“Classic ‘bait and stitch.’ Yes—stitch.” So Potemkin!
“The two largest economies in the world have reached a handshake for a framework,” Commerce Secretary Howard Lutnick said. “We’re going to start to implement that framework upon the approval of President Trump, and the Chinese will get their President Xi’s approval, and that’s the process.” – WSJ
The two days of the communication between Chinese and U.S. delegations have been “professional, rational, in-depth and candid,” said Li Chenggang, China international trade representative and Vice Minister of Commerce, as the two-day meeting in London concludes. #tariff#ChinaUSpic.twitter.com/y3JvWeNiP6
What the heck? Looks like a big nothing burger to us. Seat belts.
US commerce secretary Howard Lutnick said American and Chinese negotiators had agreed a framework deal to restore a truce in their trade war after marathon negotiations in London. The breakthrough restores the trade war ceasefire reached in Geneva last month that had faltered because of differences over Chinese rare earth exports and US export controls. The US team would return to Washington to present the deal to President Donald Trump, Lutnick said at the end of two days of talks in London. He did not provide any details about the framework. Li Chenggang, one of the Chinese trade officials, said he hoped the negotiations, which he described as professional and candid, would create more trust between the two nations, according to Reuters. Li said the Chinese team would also present the agreement to President Xi Jinping. – FT
Great graphic from the Visual Capitalist ranking cities with the fastest-growing millionaire populations from 2014 to 2024.
Shenzhen Tech Boom
Shenzhen, home to industry leaders such as Huawei, Tencent, and DJI, has rapidly emerged as a global hub for technology and innovation. Its vibrant startup culture and expanding tech sector have produced thousands of new millionaires, driven by stock options, IPOs, and private equity investments. Reinforcing its strategic importance, the Chinese government has designated Shenzhen as a showcase city for forward-looking reforms and cutting-edge development.
Pheonix Scottsdale Rising
Taking second place on the list is Scottsdale, Arizona. Once primarily known as a resort destination, the city has reinvented itself as an emerging tech center. Scottsdale now hosts the headquarters of GoDaddy and offices for major companies such as PayPal, Yelp, and Turo.
Ranked third is Bengaluru, widely recognized as the “Silicon Valley of India.” Its economy is driven by strong performance in IT, biotechnology, aerospace, telecommunications, electronics, and manufacturing.
San Francisco Still Wealth Capital
While the San Francisco Bay Area has seen some major companies relocate in recent years, it still holds the top spot for overall millionaire population, boasting 342,400. The region is also home to 82 billionaires—more than the combined total of billionaires in the next six wealth hubs.
Outside the dominant markets of the U.S., China, and India, Dubai also claims a place in the top 10. Thanks to generous tax policies, a flourishing tech industry, and large-scale real estate projects, the city continues to draw affluent entrepreneurs and global investors.
On a country-by-country basis, the United States leads with eight wealth hubs, followed by China with five, and India with three.
This one’s a must-view, folks. Not just because it’s smart and informative (it is), but because if you want to understand where this global trade war is headed, you need to understand where we’ve been. We’ve been here before, same script, different century, shinier weapons.
Opium Wars & Fentanyl
Today, the U.S. is hammering China over trade surpluses, supply chains, and fentanyl exports like it’s some 21st-century morality play. But let’s not kid ourselves, this ain’t new. Roll back the tape to the 1800s, when Britain was guzzling Chinese tea and bleeding silver to pay for it. The Empire didn’t sit down to rethink its consumption habits or embrace austerity. Nope. It pumped opium into China, grown in India by the ever-helpful East India Company. When the Qing Dynasty pushed back, the Brits (and later the French) came with gunboats. Balance-of-payments problem solved… with cannon fire.
That little-remembered and mentioned kerfuffle was called the Opium Wars, and it ended with China coughing up Hong Kong and swallowing a bitter cocktail of treaties, humiliation, and foreign occupation. So when U.S. negotiators start waving fentanyl stats as leverage in trade talks, don’t be surprised if Beijing hears echoes of a century-long trauma. To China, this isn’t just trade. It’s history. It’s memory. It’s power.
And that’s the problem. Washington’s playing checkers while Beijing’s playing Go—with a 5,000-year memory and no term limits.
Watch This Video
Economic Warfare: When Trade Turns to Warpulls back the curtain on this high-stakes chessboard and shows how trade, usually sold to the masses as the peaceful handshake of globalization, can become a blunt instrument of power. It’s a guided tour through the dark history of economic statecraft, from the silver flows and theft of Intellectual Property (IP) of the 19th century to the semiconductor sanctions and auto and steel tariffs of today.
Watch it. Learn something. Because the next chapter of this trade war isn’t going to be written in spreadsheets. It’s going to be written in strategy, scars, and steel.
The S&P 500 closed at 6000.4 on Friday, marking a significant psychological level with a 1.5% weekly gain. The strong performance was primarily driven by a short-covering bid, which reflects some big players are way offside, in our opinion. The rally gained momentum towards the end of the week, following a solid employment report (+139,000 jobs), which exceeded market expectations. Despite this, the employment data saw revisions downward for previous months’ data, and the job growth was increasingly concentrated in just two sectors: leisure and hospitality, and healthcare.
As we move into the next week, maintaining the 6000-level will be critical for the S&P 500. If the index can consolidate above this level, it increases the possibility for new highs as we move through the summer months. However, failure to hold this level might signal a shift in market sentiment that stocks cannot break through the top of the trading range. The upcoming CPI report is likely to play a crucial role.
Dollar
The dollar showed signs of weakness this week, particularly against EM currencies. The almost flat performance of the dollar index was distorted by Dollar/Yen strength, which appreciated 0.6% on the week. The dollar’s broader softness was notable, especially against emerging market currencies. This likely reflects a strong appetite for emerging market assets as global investors seek higher returns amid increasing risk appetite.
The dollar’s weakness against EM currencies suggests a shift in global capital flows. Emerging markets are poised to benefit from a stronger carry trade environment, while the U.S. faces mounting inflation risks that could further affect the currency’s value.
AI Trade
Across global risk markets, one theme continues to dominate: the AI trade. U.S. technology stocks linked to AI growth saw strong performance, particularly in sectors like information technology (+3.0%), communication services (+3.2%), and electronics technology. Asian markets, particularly Taiwan and Korea, also surged in tandem with strong demand for semiconductors and digital infrastructure driven by AI innovation.
Despite these advancements, there is still a significant underappreciation of AI’s economic impact in the market. AI technologies are not just reshaping industries but are poised to transform global productivity in ways that may not be fully captured in current market valuations. As AI continues to drive both corporate earnings and productivity gains, it is likely to become an even more dominant macro driver than traditional factors like inflation or trade tensions.
Global Markets
In Europe, the European Central Bank (ECB) continued its easing cycle, reducing its Deposit Rate by 25 basis points to 2.00%, citing softer inflation but maintaining a modest easing bias. With core inflation slowing to 2.3%, the ECB is expected to pause rate cuts in July, but a final reduction in September remains likely.
Across emerging markets, the week saw a broad rally in stocks, with EM equities rising 2.3%. This was led by Korea and China, whose currency movements and strong equity performances indicate growing investor confidence in the region despite broader global uncertainties. As EM currencies continue to outperform the U.S. dollar, the global risk appetite for these regions may remain robust, further supported by easing inflation in several key markets.
Key Takeaways
The 6000 threshold for the S&P 500 is crucial. Maintaining this level could set the stage for new highs, while a failure to hold it may signal a shift in market dynamics.
Emerging market currencies are seeing strong inflows, especially with the dollar weakening. This could continue if inflation data supports a dovish Fed stance.
AI continues to be a macro driver underappreciated by the markets. As this sector evolves, it may significantly outperform broader market expectations.
European and emerging market assets are showing resilience. The ECB’s stance and strong performances in Asia and EM currencies highlight opportunities in these regions.
As we head into the week ahead, all eyes will be on CPI data and further economic developments that may shape the outlook for the global economy, particularly in terms of tariffs, inflation, and central bank policy
Markets
U.S. Market Analysis
S&P 500 closed at 6,000.4, up +1.5% for the week and +2.02% YTD
Nasdaq Composite gained +2.2%, supported by strength in information technology and AI-related stocks.
Russell 2000 (small-cap index) rose +3.2%, outperforming large caps but remains down over 4% YTD.
Weekly gains were concentrated in:
Information Technology: +3.2%
Communication Services: +3.2%
Materials: +1.7%
Lagging sectors:
Consumer Staples: –1.4%
Utilities: –0.9%
Cboe Volatility Index (VIX) fell to 16.8, down from 18.6, indicating reduced market anxiety.
Rally was driven by:
May nonfarm payrolls: +139,000 jobs (vs. 130,000 est.)
Prior months revised down by –95,000
Unemployment rate held at 4.2%
Global Market Analysis
MSCI EAFE Index (Developed ex-US): +0.7% weekly return, +18.2% YTD
Eurozone:
Germany: +1.5%, +34.1% YTD
Italy: +1.3%, +34.7% YTD
France: +1.0%, +19.5% YTD
Emerging Markets (MSCI EM Index): +2.3% weekly, +11.4% YTD
China: +2.5%
Korea: +6.5%
Brazil: +1.6%
Japan (Nikkei 225): –0.6% on the week, yen weakened –0.4% vs. USD.
U.S. Dollar Index was soft overall:
EM FX basket rose +1.1%
Notable moves: AUD +0.8%, EUR +0.3%, JPY –0.4%
Crude Oil (WTI) rose +6.3%, reaching a 6-week high amid easing U.S.-China trade tensions
Economics
U.S. Economic Overview
Labor Market:
Nonfarm payrolls: +139,000 (May)
Unemployment rate: 4.2%, unchanged
Hourly earnings: Not explicitly cited but wage pressures are moderating
Inflation:
May CPI (due Wednesday) expected to show early tariff pass-through effects
ISM Indices:
Manufacturing PMI: <50 for third straight month (contraction territory)
Services PMI: Contracted for first time in nearly a year
ISM export orders: Lowest in 5 years, import orders at GFC lows
Rate Outlook:
Futures imply 2 Fed cuts in 2025, starting in September
Treasury yields (as of June 6):
2-yr: 4.04%
10-yr: 4.50%
30-yr: 4.96%
2s/10s spread: +47 bps, marginal steepening
Global Economic Overview
Eurozone:
ECB rate cut: 25 bps to 2.00%
May core inflation: 2.3%, headline: 1.9%
Wage growth easing: Q1 comp per employee +3.8% YoY
Japan:
Core CPI revised higher for FY2025; BoJ likely to hike next in January
Domestic equities pressured by –1.8% weekly decline and rising yields
China:
PMI (official manufacturing): 49.5 (contracting)
Non-manufacturing PMI: 50.3; signs of soft service sector demand
Yuan rallied +2.5% against USD
India:
RBI rate cut: 50 bps to 5.50%
Inflation forecast: Lowered to 3.7%, GDP growth held at 6.5%
Stanley Fischer’s impact on our journey as economists is both profound and personal. From the moment we encountered his co-authored textbook Macroeconomics—a work that distilled the complexity of the dismal science into practical, accessible insight—Fischer became a silent guide along our academic and professional path. But it wasn’t just his texts—it was his imprint on the entire field of macroeconomics that shaped us. He didn’t merely study macroeconomics; he helped define its modern contours.
Fischer’s intellectual architecture stands behind some of the most foundational frameworks in contemporary macro policy. His influence radiated through his groundbreaking research, his textbooks, and especially his students, who went on to helm central banks and global institutions. As chief economist of the World Bank during our own time there, he wasn’t just a senior figure; he was a beacon. His clarity of thought and firm grasp of both theoretical nuance and practical application brought coherence to chaos and helped us appreciate the true scale and responsibility of macroeconomic policymaking.
When we began grappling with the real-world stakes of fiscal reform and financial crises, it was Fischer’s example that pointed the way. From stabilizing Israel’s inflation-wracked economy to orchestrating IMF responses to systemic shocks in Asia and Latin America, he showed us that macroeconomics—done right—can be both precise and humane. He modeled a discipline anchored in analytical rigor but guided by ethical responsibility.
What stands out most, though, is Fischer’s legacy as a teacher. We were never in his classroom, but we worked with those he mentored—Bernanke, Draghi, Summers—and through them, learned much, the seriousness of purpose, clarity of thought, and devotion to the public good.
Stanley Fischer didn’t just teach macroeconomics; he embodied its highest ideals. We remember him not only as an intellectual giant but as the mentor we never met, whose influence quietly shaped every meaningful step of our professional journey.
Some sage advice and very relevant to the current economic situation.
Global Macro Monitor 