2025-06-04 11:01

June 4 (Reuters) - Sterling firmed against the dollar on Wednesday, as investors were relieved the United Kingdom was not in the crosshairs of U.S. President Donald Trump's latest tariff escalation, while upbeat economic data also buoyed sentiment. The U.S. doubled duties on steel and aluminium imports to 50% but exempted the UK. Analysts were sceptical, however, about what room there might be to do away with the existing 25% duties through the agreement signed last month. Sign up here. "UK steel exports were supposed to incur no tariff, so Trump's abrupt change may cause UK negotiators to question the value of 'agreements' made," said Paul Donovan, chief economist at UBS Global Wealth Management. The mood among global investors was one of caution ahead of an anticipated call between Trump and his Chinese counterpart which could determine where the world's two largest economies stand with regard to trade relations. Wednesday is also the deadline the Trump administration has given its trade partners to offer their best deals to avoid steep levies on goods imported into the U.S.. The pound firmed 0.12% and was last at $1.353, while against the euro it was last flat and bought 84.11 pence by 0947 GMT. Sterling has outperformed the greenback alongside its developed market peers, including the euro and Swiss franc , as Trump's erratic policies have encouraged investors to look outside the U.S. for opportunities and the UK is perceived to be better insulated from trade uncertainty. Tuesday's gilt auctions also indicated strong investor demand for the country's longer-dated bonds, a stark contrast to similar sales in the U.S. and Japan last month. Still, investors will closely monitor how Finance Minister Rachel Reeves goes about funding the government's proposed infrastructure plans. Yields on 30-year and 40-year gilts were up about 2 basis points each on Wednesday. Meanwhile, a survey showed Britain's services sector returned to tepid growth last month, with the Bank of England expecting deteriorating business confidence as a consequence of global uncertainty to weigh on growth in the coming months. Traders are pricing in that the central bank will lower borrowing costs by about 37 basis points by the end of this year, according to data compiled by LSEG. https://www.reuters.com/world/uk/sterling-edges-up-uk-avoids-higher-us-metals-tariffs-2025-06-04/

2025-06-04 10:54

LONDON, June 4 (Reuters) - What matters in U.S. and global markets today Despite all the trade and geopolitical tensions, markets have a spring in their step today, due to hopes that U.S. bilateral tariff deals will soon emerge, expectations that interest rates will fall in Europe, and signs of economic resilience and tech demand in the U.S. Sign up here. I discuss all this and the rest of today's market news below. Plus, check out today's column, where I explain why the euro's potential growth in reserve holdings could generate significant capital flows, even if it doesn't dethrone the dollar as the dominant global currency. Today's Market Minute * The U.S. tariff rate on most imported steel and aluminum doubled on Wednesday as President Donald Trump ratchets up a global trade war on the same day he expects trading partners to deliver their "best offer" in bids to avoid punishing import tax rates on other goods from taking effect in early July. * Billionaire Elon Musk plunged on Tuesday into the congressional debate over Trump's sweeping tax and spending bill, calling it a "disgusting abomination" that will increase the federal deficit. * Trump is set to use emergency powers and slash legal requirements relating to the Defense Production Act to lift U.S. production of critical minerals and weapons, according to a document seen by Reuters. * It is widely believed that investors around the world have a disproportionately high exposure to U.S. assets, an imbalance that could roil U.S. markets if corrected. But Reuters columnist Jamie McGeever explains why those fears may be overblown. * If 'American exceptionalism' truly is coming to an end, the key question for many investors is where capital may flow now. While Europe may be the obvious destination, Manishi Raychaudhuri, CEO of Emmer Capital Partners, argues that relative value metrics may favour emerging Asia. Global stocks hit record highs MSCI's all-country equity index (.MIWD0000PUS) , opens new tab hit a record high on Wednesday, a whopping 23% surge from the intraday trough of April 7 hit after the initial U.S. tariff sweep. The world index is now almost 6% higher for the year. Wall Street continues to lag, but the S&P 500 (.SPX) , opens new tab is positive again for the year and the Nasdaq is within a whisker of breaking even in 2025. Stock index futures are up again ahead of today's bell, with stocks in Europe and Asia also rising smartly. By contrast, U.S. Treasuries and the dollar (.DXY) , opens new tab both fell back, with the long bond yield now back near 5% and the euro briefly re-capturing $1.14 against the greenback. But is the coast really that clear for stocks? Part of the week's seeming optimism hinges on hopes that the fast approaching deadline on the 90-day pause in U.S. 'reciprocal' tariffs will focus minds and deliver deals. Despite the hoopla over a UK agreement last month, no deals have been signed and sealed so far. Central to hopes of some trade detente is the planned phone call between President Donald Trump and China's President Xi Jinping. The White House claims it's happening this week, though it's unclear exactly when. And Trump posted on Wednesday that Xi was "very tough and extremely hard to make a deal with." Washington officially doubled its tariffs on steel and aluminum imports on Wednesday, exempting Britain for now. The Trump administration also expects negotiating countries to make "best offers" by today to avoid additional import levies kicking back in next month. Maros Sefcovic, the trade negotiator for the European Union, met U.S. Trade Representative Jamieson Greer in Paris on Wednesday, with the 27-nation bloc set to make its case for cutting or eliminating threatened tariffs on European imports. But concern about auto sector disruption from the U.S.-China trade standoff has also risen by several notches. Global automakers joined U.S. counterparts to complain that restrictions by China on exports of rare earth alloys, mixtures and magnets could cause production delays and factory outages without a quick solution. Trump, meantime, is set to use emergency powers and slash legal requirements relating to a law aimed at lifting U.S. production of critical minerals and weapons, according to a document seen by Reuters. But despite the very real disruption in manufacturing, there were other signs that the wider U.S. economy is weathering the storm reasonably well, with job openings unexpectedly increasing in April as a week of labor market updates unfolds. That helped Wall Street stocks move higher on Tuesday, but the rally is mostly being driven by Big Tech once again. Information technology stocks (.SPLRCT) , opens new tab rose 1.5%, boosted by 2.9% gains by Nvidia (NVDA.O) , opens new tab, which is back to being the world's most valuable firm. Chipmaker Broadcom (AVGO.O) , opens new tab hit a fresh record high after the company said it has begun to ship its latest networking chip. Service sector survey readouts for May are due later, and European equivalents out earlier showed upward revisions to earlier flash readings. European stocks and the euro were higher ahead of the expected European Central Bank rate cut on Thursday, now seen as a done deal as euro zone inflation fell back below target in May. Markets reckon there's a 50-50 chance the Bank of Canada also cuts rates later today. The Canadian dollar held firm ahead of the decision. Elsewhere, South Korea's stocks jumped almost 3% and the won rallied 1% after the victory of liberal candidate Lee Jae-myung in the presidential election there. In today's column, I consider how a global reserve holdings shift in favor of the euro could generate massive amounts of additional investment in euro assets, even if the euro doesn't supplant the dollar. Chart of the day Switzerland is flirting with deflation yet again as a supercharged Swiss franc feeds off rising global tensions and depresses import prices. Swiss consumer prices fell 0.1% on an annual basis in May, the first negative print for more than four years. The Swiss National Bank is now widely expected to cut its main interest rate back to zero later this month, with markets pricing a one-in-three chance of policy rates returning to negative territory, where they languished for eight years until 2022. The SNB refuses to rule out a return to negative rates and may also have to resume heavy currency intervention to cap the franc to boot. The franc's nominal effective exchange rate index is up 5% since February and has appreciated by almost 30% over the past six years. Today's events to watch * Bank of Canada policy decision (9:45 AM EDT) * U.S. May private sector payrolls from ADP (1:15 PM EDT), May service sector business survey from ISM (10:00 AM EDT) * Federal Reserve publishes Beige Book on economic conditions. Atlanta Fed President Raphael Bostic speaks * NATO Secretary General Rutte convenes NATO Defence Ministers meeting in Brussels * European Commission President Ursula von der Leyen speaks in Brussels * U.S. corporate earnings: Dollar Tree Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles , opens new tab, is committed to integrity, independence, and freedom from bias. https://www.reuters.com/business/finance/global-markets-view-usa-2025-06-04/

2025-06-04 10:17

MUMBAI, June 4 (Reuters) - The Indian rupee declined for the sixth time in seven sessions on Wednesday, slipping briefly past 86 to the U.S. dollar, as traders unwound bullish positions amid persistent demand for the greenback. The rupee weakened to 86.0225 on Thursday before recovering marginally to end the day 0.4% lower at 85.90. Sign up here. The Indian currency has declined nearly 1.5% from a high of 84.78 it touched last Monday, making it one of the worst-performing Asian currencies over this period. "There is no real let-up in dollar demand from corporates and it would seem that dollar/rupee shorts are done for now, both in onshore spot and in the non-deliverable forward market," a currency trader at a bank said. Speculators are no more inclined to sell the dollar/rupee pair on rallies, unless "things improve" for the rupee, he said. The rupee has been underperforming regardless of what the dollar index or Asian peers are doing. "Frankly, most of us didn’t expect this," the trader said, forecasting more losses for the rupee in the coming days. Forex advisors are urging clients with near-term dollar payables to exercise caution. The risk-reward favours "proactive cover" rather than waiting for dips on dollar/rupee, Kunal Kurani, vice president at Mecklai Financial said. The dollar index was marginally higher on Wednesday. Market focus is on the May U.S. non-farm payrolls report on Friday, which could influence expectations around the Federal Reserve’s policy path. Asian currencies were mostly weaker awaiting updates on U.S. trade deals. President Donald Trump’s administration has set a Wednesday deadline for revised trade proposals from key partners. A call between Trump and Chinese President Xi Jinping is reportedly in the works amid mutual accusations of backtracking on tariff rollback commitments. https://www.reuters.com/world/india/rupee-buckles-under-position-unwinding-dollar-demand-builds-2025-06-04/

2025-06-04 09:32

A PM must be nominated to tackle EU's largest budget deficit President focuses on spending cuts vs tax hikes to curb deficit Failure to trim gap risks EU funds block, ratings downgrade Far-right party leads opinion surveys by wide margin BUCHAREST, June 4 (Reuters) - Romania must present a credible plan to lower the EU's highest budget deficit by the end of June, President Nicusor Dan said on Wednesday, as many state spending cuts being discussed would need at least six months to be enacted. Centrist Dan, who won a divisive presidential vote last month at the expense of the hard right, must nominate a prime minister who would be able to reduce the deficit from last year's whopping 9.3% of output to avoid a ratings downgrade to below investment level. Sign up here. Dan and the four pro-European parties who are engaged in talks to form a ruling majority are reluctant to enforce unpopular tax hikes that may boost the hard right, which controls around a third of parliament, focusing instead on cuts to state spending. But the EU and NATO member state is racing against the clock to announce credible measures to lower the deficit below the EU's 3% of output limit over seven years, or risk having access to EU funds blocked and its already high borrowing costs spiral following a downgrade. "The problem is that we need at least six months to enact many of these technical issues (spending cuts)," Dan told a news conference. "But a package of laws that gives the financial sector the guarantee that we are serious about lowering the deficit must come by June 30." "We have been paying for a medium pizza but eating a large pizza for years, someone must pay for the difference." While his comments opened the way for the tax hikes analysts and ratings agencies say are needed, Dan remained resistant to imposing a higher value-added tax, seen as the quickest fix to boost budget revenue. A London source with knowledge of talks between Romania, the European Commission and ratings agencies, said the fiscal correction must be three percentage points, with 2.5 percentage points coming from higher tax revenue and 0.5 point from spending cuts. Dan, who said he saw a new government formed in two weeks, said he expected a first draft of measures agreed by parties to come by Monday. Romania's growth has steadily slowed since a post-pandemic surge in 2021, and Brussels forecasts a budget deficit of 8.6% this year and 8.4% next year, well above the 7% target for 2025 outlined in a seven-year plan approved by the Commission. Romania is rated on the lowest investment rung by S&P, Fitch and Moody's, with a "negative" outlook. An opinion survey released this week by pollster INSCOP Research showed the hard right opposition Alliance for Uniting Romanians (AUR) would win 38% of votes in an election, whereas the Social Democrats, currently the largest party in parliament, would get 17%. https://www.reuters.com/markets/europe/romania-must-approve-credible-plan-lower-deficit-by-end-june-president-says-2025-06-04/

2025-06-04 07:32

NEW DELHI, June 4 (Reuters) - India's finance ministry wants green hydrogen prices to soften before deciding on financial support for production of steel using clean energy, two sources familiar with the matter said, as New Delhi seeks to control inflation and its expenditure. Indian steel producers have been asking for federal incentives as the nation considers mandating the use of a certain percentage of green steel in government projects. Sign up here. India, the world's biggest steel producer after China and a key green house gas emitter, has been working on a green steel policy to decarbonise production of the alloy. A delay in the launch of federal financial support could slow India's energy transition plans to meet 2070 net zero goal. The steel ministry is seeking incentives from the finance ministry for decarbonisation efforts. The finance ministry has argued that high green hydrogen costs would make use of green steel unviable and 'potentially inflationary', the sources told Reuters. The deliberations between the two ministries have been slowed, as the finance ministry has cautioned against a "hasty approach," one of the sources said, declining to be identified as discussions are not public. "Steel is an intermediate product and manufacturing green steel would be costly and there is a need to have a balanced approach between growth and sustainability," the source said, referring to the finance ministry's thinking. India's finance and steel ministries did not respond to Reuters' emails seeking comments. Currently, a majority of Indian steel mills depend on coal for their blast furnace operations. The steel ministry has touted the use of green hydrogen as an alternative but high costs are a deterrent. In December, India said steel produced with carbon dioxide emissions of less than 2.2 tonne per tonne of finished steel would be defined as "green steel". Steel producers in India, the world's fastest-growing major economy, generate 2.55 metric tons of carbon dioxide per ton of crude steel produced, 38% higher than the global average of 1.85 tons, according to Global Energy Monitor. https://www.reuters.com/sustainability/boards-policy-regulation/indias-finance-ministry-wants-lower-energy-prices-green-steel-incentives-sources-2025-06-04/

2025-06-04 07:02

Seoul to take wait-and-see stance on trade talks, sources say Open to extending deadline, unlikely to ask from the start Japan and China considered references for bargaining power South Korea better positioned than peers to strike favourable deal, analysts say SEOUL, June 4 (Reuters) - The new South Korean administration will likely make efforts to buy time for U.S. trade talks, as it studies the negotiations of bigger neighbours Japan and China for leverage, according to sources familiar with the ruling party's thinking. President Lee Jae-myung, who took office hours after winning the June 3 snap presidential election without a usual two-month transition period, said on the eve of the elections that "the most pressing matter is trade negotiations with the United States." Sign up here. The future of South Korea's export-oriented economy will hinge on what kind of deal Lee can strike, with all of his country's key sectors from chips to autos and shipbuilding heavily exposed to global trade. The new president and his liberal Democratic Party government inherit an economy that is expected to grow this year by a grim 0.8%, the weakest since 2020, and will need to unify a country deeply polarised by ousted President Yoon Suk Yeol's botched martial law attempt. South Korea and other countries may face further pressure, as a draft letter seen by Reuters showed the Trump administration wanted countries to provide their best offer on trade negotiations by Wednesday. A trade ministry official declined to confirm if Seoul had received the letter. But the transition of power after a six-month leadership vacuum provides Seoul with an excuse to slow down its negotiations and observe Washington's tariff talks with other countries, lawmakers, officials and trade experts from the Democratic Party said. "The new administration will need to take a fresh look at the overall framework of the negotiations and that will be a buffer to buy time, which the U.S. cannot reject," said a trade expert who took part in brainstorming for Lee's trade strategies. The sources added the administration may not be able to immediately ask Trump for an extension, and Lee's top diplomacy adviser has said he sees such a request being considered only after reviewing the progress. Still, prolonged negotiations by other countries may help to buy Seoul time. "It will be strategically right to take a wait-and-see stance because the situation is changing within the United States and around negotiations of other countries," one lawmaker said. STRATEGIC SILENCE South Korea, a major U.S. ally and one of the first countries to engage with Washington after Japan, agreed in late April to craft a "July package" scrapping levies before the 90-day pause on Trump's reciprocal tariffs is lifted, but progress was disrupted by continued upheavals in South Korea's leadership. Lee has since stressed there is no need to rush into clinching a deal and the deadline of July 8 set between Seoul and Washington should be reconsidered. During his election campaign, Lee did not make specific comments about contentious issues around the trade talks. That "silence" was a strategic move, a party official said. In a statement after his victory, the Korea International Trade Association called for Lee to "respond quickly to the rapidly changing foreign trade order" and use all of the government's diplomatic and trade resources to pursue a practical negotiation strategy. Trump's across-the-board tariffs on trading partners, including 25% duties on South Korea, have been the subject of ongoing litigation, but remain in place. "For different reasons, China and Japan will be references for us, with the former on the possibility of U.S. policy changes and the latter on how to make moves under a similar circumstance," another trade expert said. Heo Yoon, an economics professor at Sogang University, says Lee's best bet to win an extension would be by joining the meeting of the Group of Seven advanced economies. "There is a G7 meeting in Canada in mid-June, where South Korea could be invited to join and use it as a chance to extend the tariff-pause deadline," Heo said, adding an extension could also help Washington, as it would sway Lee towards the U.S. and away from China. Japan, another U.S. ally slapped with 24% tariffs, no longer sees merit in striking a quick deal, unless it is granted an exemption from 25% product-specific duties on its key industry of automobiles, also a major sector for South Korea. China agreed with the U.S. to significantly unwind their tariffs on each other in a 90-day truce signed in mid-May, but Trump last week accused Beijing of violating the agreement and threatened to take tougher actions. When it comes to joint responses to U.S. tariffs, there is a higher possibility with Japan than China, two sources said, citing shared interest in energy purchases and auto tariffs. Lee's party expects there to be some "two-track" transitional period, with current officials continuing negotiations as the new administration formulates its strategies, according to the official. BETTER POSITIONED Given its strength in key sectors of U.S. interest, such as shipbuilding and technology, some analysts see South Korea as better positioned than others in the region, as Seoul prepares a separate package of industrial cooperation for bargaining power. "Successful outcomes require offers that support the president's domestic agenda, and this will be comparatively easy for Korea given its importance in politically sensitive industries," said Jay Truesdale, a former U.S. diplomat and CEO of TD International, an advisory firm in Washington, D.C. Kathleen Oh, Morgan Stanley's chief Korea and Taiwan economist, said: "We believe there may be more channels and enough scope for Korea to work out a deal compared to, let's say, its exporting peer Taiwan." South Korea has the scope to decrease its trade surplus with the U.S. via more import purchases, while it can also offer lower tariffs on agricultural products, particularly rice, quoted by Trump as a high tariff example, Oh said. But, for the Lee administration, that is more the reason it does not have to rush, the second trade expert said. "In the worst-case scenario, if tariffs are adjusted after we sign an agreement, that might mean we made unnecessary concessions," the source said, adding "it's not like we don't have any leverage". https://www.reuters.com/business/autos-transportation/south-koreas-new-leader-seek-more-time-us-trade-talks-2025-06-03/