- Dollar Weakens as Trade-Driven Moves Moderate: Markets Wrap
The dollar weakened for a second session while equities inched higher, as large market moves earlier in the
week driven by the US-China tariff truce moderated. The greenback fell against major currencies, with
the yen and Swiss franc among the beneficiaries. The 10-year Treasury yield was slightly lower after declining
10 basis points Thursday, as traders priced in two Federal Reserve rate cuts this year. Australian and New
Zealand yields fell. - S&P 500 closes higher for a fourth day, Dow jumps more than 250 points
The S&P 500 climbed for a fourth session, adding to this week’s rally after the U.S. and China agreed to
temporarily slash tariff rates. Treasury yields also fell, providing a tailwind to stocks. The broad market index
rose 0.41% to end at 5,916.93, while the Dow Jones Industrial Average added 271.69 points, or 0.65%, and
closed at 42,322.75. The Nasdaq Composite underperformed, slipping 0.18% and settling at 19,112.32.
Confidence in the immediate outlook for stocks has strengthened in the wake of last weekend’s talks between
Treasury Secretary Scott Bessent and Chinese officials that appeared to stave off a short-term decline in
economic activity and a ratcheting up in inflation. - Oil prices fall after Trump raises hopes of a U.S.-Iran nuclear deal
Oil prices fell Thursday on expectations that the U.S. and Iran may soon reach a deal over Tehran’s nuclear
program. International benchmark Brent crude futures with July expiry fell 2.36% to close at $64.53 a barrel,
paring some of its earlier losses. U.S. West Texas Intermediate futures, meanwhile, closed at $61.62, down
2.42% for the session. Speaking in Doha, Qatar during his Middle East trip, U.S. President Donald Trump said
the U.S. was getting close to securing a nuclear deal with Iran. “We’re in very serious negotiations with Iran for
long-term peace,” Trump said. His comments come shortly after a top advisor to Iran’s supreme leader told
NBC News that the OPEC producer was ready to sign a nuclear deal with certain conditions in exchange for the
lifting of economic sanctions. The prospect of a U.S.-Iran nuclear deal is expected to have profound implications
for oil markets. - Gold prices rise over 1% on softer dollar and weak economic data
Gold prices rose more than 1% on Thursday, aided by a softer dollar and weak U.S. economic data, while
Russian President Vladimir Putin’s failure to attend peace talks drove some safe-haven buying. Spot gold
settled up 1.2% at 3,226.6 an ounce after hitting a more than one-month low earlier in the session. U.S. gold
futures gained nearly 1% to $3,218.70. The dollar index slipped 0.1%, making dollar-priced gold cheaper for
overseas currency holders. Data showed U.S. producer prices unexpectedly fell in April, while retail sales
growth slowed. Earlier this week, a report showed consumer prices rose less than expected in April. Markets
are pricing the Federal Reserve to cut rates by September. Lower interest rates help increase bullion’s
attractiveness as it is a non-yielding asset. Spot silver fell 1.8% to $32.29 an ounce. - US PPI dips lower than expected, signaling bearish outlook for USD
In a recent economic update, the Producer Price Index (PPI), a key indicator of consumer price inflation,
recorded a surprising downturn. The actual figure was reported at -0.5%, a number significantly lower than the
forecasted 0.2%. This unexpected drop in PPI, which measures the change in the price of goods sold by
manufacturers, has left market analysts and investors slightly taken aback. The forecast had predicted a modest
increase of 0.2%, indicating a healthy, albeit slow, growth in the manufacturing sector. Instead, the actual figure
plummeted to -0.5%, marking a stark contrast to the forecasted numbers. When compared to the previous PPI
figure, which stood at a flat 0.0%, the current reading further emphasizes the downward trend. The negative
figure indicates a decrease in the prices of goods sold by manufacturers, which can be a precursor to a dip in
consumer price inflation. The PPI is a leading indicator of consumer price inflation, which accounts for the
majority of overall inflation. Therefore, a lower PPI often signals a potential decrease in overall inflation. This
could have various implications for the economy, including a potential slowdown in economic growth and a
decrease in consumer spending. In terms of the currency market, the lower than expected PPI reading can be
seen as bearish for the US dollar (USD). A decrease in the PPI often leads to lower inflation, which in turn can
decrease the value of the USD. As a result, investors and traders will be keeping a close eye on the USD, as
further fluctuations in the PPI could lead to significant shifts in the currency market. - Fed’s Powell cautions about higher long-term rates as ‘supply shocks’ provide policy challenges
Fed Chair Jerome Powell said Thursday that longer-term interest rates are likely to be higher as the economy
changes and policy is in flux. “We may be entering a period of more frequent, and potentially more persistent,
supply shocks — a difficult challenge for the economy and for central banks,” the central bank leader said at a
policy conference. The “supply shocks” remarks are similar to those Powell has delivered over the past several
weeks cautioning that policy changes could put the Fed in a difficult balancing act. - Japan’s economy contracts by a more than expected 0.2% from prior three months as exports fall
Japan’s economy shrank for the first time in a year, contracting 0.2% in the March quarter as exports declined
sharply, preliminary government data showed Friday. The gross domestic product data was poorer compared
to the 0.1% contraction expected by economists polled by Reuters. On an annualized basis, Japan’s GDP
contracted 0.7% in the first quarter, also more than the 0.2% fall expected by the Reuters poll. Exports fell 0.6%
quarter-on-quarter, shedding 0.8 percentage points off the GDP as uncertainties caused by U.S. President
Donald Trump’s trade policies affected Japan’s export-heavy economy. On a year-on-year basis, however,
Japan’s GDP expanded 1.7%, the largest expansion since the first quarter of 2023 and a stronger showing
compared to the 1.3% growth seen in the fourth quarter. - Aramco says it has U.S. tie-ups worth up to $90 billion amid Trump Gulf tour
Saudi Aramco said on Wednesday it had signed 34 preliminary deals with major U.S. companies, potentially
worth up to $90 billion in a push to deepen commercial ties with the United States on the back of President
Donald Trump’s visit to the kingdom. The announcement was made a day after Riyadh pledged $600 billion in
U.S. investments. Still, most tie-ups listed by the state oil giant were memorandums of understanding without
a value attached. Some deals have also been previously announced, such as the agreement to buy 1.2 million
tons of LNG per year for a 20-year term from NextDecade. The agreements underscore Saudi Arabia’s efforts
to strengthen its energy partnerships and attract foreign investment as it looks to balance oil dominance with
broader industrial and technological growth under Vision 2030. “The U.S. is really a good place to put our
investment,” Aramco CEO Amin Nasser said on Tuesday at the U.S.-Saudi Investment Forum in Riyadh. The
forum coincided with Trump’s four-day tour of the Gulf, marked by lavish receptions and a series of business
deals, including $142 billion in arms agreements. Aramco is the economic backbone of Saudi Arabia, generating
a bulk of the kingdom’s revenue through oil exports and funding its ambitious Vision 2030 diversification drive.
Its shares have fallen almost 9% this year. - Walmart delivered another quarter of solid sales and earnings growth, but cautioned that tariffs and
increasing economic turbulence means even the world’s largest retailer expects to raise prices
Sales rose 4.5% at US Walmart stores open at least a year for the quarter ended April 30, while adjusted
earnings were 61 cents a share. The results were better than what analysts were expecting. Still,
President Donald Trump’s expansive, on-off tariffs haven’t spared the company. Transaction growth slowed
from a year ago and sales were choppy last quarter, with grocery and pharmacy holding up while general
merchandise slumped. And price increases fueled by the trade war are soon expected to hit shelves. “If you’ve
not already seen it, it will happen in May and then it will become more pronounced,” Chief Financial
Officer John David Rainey said of price hikes. Walmart’s shares fell 0.5%. - Applied Materials, the largest American maker of chip-manufacturing equipment, gave a lackluster
forecast for the current period, highlighting the potential cost of the US trade dispute with China
Sales will be about $7.2 billion in the fiscal third quarter, plus or minus $500 million, the company said. That
was roughly in line with Wall Street estimates, though some analysts projected as much as $7.4 billion. Profit
will be approximately $2.35 a share. Applied Materials and other chip-industry companies are adjusting to
restrictions on sales to China, one of the biggest markets for their products. The impact of tariffs imposed by
Washington also are making it more difficult to project future revenue. “There is more uncertainty in the
market,” Chief Executive Officer Gary Dickerson said. Applied Materials shares fell 5.7% in afterhours trading
following the announcement. - Alibaba ADRs dropped 7.6% after the Chinese e-commerce giant said during its earnings call that it
plans to “invest aggressively” in quick commerce, a move that’s set to intensify competition with rivals
JD.com and Meituan
Quarterly revenue missed estimates slightly, dragged down by a slowing international e-commerce arm and its
Cainiao logistics business, which is under restructuring. The closely watched cloud business failed to deliver
estimate-beating profits and missed higher buyside expectations as the company refocuses on AI. JPMorgan
(overweight): One of the key positives is customer management revenues accelerating further, driven by a
higher take rate, says analyst Alex Yao. However, adj. Ebita missed the broker’s estimates due to a decline in
cloud unit’s margins, widening losses at the local services arm and Cainiao. The international e-commerce
business saw growth slowing further. Morgan Stanley (overweight): “We think the share price weakness post
results is due to high cloud market expectations,” says analyst Gary Yu. Expects Alicloud revenue growth to
accelerate with industry demand rising after March. Double-digit CMR growth should continue with take-rate
improvement. Citigroup (Buy): Into FY26, BABA remains committed to reinvesting in AI and product pricing
competitiveness to ensure stabilizing of market share, together with the stepped-up investment in instant
commerce, says analyst Alicia Yap. Thanks to a surge in demand from enterprise customers across industries,
BABA expects cloud revs to accelerate gradually into FY26. FOURTH QUARTER RESULTS: Revenue 236.45 billion
yuan, estimate 237.91 billion yuan. Total Taobao and Tmall Group revenue 101.37 billion yuan, +8.7% y/y,
estimate 97.83 billion yuan. Total Alibaba International Digital Commerce Group revenue 33.58 billion yuan,
+22% y/y, estimate 34.97 billion yuan. Cainiao Smart Logistics Network Limited revenue 21.57 billion yuan,
12% y/y, estimate 25.11 billion yuan. Cloud Intelligence Group revenue 30.13 billion yuan, +18% y/y, estimate
29.9 billion yuan. Adjusted earnings per American depositary receipts 12.52 yuan vs. 10.14 yuan y/y, estimate
12.71 yuan. Adjusted Ebitda 41.78 billion yuan, +36% y/y, estimate 41.23 billion yuan.
