Headlines
Trading Day-War fears crush confidence
Published by Global Banking & Finance Review®
Posted on June 13, 2025
5 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 13, 2025
5 min readLast updated: January 23, 2026
Geopolitical tensions and trade developments impact market confidence, causing oil prices to rise and the U.S. dollar to weaken.
ORLANDO, Florida (Reuters) - - TRADING DAY
Making sense of the forces driving global markets
By Jamie McGeever, Markets Columnist
A week that started with investors in a reasonably optimistic mood, betting that the U.S. and China would strike a deal in their trade talks in London, ended on a sour note as Israel's strike on Iran sparked a sharp rise in oil prices and a selloff in world stocks.
Washington and Beijing did reach a 'framework' deal, and although there is some ambiguity around the details and it has yet to be ratified, it helped ease global tariff tensions.
Investor sentiment was also boosted by signs that global inflation pressures are cooling. Consumer and producer price inflation figures from the U.S., Japan, India and China were all weaker than expected, although the big caveat is the impact of tariffs has yet to be properly felt.
Strong demand for long-dated U.S. Treasuries at auction this week also soothed concerns over U.S. debt sustainability. President Donald Trump's 'big, beautiful bill', the budget deficit and federal debt still loom over the market, but there was a temporary reprieve this week.
Not so for the dollar. It slumped to its weakest level against a basket of currencies in more than three years and failed to draw any discernible 'safe haven' demand from the flaring geopolitical risk and tensions in the Middle East.
Non-U.S. investors continue to reassess their exposure to dollar-denominated assets. Those wanting to cut their exposure will either sell assets outright, buy less, or hedge more. Many long-term investors in Europe are increasing their hedge ratios, which effectively equates to selling dollars on a large scale.
The other big move of the week was oil, which surged nearly 10% at one point on Friday. It cooled a bit, but the specter of high energy prices is suddenly back. If so, what does that do for the inflation outlook?
We may get an insight into what policymakers think about that next week. The G7 leaders' summit in Canada gets underway on Sunday, and three of the world's most important central banks deliver their latest policy decisions - the Federal Reserve, Bank of Japan and Bank of England.
I'd love to hear from you, so please reach out to me with comments at . You can also follow me at @ReutersJamie and @reutersjamie.bsky.social.
This Week's Key Market Moves
* Oil. Brent crude rose 12% this week and WTI rose 13.5% -at one point they were up nearly 10% on Friday alone - markingthe biggest weekly rise since February and October, 2022,respectively. * Gold ends the week 3.5% higher, within $50 of April'srecord high $3,500/oz. * The dollar weakens 1%, ending the week near three-yearlows, while the euro rises 1.3%, having traded above $1.16earlier this week for the first time since 2021. * U.S. Treasury yields fall after weak economic data, strongauctions. But weekly declines at the long end of the curve arevirtually halved by Friday's spike. * World stocks and Wall Street end slightly lower. TheMSCI World hits record highs earlier in the week but Friday'sweakness bites. The S&P 500 falls 0.5% on the week, MSCI Worldsheds 0.3%.Chart of the Week
My generosity knows no bounds, so two charts for you again this week. Both highlight current relative market price dynamics that have not been seen for around half a century.
The first from Bank of America shows that, in dollar terms, emerging market stocks are the weakest relative to U.S. stocks in 50 years. BofA analysts are in no doubt what investors should do: "long EM... easy allocation decision." I wrote about this last month.
The second chart is from veteran strategist Jim Paulsen, who calculates that the market cap value of U.S. fixed income assets as a share of total U.S. equity market cap is the smallest in over 50 years. Along with a historically low equity risk premium, it raises the question of how much further the gap between stocks and bonds can widen.
Emerging markets and bonds, your time is ... now?
Here are some of the best things I read this week:
1. Dealing with Trump: Dos and don'ts 2. The 2025 trade war: Dynamic impacts across US states andthe global economy 3. The Dollar's Global Role and the Financing of the U.S.External Deficit - Brad Setser 4. Abundance for Workers - Dani Rodrik 5. Bruce Springsteen faces the end of AmericaWhat could move markets on Monday?
* China's monthly "data dump" - house prices, industrialproduction, retail sales, investment, unemployment (May) * India wholesale price inflation (May) * U.S. 20-year bond auction * U.S. New York Fed manufacturing index (June) * G7 leaders' summit in Calgary, CanadaOpinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Trading Day is also sent by email every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.
(Writing by Jamie McGeever; Editing by Bill Berkrot)
Investors started the week with a reasonably optimistic mood, betting on a potential deal between the U.S. and China during their trade talks in London.
The dollar slumped to its weakest level against a basket of currencies in over three years and did not attract safe haven demand due to rising geopolitical risks.
Oil prices surged nearly 10% at one point on Friday, raising concerns about high energy prices and their potential impact on inflation.
The G7 leaders' summit is anticipated to provide insights into policymakers' views on the current economic situation and the implications of rising oil prices.
Bank of America analysts indicated that emerging market stocks are currently the weakest relative to U.S. stocks in 50 years, suggesting investors should consider long positions in EM stocks.
Explore more articles in the Headlines category
