US stocks retreated as bond-market turbulence and new tariff threats undermined sentiment. A poor 20Y Treasury auction pushed 30Y yields to a 2-year high, reviving worries about deficits after Moody’s downgrade and House approval of President Trump’s tax-cut bill. Losses deepened when Trump vowed a 50% tariff on all EU imports from 1 June (later delayed to July 9) and threatened 25% duties on overseas-made iPhones, knocking Apple 3%. Macro data were firmer: flash PMIs rose to 52.3 in both manufacturing and services, although firms reported the fastest price increases since August 2022.
Europe’s rally stalled as Washington’s hawkish trade stance rekindled growth fears. The STOXX 600 lost 0.8%, with France’s CAC 40 (-1.9%) and Italy’s FTSE MIB (-2.9%) lagging, while the UK’s FTSE 100 edged higher. Trump’s tariff warning landed just as S&P Global/HCOB surveys showed the eurozone composite PMI slipping back into contraction at 49.5, led by a services pullback. Spanish and Dutch PMIs also dipped, underscoring the breadth of the slowdown. In response, the European Commission cut its 2025 GDP forecast to 0.9% and now sees inflation hitting the ECB’s 2% by mid-2025. Germany was a rare bright spot: first-quarter GDP was revised up to 0.4% q/q, the strongest since 2022, on better consumption, investment and trade. The UK picture remained mixed: inflation re-accelerated to 3.5% in April and retail sales jumped, yet the private-sector PMI fell for a second month, highlighting an uneven recovery.
