- Stocks Drop, Gold Rises as Trade Frictions Ramp Up: Markets Wrap
Asian shares dropped along with US stock-index futures as trade tensions dialed up, prompting investors to
hold back on taking risky bets. Gold rose in demand for safe haven assets. A gauge of Asian stocks fell 0.7%
while S&P 500 futures slipped 0.3% after President Donald Trump said he would double tariffs on steel and
aluminum imports. China and the US accused each other of violating their trade deal last month, sending Hong
Kong shares down 2.2%. Treasuries dropped, with the yield on the 10-year rising three basis points. Gold
advanced 0.5% after retreating last week. - S&P 500 is flat to close out a 6% May gain as investors continue to look past trade policy confusion
The S&P 500 was little changed on Friday to close out a big winning month, as investors shook off trade war
fears after President Donald Trump said China violated its preliminary trade agreement. The broad index inched
down by 0.01% to end at 5,911.69. The Nasdaq Composite slid 0.32% to 19,113.77, while the Dow Jones
Industrial Average added 54.34 points, or 0.13%, to finish at 42,270.07. Friday’s trading session marked the end
of a strong May trading month, with a chunk of the rally following a trade deal announcement between the
U.S. and UK. Investors hoped that could pave the way for more agreements with other countries facing duties.
The S&P 500 added 6.2% this month, while the Nasdaq surged 9.6% in that time. Both notched their best
months since November 2023. The 30-stock Dow has gained 3.9% on the month. For the week, the S&P 500
jumped 1.9%, while the 30-stock Dow rose 1.6%. The tech-heavy Nasdaq advanced 2%. - Oil rebounds after OPEC+ sticks to same output hike in July versus June
Oil prices rebounded more than $1 a barrel on Monday after OPEC+ decided to increase output in July by the
same amount as it did in each of the prior two months, in line with market expectations. Brent crude
futures climbed $1.19, or 1.9%, to $63.97 a barrel by 0044 GMT after settling 0.9% lower on Friday. U.S. West
Texas Intermediate crude was at $62.09 a barrel, up $1.30, or 2.14%, following a 0.3% decline in the previous
session. Both contracts were down more than 1% for the week. The Organization of the Petroleum Exporting
Countries and their allies decided on Saturday to raise output by 411,000 barrels per day in July, the third
month the group known as OPEC+ increased by the same amount, as it looks to wrestle back market share and
punish over-producers. The group had been expected to discuss a bigger production hike. “Had they gone
through with a surprise larger amount, then Monday’s price open would have been pretty ugly indeed,” analyst
Harry Tchilinguirian of Onyx Capital Group wrote on LinkedIn. Oil traders said the 411,000-bpd output hike had
already been priced into Brent and WTI futures. Looking ahead, low levels of U.S. fuel inventories have stoked
supply jitters ahead of expectations for an above-average hurricane season, analysts said. - Gold prices climb as tariff jitters lift safe-haven demand
Gold prices climbed on Monday as an escalation in the Russian war in Ukraine and U.S. President Donald
Trump’s fresh threat to double tariffs on imported steel and aluminum prompted investors to seek refuge in
safe-haven bullion. Spot gold was up 0.5% at $3,305.85 an ounce, as of 0204 GMT. U.S. gold futures rose 0.4%
to $3,329.80. “With trade and geopolitical worries bubbling to the surface once again, it’s no surprise to see
gold ticking higher to start the week,” said Tim Waterer, chief market analyst at KCM Trade. “Risk assets are
on the backfoot to start the week while a dip in the dollar is also keeping gold supported.” Trump said on
Friday that he plans to raise tariffs on imported steel and aluminum to 50% from 25%, prompting the European
Commission to warn that Europe is prepared to retaliate. Ukraine and Russia escalated hostilities ahead of their
second round of peace talks in Istanbul, with a wave of attacks that included one of Ukraine’s boldest strikes
of the war and an overnight drone assault by Russia. The U.S. dollar index edged 0.2% lower, making bullion
less expensive for overseas buyers. Elsewhere, spot silver was steady at $32.99 an ounce, platinum was down
0.6% at $1,049.72 and palladium fell 0.5% to $965.77. - China counters Trump’s accusations of Geneva trade deal violations, says U.S. undermining consensus
China on Monday refuted Washington’s claims that it had broken the Geneva trade agreement, instead
accusing the U.S. for breaching deal terms, signaling talks between the worlds top two economies have taken
a turn for the worse. Trade frictions between Washington and Beijing have flared up after a hiatus following a
meeting between U.S. Treasury Secretary Scott Bessent and his Chinese counterpart He Lifeng in Geneva,
Switzerland, that had led them to suspend most tariffs for 90 days. The Trump administration has ratcheted
up export restrictions on semiconductor design software and chemicals to China, while announcing it would
revoke visas for Chinese students, drawing ire from Beijing. Those steps “seriously undermine” the deal
reached in Geneva, a Chinese commerce department spokesperson said, while vowing that Beijing would take
measures to safeguard its rights and benefits, if the U.S. presses ahead with actions that “damage China’s
interests.” China has kept a firm grip on its rare earths exports, contrary to Washington’s expectations.
Chinese state media in an article Monday touted coordinated efforts across the nation on scrutinizing and
curbing illicit mining and exports of critical minerals. Beijing is “comfortable taking an extremely firm stance in
these negotiations” and “sees no reason to roll over,” said Stephen Olson, visiting senior fellow at Yusof Ishak
Institute in Singapore. “It is well understood in Beijing that any deal reached with the U.S. will only buy some
short-term peace, not the end of the story,” Olson added. - India’s economy grew by faster-than-expected 7.4% in the March quarter
India’s economy expanded at a faster-than-expected annual rate of 7.4% in the quarter ended in March,
despite mounting global economic uncertainty. The print for the gross domestic product of the fourth quarter
of the government’s fiscal year 2025 came in sharply higher than the 6.7% growth forecast by economists in a
Reuters poll. That marked the strongest quarterly growth in the fiscal year of 2025, according to government
data released Friday. India’s economy expanded by 6.5% in the full fiscal 2025 year, in line with
the government’s February estimate. The growth outlook in Asia’s third-largest economy has remained
relatively robust, thanks to strong domestic consumption and a relatively lower dependence on exports,
cushioning the blow from U.S. President Donald Trump’s erratic trade policy. Trump last month slapped so
called “reciprocal” tariffs of 26% on goods imported from India as part of broader U.S. trade measures, only to
lower them to 10% for 90 days ending in July to allow for deal negotiations. The White House has been
resorting to protectionist trade policies to address trade imbalances. India ran a nearly $46 billion surplus with
the U.S. in 2024, according to government data. New Delhi could be next in line to clinch a deal with the U.S.,
following Washington’s agreements with China and the U.K. Trump reportedly said earlier this month that India
had offered zero tariffs on all U.S. imports. - U.S. foreign tax bill sends jitters across Wall Street
The “One Big Beautiful Bill Act,” includes the most sweeping changes to the tax treatment of foreign capital in
the U.S. in decades under a provision known as Section 899. Section 899 will hit entities from so-called
“discriminatory foreign countries” that impose levies that disproportionately affect U.S. companies. Under the
new tax bill, the U.S. would hit investors from such countries by increasing taxes on U.S. income by 5 percentage
points each year, potentially taking the tax rate up to 20%. - Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows
The personal consumption expenditures price index, the Federal Reserve’s key inflation measure, increased
just 0.1% for the month, putting the annual inflation rate at 2.1%. Core inflation also was at 0.1% for the month
though it was higher on an annual level at 2.5%. Consumer spending, though, slowed sharply for the month,
posting just a 0.2% increase, while the savings rate surged to 4.9%, the highest in nearly a year. - Palantir shares climbed 7.7% after the New York Times reported that the Trump administration has
expanded the data-analysis software company’s work across the federal government in recent months
Palantir has received more than $113 million in federal government spending since President Donald Trump
took office, the New York Times reported, citing public records. The company is also in talks with at least two
other US agencies — the Social Security Administration and the Internal Revenue Service — about purchasing
its technology, the newspaper reported, citing six government officials and company employees with
knowledge of the discussions. The push has put a key Palantir product called Foundry into at least four federal
agencies, including D.H.S. and the Health and Human Services Department. Widely adopting Foundry, which
organizes and analyzes data, paves the way for Mr. Trump to easily merge information from different agencies,
the government officials said. Sharing data across agencies, raises questions over whether Trump might
compile a master list of personal information on Americans that could give him untold surveillance power. - Marvell Technology shares fell 5.6% after the chipmaker reported its first-quarter results and gave an
outlook. While analysts are generally positive, they said more may have been expected given AI enthusiasm
Bloomberg Intelligence: “Marvell 1Q sales and 2Q sales guidance only slightly beating consensus, and missing
on gross margins for both, might leave investors wanting more, especially for a high-growth AI semi name”.
Melius Research (hold, PT to $67 from $66): “The lack of Data Center upside in the F1Q results and F2Q guide
leaves more questions around the current ramp of the AI business,” and “without Data Center and AI upside
in the year, the stock is a ‘show-me story’ and may have trouble breaking out”. SECOND QUARTER FORECAST:
Sees adjusted EPS 62c to 72c, estimate 67c. Sees net revenue $1.9 billion to $2.1 billion, estimate $1.99 billion.
Sees adjusted gross margin 59% to 60%, estimate 59.6%. FIRST QUARTER RESULTS: Adjusted EPS 62c vs. 24c
y/y, estimate 61c. Net revenue $1.90 billion, +63% y/y, estimate $1.88 billion. Adjusted gross margin 59.8% vs.
62.4% y/y, estimate 60%. - Sanofi’s shares fell 4.8% following mixed results of its experimental drug for a deadly lung condition
Itepekimab, a medicine that is being jointly developed by Sanofi and Regeneron, is being tested as a treatment
for chronic obstructive pulmonary disease in former smokers. Two late stage trials showed contrasting results,
Sanofi said, with one showing a reduction in worsening of the condition — called exacerbations — of 27%. The
other trial didn’t show the same benefit despite having shown it earlier in the study. Sanofi and Regeneron
are assessing the data and will discuss it with regulatory authorities. The results of both studies merit further
exploration to fully understand how the drug interacts with a protein, called IL33, that causes inflammation in
this complex disease, according to Houman Ashrafian, head of research and development at Sanofi. IL33 is
elevated in the lungs of former smokers. Analysts had been keenly anticipating the data, as the patent expiry
of blockbuster Dupixent looms. Dupixent, a drug approved for multiple conditions including COPD (Chronic
Obstructive Pulmonary Disease), has helped fuel Sanofi’s growth. The mixed results are “a major setback and
at best — with new registrational trials in a patient subgroup — suggest a three-year delay,” said John Murphy,
an analyst at Bloomberg Intelligence. “Many COPD drugs have initially failed only for detailed analysis to
indicate benefit in some patients yet hopes were high (risk-adjusted sales of up to €1 billion ($1.1 billion) in
2030 for Sanofi) for this potential disease-modifier. Use elsewhere remains under investigation,” he said. - Zscaler shares rose 9.8% after the software company reported third-quarter results that beat
expectations and raised its full-year forecast
Bloomberg Intelligence: “Zscaler’s increased order momentum suggests the company is seeing broader
adoption of its new products, including data security, which is exposed to greater data consumption tied to
generative AI and agent deployments at enterprises”. Piper Sandler: Downgrades to neutral from overweight,
PT to $260 from $235. “The year appears to be playing out as we had hoped, with the company topping 3Q
metrics and the back half billings ramp appearing less daunting given quarterly performance”. However, “we
don’t think investors should chase what has been solid performance (fundamentals and stock) and should look
for more compelling entry points to buy shares”. BMO Capital Markets (outperform, PT to $295 from $233):
“ZS reported upside to all key metrics and raised its FY25 billings guide by the beat in the quarter, which makes
ZS one of the best Mar/April reports in our software universe”. Execution is strong, and “increasing traction
among new products gives us greater confidence in ZS’ longer-term revenue growth durability”. YEAR
FORECAST: Sees adjusted EPS $3.18 to $3.19, saw $3.04 to $3.09, estimate $3.09. Sees revenue $2.66 billion
to $2.66 billion, saw $2.64 billion to $2.65 billion, estimate $2.65 billion. Sees calculated billings $3.18 billion
to $3.19 billion, saw $3.15 billion to $3.17 billion, estimate $3.16 billion. FOURTH QUARTER FORECAST: Sees
adjusted EPS 79c to 80c, estimate 77c. Sees revenue $705 million to $707 million, estimate $710.7 million.
THIRD QUARTER RESULTS: Adjusted EPS 84c vs. 88c y/y, estimate 76c. Revenue $678.0 million, +23% y/y,
estimate $666.3 million. Calculated billings $784.5 million, +25% y/y, estimate $760.8 million.
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