Global News Summary: 26 - 31 May 2025

Written By Larry Lim

Global markets closed May in a swirl of volatility, dominated by trade tensions, legal blows to Trump’s tariff agenda, and rising inflation signals across major economies. The U.S. posted a surprise Q1 GDP contraction of -0.2%, while the Fed warned of “long-lasting” damage from eroding safe-haven status. UK gilt yields surged on debt fears as food inflation hit 2.8%, and Japan’s Tokyo CPI climbed to 3.6%, reinforcing BoJ’s hawkish stance. AI developments saw China pivot to domestic chips amid U.S. restrictions, while Nvidia and Oracle advanced their AI hardware push. Meanwhile, European negotiators braced for deeper concessions to avert a full-blown U.S. trade war. Investor sentiment remains fragile but increasingly tethered to fundamentals as headline risk peaks.

United States

  • Q1 GDP contraction: The U.S. economy contracted at an annual rate of 0.2% in Q1 2025, as reported by the Bureau of Economic Analysis.

  • Legal challenges to tariffs: The U.S. Court of International Trade ruled that President Trump's imposition of broad global tariffs exceeded his authority under the International Emergency Economic Powers Act. An appeals court temporarily stayed this ruling, allowing the tariffs to remain in effect pending further review.

  • Market reactions: The S&P 500 index gained 6.2% in May, reflecting investor optimism despite trade policy uncertainties.

  • Federal Reserve concerns: Minutes from the Federal Reserve's May meeting indicated concerns about the potential loss of the U.S. dollar's safe-haven status due to trade policy-induced market volatility.

  • Trade negotiations: Treasury Secretary Scott Bessent acknowledged that U.S.-China trade talks were "a bit stalled," suggesting that direct engagement between President Trump and President Xi Jinping might be necessary to advance discussions.

  • Monetary policy pressure: President Trump urged Federal Reserve Chair Jerome Powell to lower interest rates to mitigate the impact of trade policies, but Powell reaffirmed the Fed's commitment to data-driven and independent monetary policy decisions.

United Kingdom

  • Food inflation: UK food prices rose by 2.8% year-on-year in May 2025, marking the highest annual rate since May 2024, driven by increased costs in fresh produce.

  • Fiscal policy: The International Monetary Fund provided Chancellor Reeves with leeway to "refine" the UK's fiscal framework but warned of limited fiscal buffers, suggesting that additional tax increases or spending cuts might be necessary if economic shocks occur.

Eurozone

  • Trade negotiations: European Union trade negotiators acknowledged the difficulty in overturning U.S. tariffs and emphasized the need for deeper concessions to avoid a full-blown trade war.

  • Monetary policy stance: European Central Bank officials, including Robert Holzmann, advocated for a cautious approach to interest rate cuts, emphasizing a data-dependent strategy amid ongoing trade tensions.

  • Consumer spending: French consumer spending increased by 0.3% month-on-month in April, falling short of expectations and indicating tepid household demand.

Japan

  • Inflation: Tokyo's Consumer Price Index rose by 3.6% year-on-year in May, up from 3.4% in April, driven by rising food costs.

  • Monetary policy: Bank of Japan Governor Kazuo Ueda indicated the possibility of adjusting monetary easing measures if the economy improves as expected, aiming to achieve the bank's sustainable price goal.

  • Bond market dynamics: The bid-to-cover ratio for 40-year Japanese government bonds fell to 2.2, the lowest since July 2024, reflecting reduced demand amid concerns over the bond market's fundamentals.

China

  • Industrial profits: China's industrial profits grew by 3% year-on-year in April, up from a 2.6% gain in March, supported by government programs aimed at boosting demand for manufactured products.

  • Trade tensions: President Trump accused China of violating a recent trade agreement, citing delays in the shipment of critical minerals, leading to considerations of revoking Chinese student visas and imposing new chip export restrictions.

New Zealand

  • Monetary policy outlook: Reserve Bank of New Zealand's Hawkesby stated that the central bank could hold the Official Cash Rate steady at its next policy decision in July, emphasizing a data-dependent approach to future rate changes.

Australia

  • Inflation: Australia's Consumer Price Index remained at 2.4% year-on-year in April, slightly above economists' expectations of 2.3%.

  • Housing market: Housing prices in Australia increased by 2.2% year-on-year in April, marking the fastest pace since August 2024 and contributing to inflationary pressures.

Economic Growth

  • United States: The U.S. economy contracted at an annual rate of 0.2% in Q1 2025, marking the first quarterly GDP contraction in three years.

  • Europe: French consumer spending data indicated a weaker-than-expected economic performance, with a 0.3% month-on-month increase in April.

  • China: Industrial profits showed modest recovery, growing by 3% year-on-year in April, suggesting resilience amid trade pressures.

Debt Securities

  • Global bond yields: Bond yields surged globally, led by the U.S. and UK, causing volatility in long-duration assets.

  • Japan: Ultra-long Japanese government bonds faced reduced demand, with the 40-year bond's bid-to-cover ratio falling to 2.2.

  • United Kingdom: The UK government shifted to shorter-term borrowing to lower its interest bill amid a global debt sell-off.

Artificial Intelligence

  • Nvidia: Suppliers resumed production of Nvidia's AI data center racks after resolving technical issues, with Oracle planning to spend $40 billion on Nvidia chips.

  • China: DeepSeek upgraded its R1 AI model, and major tech firms began shifting away from Nvidia, focusing on domestic semiconductors due to tightening U.S. export controls.

  • OpenAI: Acquired Jony Ive's hardware startup, io, for $6.4 billion, aiming to develop new post-smartphone interfaces.

ESG

  • Energy policy: President Trump's administration focused on fast-tracking nuclear energy projects, including small modular reactors, potentially impacting ESG fund allocations.

  • EU procurement: The European Union promoted a "Buy European" agenda in public procurement to reduce foreign exposure amid U.S. trade disputes.

Inflation

  • Tokyo: Consumer Price Index rose by 3.6% year-on-year in May, up from 3.4% in April.

  • United Kingdom: Food inflation increased to 2.8% year-on-year in May, the highest rate since May 2024.

  • Australia: CPI remained steady at 2.4% year-on-year in April, slightly above expectations.

  • Eurozone: ECB officials noted that inflation is near the 2% target but emphasized that elevated uncertainty

Larry Lim
Next

Global News Summary 19–24 May 2025