Global risk appetite wavers amid tariff escalation, dollar volatility, and political surprises

Markets kicked off the new month on the defensive, as a cascade of geopolitical, trade, and central bank developments tested investor sentiment. From rising US-China trade friction and volatile currency shifts to election surprises and OPEC manoeuvres, today’s landscape reflects mounting uncertainty across asset classes. The mood remains cautious, with traders shuffling exposure across stocks, bonds, commodities, and currencies amid shifting global dynamics.

Tariff tensions resurface, risk sentiment erodes

The resurgence of tariff headlines, particularly around former President Trump’s aggressive trade posture, rattled global markets. US and Chinese officials exchanged fresh accusations of violating the trade deal, raising the spectre of renewed tariff escalation. Trump’s vow to double tariffs on steel and aluminium imports added to the sour tone.

• S&P 500 futures fell 0.6%, while Nasdaq 100 and Dow Jones futures dropped 0.7% and 0.5%, respectively.
• European markets mirrored the caution, with the Euro Stoxx 50 and Stoxx 600 lower by around 0.5%.
• Asian equities edged down, led by declines in the MSCI Asia Pacific Index (-0.3%) and MSCI EM Index (-0.4%).

OPEC+ supply strategy sparks oil volatility

OPEC+ agreed on a third consecutive supply increase, further amplifying concerns of oversupply. Despite some members pushing for a larger hike, the final adjustment was smaller than feared, lending temporary support to oil prices.

• Brent crude rose 2.2% to $64.19/barrel.
• Traders remain concerned that aggressive summer output increases, paired with weaker demand amid trade friction, could weigh on crude into Q3.

Currency moves: Dollar slides, Sterling and Yen gain

The US dollar extended its retreat, falling 0.5% on the day and notching a fifth straight monthly loss.

• EURUSD gained 0.7% to 1.1423.
• GBPUSD rose 0.7% to 1.3552, boosted by firm UK data.
• JPYUSD firmed 0.8% as haven flows intensified.
• Offshore yuan remained largely stable despite trade rhetoric.

Morgan Stanley flagged structural headwinds for the greenback, projecting a 9% decline over the next year due to slowing US growth and expected rate cuts.

Poland election adds political uncertainty to EU landscape

In a surprise outcome, nationalist candidate Karol Nawrocki—backed by Trump—won Poland’s presidency by a narrow margin. The result complicates PM Donald Tusk’s pro-EU agenda and may rekindle friction within the EU bloc.

• The Polish zloty weakened ~0.5% against the euro.
• Polish assets, which had outperformed under Tusk, may now face headwinds amid growing domestic polarization and legislative gridlock.

Ukraine escalation adds to geopolitical headwinds

Ukraine carried out a series of deep strikes inside Russian territory, utilizing drones embedded in civilian vehicles. This marks a significant escalation and further clouds geopolitical stability in Eastern Europe.

• Gold rose 2.1% to $3,356.70/oz on haven demand.
• Investors remain alert to potential retaliatory actions or broader military fallout.

China pushes back on US tech policy

Beijing accused Washington of breaching the spirit of the recent trade accord by expanding chip export restrictions. The rhetoric underscores a likely decoupling path between the two largest economies.

• Chinese equities reflected some of the anxiety, though FX markets remained muted.
• Tensions may bleed into broader supply chain dynamics, particularly in semiconductors.

Bond market update: Yields climb globally

Bond yields edged higher globally, signaling investor recalibration of inflation expectations and policy trajectories.

• US 10Y Treasury: +4 bps to 4.44%
• Germany 10Y Bund: +5 bps to 2.55%
• UK 10Y Gilt: +5 bps to 4.69%
• Australia 10Y: edging up to 4.47%

Corporate Highlights

• Sanofi announced a $9.1B acquisition of Blueprint Medicines, expanding its rare disease pipeline.
• GE is raising prices to offset new tariff costs.
• BYD stock continues to fall despite strong sales, as discounting pressures rise.
• Dior appointed Jonathan Anderson as head of womenswear in a strategic brand refresh.

Crypto snapshot

• Bitcoin rose 0.4% to $105,468
• Ethereum slipped 0.7% to $2,508

Digital assets remain volatile but are attracting new flows amid fiat currency instability.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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