The tentative truce brokered between Washington and Beijing appears, at face value, a win for global trade stability. Commerce Secretary Howard Lutnick's announcement of a framework to lift rare-earth restrictions should have ignited markets. Instead, the absence of details left traders unimpressed, the news absorbed into already-priced expectations.

The May Consumer Price Index, released this morning, carries significant weight. Investors are hunting for any sign that tariffs, and their domino effect on supply chains, are now seeping into core inflation. However, the data shows that despite the renewed imposition of tariffs under Donald Trump's trade policies, inflation in the United States continues to trend below expectations - for now.

The latest figures from May show consumer prices rising just 0.1% month-over-month, under the estimated 0.2%, while core CPI (excluding food and energy) increased only 0.1% versus the anticipated 0.3%. On a yearly basis, headline inflation matched expectations at 2.4%, but core inflation surprised slightly on the downside, coming in at 2.8% instead of the forecast 2.9%. These figures suggest that inflationary pressures remain contained, even as protectionist measures typically associated with upward price effects have returned. Whether this trend can persist as tariffs potentially ripple through supply chains remains to be seen, but for now, inflation remains subdued.

In other news, the US and China announced a framework agreement on Tuesday aimed at reviving their trade truce, particularly around the lifting of Chinese restrictions on rare earths. The agreement, discussed in London, follows a consensus reached in Geneva in May, but remains subject to approval by Presidents Trump and Xi. It should also allow for the partial lifting of certain US restrictions on high-tech exports. However, no specific details were provided at the end of the negotiations. The markets reacted cautiously, aware that the devil is in the details. The two sides have until August 10 to reach a more comprehensive agreement.

Upon the announcement of the agreement, Wall Street futures were positioning for the S&P 500 to open down 0.3%. In financial terms, that means “yeah, whatever.” More seriously, some of the progress has already been priced in. Probably most of it, since the US stock market has recovered 25% since its low on April 7. The London compromise, which is more of a moratorium, leaves two months to find a better solution. It leaves in place a less favorable customs situation than at the beginning of the year, but temporarily neutralizes this source of volatility. As a result, the markets are likely to refocus on fiscal policy, the budget, interest rates and, more generally, the US macroeconomy.

Equity markets continued to climb yesterday, with a few exceptions. The German DAX, for example, is taking a breather after rising 25% since January 1. This is the third consecutive session in the red for the European star of 2025, weighed down by profit-taking in the defense sector. In the United States, it was still green. The S&P 500 is back to within 1.8% of the peak reached at the beginning of the year. Of the four major Wall Street indices, only the Russell 2000 is still losing ground in 2025 (down around 3.3%). The index that was supposed to benefit most from Donald Trump's election is lagging behind. “Tariffs, tax cuts, reshoring, deregulation… but nothing for the little people,” Michael Hartnett said ironically. In his latest commentary, Bank of America's chief strategist published a chart showing that the “bro billionaires” index has gained 45% since Donald Trump's election victory in November 2024, while the Russell 2000 has lost 7%. This virtual index includes Nvidia, Meta Platforms, Palantir, Tesla, Interactive Brokers, ARK Innovation, Coinbase, Apollo Global Management and bitcoin. Bro-capitalism is in full swing… for those already at the top, that is.

In Asia-Pacific, the reaction to the Sino-US compromise was fairly positive, after initially being neutral. Japan was up 0.5%, while Hong Kong, South Korea and Taiwan were up around 1%. Gains are limited to 0.1% in Australia and India. Leading indicators are rather flat in Europe.

Today's economic highlights:

  • Dollar index: 98,730
  • Gold: $3,357
  • Crude Oil (BRENT): $67.75 (WTI) $65.20
  • United States 10 years: 4.44%
  • BITCOIN: $109,600

In corporate news:

  • Uber and Wayve to collaborate on a self-driving vehicle trial in the UK.
  • Mistral launches Europe's first AI reasoning model.
  • Meta expands AI capabilities, acquires 49% stake in Scale AI for $14.8 billion.
  • Tesla plans to launch public robotaxi rides on June 22. 
  • Boeing achieves 737 MAX production target and secures 303 new orders in May.
  • OpenAI expands partnership with Google for cloud services.
  • Salesforce is preventing its AI competitors from using Slack data, according to The Information.
  • General Motors will invest $4 billion in three US factories to accelerate the production of gasoline-powered vehicles.
  • GameStop lost 3.5% in after-hours trading after announcing its quarterly results.

Analyst Recommendations:

  • Arista Networks Inc: BNP Paribas Exane downgrades to neutral from outperform with a target price reduced from USD 109 to USD 106.
  • Bill Holdings, Inc.: Morgan Stanley downgrades to equalwt from overwt with a target price reduced from USD 60 to USD 55.
  • Etsy, Inc.: Arete Research downgrades to sell from neutral with a target price raised from USD 40 to USD 43.
  • Micron Technology, Inc.: GF Securities Co. Ltd. upgrades to hold from underperform with a price target raised from USD 74 to USD 116.
  • Mongodb, Inc.: Daiwa Securities upgrades to buy from outperform with a price target raised from USD 202 to USD 275.
  • Casey's General Stores, Inc.: Deutsche Bank maintains its buy recommendation and raises the target price from USD 452 to USD 561.
  • Docusign, Inc.: Daiwa Securities maintains its outperform recommendation and reduces the target price from USD 108 to USD 85.
  • Gitlab Inc.: BTIG maintains its buy recommendation and reduces the target price from USD 86 to USD 67.
  • Hexcel Corporation: Vertical Research Partners maintains its hold recommendation with a price target raised from 50 to USD 62.
  • Insmed Incorporated: Evercore ISI maintains its outperform recommendation and raises the target price from 90 to USD 110.
  • Palantir Technologies Inc.: Mizuho Securities maintains its underperform recommendation and raises the target price from 94 to USD 116.
  • Rtx Corporation: Vertical Research Partners maintains its buy recommendation and raises the target price from USD 127 to USD 153.