$ vs. the US$ and higher inflation?– but instead opted to cut 25bps, against a backdrop of low unemployment, above-target inflation, and a sea of already asset-rich housing speculators waiting at the starting line like sprinters, in order to remain “predictable” to markets in times of rising uncertainty. Let’s just say that there was never any uncertainty that the RBA would be anything other than predictable in that predilection.  

Less predictable, President Trump denied an Axios report to post that he would never allow Iran the ability to enrich uranium, while Iran told the US it will continue talking but won’t stop enriching (to near weapons grade, according to the IAEA). What Israel will do remains unclear. The fat tail risk isn’t.

The FT’s Gideon Rachman op-eds that Trump always chickens out on foreign policy too, listing all the wars he didn’t start despite bellicose rhetoric, before then concluding “it’s rarely a good idea to mock a bully,” and that countries who think the US won’t ultimately act should keep quiet. In which case, shouldn’t some op-ed writers too?

Nuclear stocks moved higher in premarket trading after Meta Platforms signed a power contract with Constellation Energy for emissions-free nuclear energy from the Clinton Clean Energy Center in Clinton, Illinois. 

The parent company of Facebook, Instagram, and WhatsApp announced that it has entered into a 20-year power purchase agreement (PPA) with Constellation Energy for 1,121 MW of emissions-free nuclear energy from the Clinton plant, which is expected to begin in 2027 and support its operations in the region. 

“Our data centers enable these innovations, housing the infrastructure that brings these technologies to life – and we prioritize operating our data centers efficiently, matching our electricity with 100% clean and renewable energy and exploring emergent energy technologies,” Meta wrote in a press release.

Here’s a summary of the PPA:

Meta’s 20-year agreement with Constellation, starting in 2027, secures the continued operation of the Clinton Clean Energy Center, delivering 1,121 MW of emissions-free nuclear power. The deal adds 30 MW of new capacity, enables exploration of further nuclear development, preserves 1,100+ jobs, and generates $13.5 million annually in tax revenue—all without state subsidies or additional ratepayer support.

The Clinton plant was slated for closure in 2017 after years of financial losses, despite being one of the best-performing nuclear plants in Illinois. Clinton’s retirement was prevented by the Future Energy Jobs Act, which established a Zero Emission Credit program that provides financial support to the plant through mid-2027. Constellation’s agreement with Meta will help revive the power plant with a market-based solution that replaces the ZEC program. The PPA will also enable Clinton to deliver power to the local grid, providing grid reliability and low-cost power to the region through the 2030s, while fulfilling the contract with Meta.

In markets, uranium stocks are moving higher. Constellation shares are up as much as 13%, nearing record highs. 

Likewise, Microsoft recently secured a PPA with Constellation that allows for the restart of Three Mile Island Unit 1. The PPA is based on a 20-year contract that will fuel Microsoft’s data centers in the region. 

The broader theme is twofold: the AI data center boom and ‘powering up America’ through the revival and expansion of the nation’s nuclear power capacity. 

The White House wants to deploy 300 GW of net new nuclear capacity by 2050 and have 10 large reactors under construction in the U.S. by 2030. 

We’ve been covering the “nuclear ESG theme” since December 2020—well ahead of the curve—and continue to provide readers with the latest developments in this investing trend that major banks are now rushing to embrace:

• Goldman Names “Top Tactical Play” In Nuclear Theme Ahead Of Uranium Structural Deficit Explosion

• Trump’s “Nuclear” Order And How To Profit: All You Need To Know About The Coming Nuclear Energy Transition

Recently speaking to industry insiders—particularly those on the financing side of AI data centers—describe to Zero Hedge the current buildout as a “sprint” expected to continue through President Trump’s second term.

While not a direct play, there is a critical indirect angle tied to defending data centers and nuclear plants on U.S. soil—as the world fractures into a dangerous bipolar state, a trend set to accelerate through the 2030s. This is why we launched our “Hemispheric Defense” theme—where Goldman has identified one standout firm leading the charge.

Recall what former Google CEO Eric Schmidt recently warned about: the AI race could escalate to include sabotage or even attacks on data centers in the event of a conflict.

For the third time since the Russia-Ukraine war started, a large explosion has damaged the bridge connecting Russia’s mainland to Crimea. 

Ukraine’s security service (SBU) has quickly claimed responsibility, describing that this time it was an underwater explosive attack, possibly facilitated with an unmanned submarine, which left the structure which goes from the Russian city of Krasnodar in the east to Kerch in Crimea “in disrepair”.

Video was soon after published of the explosion of what the SBU called the “badly damaged” bridge after support columns were blown up.

“The Security Service of Ukraine carried out a new unique special operation and struck the Crimean Bridge for the third time – this time underwater!” the SBU declared on Telegram.

“Today, at 4:44 a.m., without any civilian casualties, the first explosive device was detonated,” the statement said. “The underwater support pillars were severely damaged at the seabed level — aided by the equivalent of 1,100 kg of TNT. As a result, the bridge is effectively in an emergency condition.”

BREAKING: Kerch bridge pic.twitter.com/7unanrrzQU

— Pekka Kallioniemi (@P_Kallioniemi) June 3, 2025

Russia since confirmed that traffic on (alternatively called) Crimea Bridge was temporarily suspended as a result of the damage and emergency situation. But the 12-mile bridge, Europe’s longest, was reportedly quickly reopened after hours.

“RIA Novosti, a Russian state news agency, reported that the bridge was briefly closed for several hours on Tuesday,” the NY Times writes. “An app that is widely used in Russia to track traffic on the bridge showed that it was open again as of midafternoon.”

Several attacks on the $3.7 billion, iconic bridge have occurred throughout the war, including an October 2022 truck bombing on the bridge, which killed and wounded civilians. That attack took at least ten months to repair, but there was another attack nearly a year after the first one, which utilized maritime drones hitting support pillars.

This comes two days after Ukraine’s ‘Operation Spider’s Web’ which reportedly took out some forty Russian combat aircraft, among them strategic bombers, in Kiev’s most ambitious and provocative operation to date.

Ukrainian intelligence is really on a roll, but the world awaits a likely devastating ‘shock and awe’ style attack by Moscow, which is apparently exercising patience as it readies the inevitable retaliation. Likely, ‘command HQ’ centers are going to be targeted in the coming days.

US equity futures follow European markets lower, although off session lows, amid more tariff gloom confronting traders this morning: the pressure of Trump’s tariffs pushed China’s manufacturing PMI survey to its lowest since 2022, while the OECD cut its 2025growth outlook for a second time. As of 8:00am, S&P futures are down 0.2%, erasing almost a 0.7% drop as the US benchmark is set to continue a run of daily swings between gains and losses; Nasdaq 100 futures were flat even as all Mag 7 are modestly lower premarket (AMZN/META -0.4%). Meanwhile, the OECD slashed its global economic forecast again, blaming trade anxiety for holding back investment and warning that protectionism is inflationary (which it clearly isn’t judging by recent inflation prints). The OECD now expects 2025 and 2026 US GDP to print 1.6% and 1.5%, respectively; this is below the G20 average of 2.9% and 2.9% in 2025 and 2026, respectively.  Bond yields are 2-3bp lower; the dollar climbed on Tuesday, posting a broad-based rebound after closing Monday at the lowest point since July 2023; all G-10 currencies declined, with the Australian dollar and Swedish krona under-performing peers. Commodities are mixed with oil moving higher and precious metals lower. Overnight headlines are mostly muted. Today’s US economic data includes April factory orders and JOLTS job openings (10am). 

In premarket trading, Mag 7 stocks were mixed (Nvidia +0.4%, Tesla +0.3%, Meta +0.1%, Apple -0.2%, Microsoft -0.2%, Amazon -0.2%, Alphabet -0.3%). Nuclear stocks (CEG) gained in US premarket trading after Constellation Energy agreed to sell power from an operating nuclear plant in Illinois to Meta Platforms, an agreement that could lead to the construction of a new reactor at the site. Here are some of the biggest US movers today:

• Block shares (XYZ) rise 3% in premarket trading after the digital payments provider was upgraded to outperform from inline at Evercore ISI, with analysts citing positives such as resilient consumer spending trends and a boost from new products.
• Bumble shares (BMBL) fall 5.4% in premarket trading on Tuesday after JPMorgan downgrades to underweight from neutral.
• Credo Technology shares (CRDO) advance 13% in premarket trading after the company reported revenue for the fourth quarter that beat the average analyst estimate.
• Dollar General shares (DG) rise 8.1% ahead of the bell after the retailer reported first-quarter profit and sales that topped expectations, and management boosted its comparable sales forecast for the full year, as well as the low end of its EPS target.
• MoonLake Immunotherapeutics shares (MLTX) jump 22% in premarket trading after the Financial Times reported that Merck held talks to buy the Swiss biotech firm, citing three unidentified people familiar with the matter.
• Pinterest (PINS) gains 3.8% in premarket trading after JPMorgan raises rating to overweight from neutral. A diversification of its advertising platform to provide full-funnel capabilities is supporting further revenue upside at the social media firm, says analyst Doug Anmuth.
• Signet Jewelers shares (SIG) climb 13% in premarket trading after the owner of Kay Jewelers boosted its adjusted earnings per share forecast for the full year, following first-quarter results that was ahead of expectations.
• Woodward shares (WWD) are up 1% after it was upgraded back to buy at Deutsche Bank, after 11 months with a hold rating on the aircraft and industrial engine component maker, with the broker conceding last year’s cut was a mistake.

Earlier today, the Paris-based OECD slashed its global growth forecasts for the second time this year, saying that a combination of trade barriers and uncertainty are hitting confidence. The alert comes two months into President Donald Trump’s push to reshape global trade and agree new deals, with few signs of a breakthrough in talks with major partners.

“We’re clearly seeing a lot of volatility and investors want more visibility,” Massimiliano Bondurri, founder and chief executive officer of SGMC Capital in Singapore, said on Bloomberg TV. “It’s normal that markets are actually going to be flip-flopping.”

The US economy has also increasingly shown signs of a moderate yet broad-based softening. A report due later Tuesday on April vacancies is forecast to show a decline in job openings to the fewest since 2020 as companies are growing more conscious about consumers’ cost-saving efforts. Payrolls data scheduled for Friday will probably show a slowing in the pace of hiring.

“Markets are trading higher than on April 2, but earnings have been revised down, global growth too,” said Gilles Guibout, head of European equities at AXA Investment Managers in Paris. “Are we really in a better position? The answer is ‘no’.”

Meanwhile, Bloomberg reported that Trump was working the phones Monday and took to social media to try to sway Republican holdouts on his multi-trillion dollar tax bill. Investors and traders have raised concern that the legislation could worsen a ballooning budget deficit and US debt pile.

Conference season kicks off in earnest this week, with CEOs gathering for gabfests from San Francisco to New York at a time when their confidence in the economy has barely recovered from the shocks of “Liberation Day.” 

In Europe, the Stoxx 600 pared losses of as much as 0.5%, while the euro fell 0.4% against the dollar after inflation in the euro-area eased more than expected, dipping below the European Central Bank’s 2% target and supporting the case for interest rates to be lowered further. Here are the most notable European movers:

• UBS shares jump as much as 4.1%. Jefferies upgrades the stock to buy from hold, saying that the bank may be reaching a potential turning point on capital, with some clarity expected this week.
• Chemring Group shares rise as much as 3.6%, hitting new 2011-highs. Analysts at Shore say strong demand for defense is driving the stock higher, with shares up for a fifteenth consecutive session.
• Dalata shares gain as much as 4.3%, to 2019 highs, after a consortium including Pandox and Eiendomsspar submitted a non-binding bid for the the Dublin-based hospitality operator, valuing it at €1.3 billion.
• European miners underpeform as base metals fall on concern about China’s economic outlook, as a gauge of the country’s manufacturing activity fell to its lowest level in more than two years.
• ASML shares slip as much as 1.6% after a cut to equal-weight from overweight by Barclays, which says the firm may struggle to see any growth in unit numbers for its most cutting-edge extreme ultraviolet lithography tools next year.
• HSBC shares decline as much as 1.6% after BofA Global Research cut its recommendation to neutral from buy, citing the challenges facing large banks “in a more unstable world.”
• GSK shares fall as much as 1.7%. Berenberg downgrades the stock to hold from buy to “pause for breath” after a strong year-to-date performance from the drugmaker.
• Rio Tinto shares fall as much as 2.3% in London after Jefferies downgraded to hold from buy, with the bank citing geopolitical factors, capital allocation and expenditure risks and valuation.
• Julius Baer shares retreat as much as 2.3% after its strategy update on Tuesday failed to impress analysts, with KBW describing it as “underwhelming.”
• Poste Italiane shares fall as much as 2.1% as Morgan Stanley downgrades the stock to equal-weight from overweight expecting limited extraordinary capital deployment until 2027.
• NKT shares slide as much as 5.6% after the electrical component maker was downgraded by analysts at DNB Carnegie.
• MJ Gleeson shares slump as much as 28%, the most on record, after the UK homebuilder issued a profit warning.

Earlier in the session, Asian stocks edged higher as investors looked ahead to a potential conversation between US President Donald Trump and China’s Xi Jinping to dial down the recent flare-up in trade tensions. The MSCI Asia Pacific Index rose as much as 0.5%, before paring much of the gain. Concerns over persistent weakness in China’s economy also kept a lid on sentiment, after the latest Caixin PMI factory data showed the worst slump in over two years amid higher US tariffs. 

Key benchmarks in Hong Kong jumped more than 1%, with notable advances also in Taiwan and mainland China. South Korean markets were closed for a presidential election Tuesday after months of political chaos. The White House said Trump and Xi are “likely” to speak this week, fueling optimism that trade negotiations between the two nations can get back on track. China hasn’t confirmed any decision on such talks, however, and investors remain wary after Washington and Beijing recently accused each other of violating an agreement reached in May.

In FX, the dollar rose against all of its Group-of-10 peers, erasing part of Monday’s drop, while US Treasuries gained. Focus is on job openings data, which will give an insight into the health of the labor market ahead of non-farm payrolls on Friday. Bloomberg Dollar Spot Index inched up 0.2% on Tuesday, having dropped on Monday due to a flare-up in global trade tensions. The gauge saw its weakest level since 2023 after data showed that US factory activity contracted in May for a third month running. USD/JPY gains 0.2% to ~143. The euro fell 0.4% against the dollar to 1.1383 after inflation in the euro-area eased more than expected, dipping below the European Central Bank’s 2% target and supporting the case for interest rates to be lowered further.

In rates, US Treasuries gained, sending yields about 2bps lower across the curve, as US stock futures fell; 10-year yield -2bps to 4.42%. Gilts outperformed after the Bank of England’s Catherine Mann said late Monday there’s a tension between cuts to interest rates and efforts to unwind quantitative easing; 30-year yield falls 7bps to 5.34%

Today’s US economic data includes April factory orders and JOLTS job openings (10am). Fed speaker slate includes Goolsbee (12:45pm), Cook (1pm) and Logan (3:30pm).

Market Snapshot

• S&P 500 mini -0.4%
• Nasdaq 100 mini -0.4%
• Russell 2000 mini -0.4%
• Stoxx Europe 600 -0.3%
• DAX little changed
• CAC 40 -0.4%
• 10-year Treasury yield -3 basis points at 4.41%
• VIX +0.7 points at 19.04
• Bloomberg Dollar Index +0.2% at 1210.84
• euro -0.3% at $1.1411
• WTI crude +0.4% at $62.8/barrel

Top Overnight News

• The Trump administration wants countries to provide their best offer on trade negotiations by Wednesday as officials seek to accelerate talks with multiple partners ahead of a self-imposed deadline in just five weeks. RTRS
• US Commerce Secretary Howard Lutnick said he was optimistic that the United States and India would reach a trade agreement soon, but urged New Delhi to open its markets, reduce arms purchases from Moscow, and scale back its alignment with Brics. SCMP
• US President Trump posted on “Passing THE ONE, BIG, BEAUTIFUL BILL is a Historic Opportunity to turn our Country around after four disastrous years under Joe Biden. We will take a massive step to balancing our Budget by enacting the largest mandatory Spending Cut, EVER, and Americans will get to keep more of their money with the largest Tax Cut, EVER, and no longer taxing Tips, Overtime, or Social Security for Seniors”.
• OECD cut its global growth forecast this morning (2025 from +3.1% to +2.9% and 2026 from +3% to +2.9%) due to rising headwinds (“Substantial increases in trade barriers, tighter financial conditions, weakened business and consumer confidence, and elevated policy uncertainty all pose significant risks to growth). OECD
• A private gauge of China’s manufacturing activity tumbled into contraction in May, touching the lowest level since September 2022 as tariffs continue to weigh despite a trade truce with the U.S. The Caixin manufacturing purchasing managers index slid to 48.3 in May from 50.4 in April. WSJ
• China’s chief trade negotiator, He Lifeng, is prepared to play “hardball” with the US as Beijing pursues a more confrontational approach to talks w/Washington vs. Trump’s first term. WSJ
• Stronger demand at Japan’s 10-year bond sale brought some temporary relief as traders position for another auction in less than 48 hours that will test appetite for longer-dated debt (30 yr). BBG
• Russia told Ukraine at peace talks on Monday that it would only agree to end the war if Kyiv gives up big new chunks of territory and accepts limits on the size of its army. RTRS
• Eurozone CPI for May comes in below expectations at +1.9% on the headline (down from +2.2% in Apr and vs. the Street +2%) and +2.3% core (down from +2.7% in Apr and vs. the Street =2.4%) BBG
• TSMC said profit will rise to a record this year and reaffirmed its plan to invest another $100 billion on manufacturing in Arizona. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly higher as the region took impetus from the rebound on Wall St but with gains capped following disappointing Chinese Caixin Manufacturing data and as trade uncertainty lingered. ASX 200 edged higher amid strength in mining stocks but with further upside limited as defensives lagged and after mixed data releases including a surprise contraction in net exports contribution to GDP. Nikkei 225 kept afloat but lacked firm conviction after recent currency fluctuations and after a deluge of comments from BoJ Governor Ueda who reiterated they will continue to raise interest rates if the economy and prices move in line with forecasts, but also noted there was no preset plan for rate hikes and that they will raise interest rates only if the economy and prices turn up again and outlooks are likely to be realised. Hang Seng and Shanghai Comp were underpinned after the US reportedly extended the tariff pause on some Chinese goods to August 31st, while the White House Press Secretary stated that US President Trump and Chinese President Xi will likely talk this week, although the upside was restricted in the mainland given the lack of confirmation by Beijing regarding Trump-Xi talks and as participants also digested disappointing Caixin Manufacturing PMI data which showed its first contraction in eight months and printed its weakest since September 2022.

Top Asian News

• BoJ Governor Ueda said Japan’s economy is modestly recovering despite some weakness seen, corporate profits are improving and business sentiment is solid, but noted the slowdown in the overseas economy pressures corporate profits and the pace of economic growth is expected to slow down. Ueda reiterated that they will continue to raise interest rates if the economy and prices move in line with forecasts and they will conduct monetary policy appropriately depending on price, and economic developments to achieve the 2% target in a stable and sustainable manner. However, he noted it is important to make judgments without any preset ideas and that they said in the Outlook Report that the baseline scenario could change significantly, as well as stated there is no preset plan for rate hikes and they will raise interest rates only if the economy and prices turn up again and outlooks are likely to be realised. Furthermore, Ueda said they will review bond taper plans at the next policy meeting taking into account the opinions of bond market participants and he is aware of the market view that some investors’ appetite for super-long JGBs has declined.
• BoJ Governor Ueda says domestic and overseas economic developments have changed shape since Liberation day, which the levels exceeded many expectations; price environment is becoming more complex. Uncertainty is high; could weigh on corporate and household spending. Must look at underlying inflation, which excludes direct cost-push factors, in judging whether Japan sustainably achieves the BoJ’s 2% inflation target.
• RBA Minutes from the May meeting stated the Board considered keeping rates unchanged and cutting by 25bps or 50bps but decided the case for a 25bps cut was the stronger one and preferred policy to be cautious and predictable. RBA said inflation is still not at the mid-point of the target band and the labour market is still tight, while the Board agreed developments in the domestic economy alone warranted a rate cut and progress on inflation meant policy did not need to be as restrictive. Furthermore, it was stated that a larger move might offer more insurance against adverse global scenarios although the Board was not persuaded that 50bps was needed and US tariffs had not yet affected the Australian economy, while it would be challenging for businesses and households if aggressive easing had to be reversed and the Board judged it was not yet time to move monetary policy to an expansionary setting.

European bourses (STOXX 600 -0.3%) opened modestly firmer across the board, but sentiment soon slipped surrounding reports that Dutch Far Right Leader Wilders, confirmed to quit government coalition. European sectors opened with a strong positive bias, but sentiment soon dwindled to display a negative picture in Europe. Telecoms took the top spot, then joined by Utilities; Financial Services was the morning’s outperformer, lifted by upside in UBS (+2.7%) after it received a broker upgrade at Jefferies. Basic Resources have been pressured today given the downside in metals prices following weaker-than-expected Chinese Caixin Manufacturing PMI. US equity futures are broadly in negative territory, in-fitting with the risk tone and scaling back from some of the upside seen in the prior session.

Top European News

• Dutch Far Right Leader Wilders, confirms to quit government coalition (as expected), according to NOS. Dutch Far Right leader Wilders tells PM Schoof that all of his ministers will quit government.
• Dutch Cabinet scheduled to meet at 13:30 CET (12:30 BST) to “discuss next steps”.
• OECD GDP Forecasts: Forecasts generally downgraded, with the exception of the EZ (maintained) and Japan 2026 (upgraded). 
• Polish Parliament Speaker has proposed a government confidence vote to take place next week.

BoE TSC

• BoE Governor Bailey says the key factors for the May rate decision were domestic and not tariffs; have not seen particular inflation surprises. Labour market has loosened somewhat, pay growth is above levels consistent with the 2% inflation target but lower than expected in February. Gradual and careful remain “my guide for rates”. Savings to public finances through changing reserve remuneration by tiering would be illusory.
• BoE’s Breeden says sees merit in maintaining a gradual and careful approach to adjusting the policy stance. As the BoE approaches a neutral policy stance, evidence of restrictiveness will become less clear, and the decision to further loosen policy will require a greater degree of certainty that inflation is on track. Has gained greater confidence that the disinflationary process is progressing at a steady pace. The economy appears to be moving gradually into excess supply. Sees downside risks from greater trade diversion, but also sees upside risks from the introduction of supply chain frictions globally. Thinks this latter channel is likely under-represented in models. Tariffs expected to have a small impact on the UK economy. In March, “I expected that I would vote to cut again in May”.
• BoE’s Mann said must consider interactions of QT and rate decisions, while she added that the BoE cannot exactly offset high long-term rates caused by QT by cutting the bank rate further and extra cuts to short rates to compensate for QT could run counter to the need to purge structural rigidities in the UK labour and product markets. Furthermore, she expects these issues will be part of MPC considerations before the September QT decision.
• BoE’s Dhingra says risks to inflation and growth are tilted to the downside; would have preferred the bank rate to followed a different path. Overly restrictive policy risks supressing demand and disincentivising investment.

FX

• USD is attempting to atone for recent losses after being sold yesterday on account of trade woes, ongoing fiscal concerns and a miss on ISM manufacturing PMI. Focus thus far has been on the trade front after a Reuters report noting that US President Trump’s administration wants countries’ “best offer” by Wednesday. Elsewhere, the White House Press Secretary said US President Trump and Chinese President Xi will likely talk this week; note, we have not seen any confirmation of this from the Chinese side. Focus now turns to US JOLTS Job Openings and Fed speak.
• EUR is on the backfoot vs. the USD but just about holding above the 1.14 mark. Losses were extended in early European trade alongside a deterioration in the risk environment as news broke that Dutch Far Right Leader Wilders confirmed he is to quit the government coalition. Flash CPI metrics were cooler-than-expected with both the headline and core figures printing shy of expectations.
• JPY is softer vs. the USD but to a lesser degree than peers. USD/JPY briefly reclaimed the 143 level but failed to hold onto the level alongside a deterioration in the risk environment and a slew of comments from BoJ Governor Ueda who reiterated the Bank will continue to raise rates if the economy and prices move in line with forecasts. On the trade front, Japan’s trade negotiator Akazawa said they are aiming to have cabinet discussions towards a US trade deal and are seeking to accelerate talks ahead of the mid-June G7 talks. USD/JPY is back on a 142 handle and has traded within a 142.39-143.27 range.
• After a session of gains yesterday, GBP is softer vs. the USD but still managing to hold above the 1.35 mark. In terms of UK-specific newsflow, UK Trade Minister Reynolds will meet USTR Greer on Tuesday to discuss the implementation of a trade deal that has been complicated by the announcement of fresh US tariffs on steel, according to Reuters. Elsewhere, BoE’s Mann said the BoE cannot exactly offset high long-term rates caused by QT by cutting the bank rate further. Cable’s session low sits at 1.3511. Do note that the BoE’s Treasury Select Hearing on the BoE May MPR is ongoing. Just to pick out the key commentary so far; Breeden reiterated the Bank’s gradual and careful approach; Bailey highlighted that the May rate decision were domestic and not tariffs; Mann kept her usual hawkish tone and suggested Services is above what she viewed as consistent to get inflation back to target.
• Antipodeans are both softer vs. the USD and at the bottom of the G10 leaderboard in a reversal of yesterday’s price action. Losses come as risk sentiment has deteriorated. RBA minutes noted that the Board considered keeping rates unchanged and cutting by 25bps or 50bps, but decided the case for a 25bps cut was the stronger one and preferred for policy to be cautious and predictable. Elsewhere, Australian data saw a surprise contraction in net exports contribution to GDP.

Fixed Income

• Japan’s 10yr sale was met with strong demand overnight and a very small price tail, a well-received outing that sparked immediate upside in JGBs and weighed on yields. Japanese paper was unreactive to BoJ Governor Ueda comments overnight.
• Bunds picked up at the resumption of trade, perhaps acknowledging ongoing trade uncertainty and the commentary from China in response to the EU on Monday taking action to limit China’s participation in healthcare. Thereafter, German paper picked up following the strong Japanese 10yr auction overnight, a move which has continued into the European morning. There was some choppy action on news that the Dutch government collapsed. As for EZ HICP, metrics were cooler-than-expected sparking some modest upside in Bunds but failed to test the earlier peak of 131.49.
• As above, USTs picked up on the Japanese auction and has continued to grind higher since. As high as 110-25, but so far at least has stalled ahead of a double-top at 110-30 from the two sessions prior. Ahead, the docket features JOLTS, Factory Orders, RCM/TIPP, the latest Discount Rate Minutes and remarks from Fed’s Cook (voter), Goolsbee (2025) and Logan (2026).
• Gilts began the day on the front-foot, given the outlined bullish bias. Specifically, it opened higher by 24 ticks and then climbed another 22 to take out last week’s 91.89 best and print a 92.01 peak for the day. Do note that the BoE’s Treasury Select Hearing on the BoE May MPR is ongoing. Just to pick out the key commentary so far; Breeden reiterated the Bank’s gradual and careful approach; Bailey highlighted that the May rate decision were domestic and not tariffs; Mann kept her usual hawkish tone and suggested Services is above what she viewed as consistent to get inflation back to target.
• UK sells GBP 1.25bln 4.0% 2063 Gilt: b/c 3.51x (prev. 2.8x), average yield 5.281% (prev. 5.076%), tail 0.3bps (prev. 0.3bps)
• Germany sells EUR 3.678bln vs exp. EUR 4.5bln 1.70% 2027 Schatz: b/c 2.9x (prev. 2.2x), average yield 1.78% (prev. 1.94%), retention 18.27% (prev. 24.42%).

Commodities

• Crude is trading in positive territory and has been trading with a modest upward bias throughout the European morning. This comes in contrast to a mostly downbeat mood across markets, with energy traders still very much focused on the current geopolitical backdrop with Iran dismissing the US proposal for a nuclear deal as “unrealistic”. Brent Aug’25 currently trading towards the mid-point of a USD 64.68-65.09/bbl range. Do note that Kpler’s Bakr reported that there was no OPEC+ discussion about a higher hike than the 411k bpd over the weekend – but the complex was little moved on this.
• Precious metals are broadly in the red, with some modest underperformance in spot silver. As for spot gold, the yellow-metal was subdued overnight and scaled back from the upside seen in the prior session; it has traded sideways throughout the European morning. XAU/USD currently trades in a USD 3,351.81-3,392.10/oz range.
• Base metals are entirely in negative territory, in reaction to weaker-than-expected Chinese Caixin Manufacturing PMI data and as the Dollar moves a little higher. 3M LME Copper currently trades in a USD 9,521.55-9,610.90/t range.
• “During the OPEC-plus meeting on Saturday with the 8 member states, there were no discussions at all about a higher hike than the 411kbd, according to delegates attending the meeting”, via Kpler’s Bakr.” Russia did propose a pause which was also supported by Oman, but quick consensus was reached to go ahead with the 411kbpd addition in July”.

Geopolitics: Middle East

• US President Trump posted on Truth Social “The AUTOPEN should have stopped Iran a long time ago from “enriching.” Under our potential Agreement — WE WILL NOT ALLOW ANY ENRICHMENT OF URANIUM!”
• An Iranian official reportedly said the US nuclear proposal is unrealistic, according to CNN.
• US State Department said Secretary of State Rubio spoke with Saudi’s Foreign Minister and discussed Ukraine and Russia talks, stabilisation in Syria and the situation in Gaza.

Geopolitics: Ukraine 

• Russian-controlled parts of Zaporizhzhia in Ukraine lost power as a result of Ukraine’s attacks although the power cut-off had not affected the Zaporizhzhia nuclear power plant, according to Russian agencies.
• Ukraine’s Energy Minister says Russian Rocket attack hit a large energy generation facility in overnight attack

US Event Calendar

• 10:00 am: Apr Factory Orders, est. -3.2%, prior 4.3%, revised 3.44%
• 10:00 am: Apr F Durable Goods Orders, est. -6.3%, prior -6.3%
• 10:00 am: Apr F Durables Ex Transportation, est. 0.19%, prior 0.2%
• 10:00 am: Apr F Cap Goods Orders Nondef Ex Air, est. -1.29%, prior -1.3%
• 10:00 am: Apr F Cap Goods Ship Nondef Ex Air, est. -0.08%, prior -0.1%
• 10:00 am: Apr JOLTS Job Openings, est. 7100k, prior 7192k

Central Banks 

• 12:45 pm: Fed’s Goolsbee Participates in Moderated Q&A
• 1:00 pm: Fed’s Cook Discusses Economic Outlook
• 3:30 pm: Fed’s Logan Gives Opening Remarks at Fed Listens

DB’s Jim Reid concludes the overnight wrap

This morning DB host our 29th annual European LevFin Conference, the largest in the continent with well over 1000 issuers and investors attending. I’ve been speaking at it for 20 years now and kick off the event at 8am this morning. In previous years the likes of Bon Jovi, Duran Duran and The Killers, amongst others, have performed. Hopefully they’ve taken away some sage advice on their CLO portfolios. These events have evolved over the years across the industry and there is now sadly more chance of having my band perform than rubbing shoulders with Jon Bon Jovi.

Looking on the Mr Brightside, yesterday we released our latest World Outlook from DB Research, which updates all our global macro forecasts. It is called “The Limitations of Liberation…” You can read the full report here. It’s a difficult time to forecast right now given the relentless crossfire of trade headlines. But there’s a growing sense that we’re now on a turbulent but sustained path towards de-escalation. Even if the US administration remain hawkish on trade, we have already seen there are limits to that approach, particularly in the face of market turmoil and declining approval ratings for President Trump. So although we think there’s likely to be prolonged uncertainty and a notable slowdown in US growth over H2, the de-escalation so far will support growth relative to earlier expectations.

Nevertheless, a lot of collateral damage has already been done. Our outlook argues that the structural foundations of US exceptionalism – particularly the ability to finance itself cheaply via the dollar’s reserve status – have begun to erode. So we remain structurally bearish on the dollar and expect US term premia to keep rising.

The biggest risk to our view would be if the US administration reverts to a more aggressive stance after the court ruling. But in a world where funding US deficits is now going to be structurally harder, Washington may not have the latitude it once did. For Europe, this may be a rare window to recapture the geopolitical and economic momentum. Indeed, their economy has shown surprising resilience so far, and we revised up our 2025 Euro Area forecast back to 0.8%, where it was in our last World Outlook in November. Indeed since last November the largest growth downgrade is the US and the largest up move is Germany. See the full report for much more.

When it comes to the last 24 hours, June has got off to a mixed start amidst the latest trade tensions and an underwhelming ISM manufacturing print. To be fair markets have been more resilient than sentiment with the S&P 500 managing to recover from a weak open to close +0.41% higher, even if futures have given up these gains this morning. Bonds saw a renewed sell off, with the 30yr Treasury yield (+3.4bps) moving up to 4.97% before rallying back a basis point this morning. Matters also weren’t helped by a fresh rise in oil prices, as OPEC+ only increased supply in line with expectations for July over the weekend. Brent crude was up +2.95% to $64.63/bbl, which in turn led to a renewed bout of concern about inflationary pressures. So although there wasn’t a single story driving markets, the incremental newsflow predominantly leaned in a more negative direction.

To be fair, there wasn’t much optimism going into the session, as markets were already reacting to Trump’s tariff announcement after the close on Friday, where he promised to double the steel and aluminium tariff rate to 50%. As a reminder, that’s one where Trump’s still able to take action, as the court ruling last week did not include the steel/aluminium/automobile tariffs. And from a market perspective, it reminded investors that the administration wasn’t backing down from an aggressive trade posture, despite the various court rulings.

Then as the US session got underway, the latest ISM manufacturing print for May came through. That unexpectedly fell to a 6-month low of 48.5 (vs. 49.5 expected), so that added to investor nerves about the near-term outlook. Strikingly, the import component slumped to just 39.9, which is beneath its low point during the Covid pandemic, and at a level unseen since May 2009 as the economy was emerging from the GFC. Meanwhile, the prices component remained elevated at 69.4, so there wasn’t much to get excited about, and it offered a fresh indication of how the trade war was having a tangible economic impact.

That backdrop was a pretty tough one for markets, and the various developments meant the dollar index (-0.63%) continued to slide, moving very close to its post-Liberation Day low back in late-April. In bond markets, there was another round of déjà vu as the 30yr Treasury yield bounced off the 5% mark again. That’s proved something of a resistance level in this cycle, and by the end of the session, it was up +3.5bps to 4.97% (4.96% in Asia). That move in yields was echoed across the curve, with the 10yr yield (+3.9bps) up to 4.44%, whilst the 2yr yield (+3.7bps) was up to 3.94%. Meanwhile in Europe, yields on 10yr bunds (+2.4bps), OATs (+2.8bps) and BTPs (+1.9bps) all moved higher as well. And the Italian-German 10yr spread fell to its tightest level since September 2021, at just 97.5bps.

Equities also struggled for much of the day, with the S&P 500 trading as much as -0.85% lower shortly after the ISM release. However, the equity mood improved as the session went on, with the S&P closing +0.41% higher led by gains for energy (+1.15%) and information technology (+0.89%) sectors. The Mag-7 advanced +0.59%, while the Philadelphia Semiconductor index (+1.57%) saw an outsized gain. Still, the overall equity mood was far from upbeat, with just over half of the S&P 500 stocks moving lower on the day. In Europe, markets closed before the late US rally, with the STOXX 600 (-0.14%) falling back slightly. Meanwhile, gold prices (+2.81%) were one of the few beneficiaries of the more anxious mood, posting their biggest daily jump in almost a month.

Asian equity markets are mostly higher this morning with the Hang Seng (+1.47%) recovering from yesterday’s losses. The S&P ASX 200 (+0.41%) briefly reached a near four-month high following the release of the RBA’s May meeting minutes, which largely indicated a dovish outlook from the central bank. Elsewhere, mainland Chinese markets have resumed trading after a long weekend, with the CSI (+0.49%) and the Shanghai Composite (+0.48%) both higher perhaps after US Press Secretary Leavitt last night suggested that Trump and Xi could still speak as soon as this week. S&P 500 (-0.42%) and NASDAQ 100 (-0.40%) futures are both lower though.

Early morning data revealed that China’s manufacturing activity in May contracted at its most rapid rate since September 2022, as the Caixin/S&P Global manufacturing PMI printed at 48.3 (compared to the expected +50.7) and fell sharply from 50.4 in April. This decline was exacerbated by a significant drop in new export orders, underscoring the effects of stringent US tariffs.

In FX, the Japanese yen (-0.32%) weakened past 143 against the dollar, ending a three-day winning streak, despite BOJ Governor Kazuo Ueda expressing willingness to raise interest rates once the central bank is sufficiently convinced that economic and price growth will resume after a period of stagnation.

In terms of other data releases yesterday, UK mortgage approvals were weaker than expected in April, coming down to a 14-month low of 60.5k (vs. 62.8k expected). We also got the final manufacturing PMIs for May. The Euro Area PMI was unchanged from the flash print at 49.4, but the US number was revised down three-tenths from the flash reading to 52.0.

To the day ahead now, and data releases include the Euro Area flash CPI print for May, along with the unemployment rate for April. We’ll also get the US JOLTS report for April, and factory orders for April. Central bank speakers include BoJ Governor Ueda, the Fed’s Goolsbee, Cook and Logan, BoE Governor Bailey, Deputy Governor Breeden, and the BoE’s Mann and Dhingra.