Market navigator: week of 2 June 2025
European Central Bank rate decisions and US employment data headline this week amid ongoing tariff policy uncertainty. Markets consolidate awaiting direction.
Summary
- What happened last week: Policy uncertainty dominated markets as tariff rulings fluctuated, with investors showing fatigue towards policy volatility. FOMC minutes separately revealed persistent inflation concerns and cautious consumer spending patterns emerged.
- Markets in focus: Technical consolidation observed in major indices, with the Nasdaq 100 maintaining uptrend support while the Hang Seng navigated mixed earnings results, and gold retreated amid dollar strength despite robust central bank demand.
- The week ahead: Critical monetary policy decisions from the ECB and BoC headline the calendar alongside comprehensive US labour market data, with eurozone rate cut probabilities reaching 97% following recent tariff threats.
What happened last week
- Tariffs on? Tariffs off? An appeals court reinstated Trump's tariffs one day after the Court of International Trade ruled that the administration lacked authority to impose them. The White House indicated its intention to circumvent judicial decisions. Market reactions remained relatively muted.
- Fed's restrictive stance: Federal Open Market Committee (FOMC) minutes revealed officials anticipate inflation may prove more persistent than expected whilst unemployment rates are expected to increase and remain elevated through 2027, reinforcing their decision to hold rates. Chair Powell reaffirmed his commitment to data-dependent policy adjustments despite Trump's pressure to reduce rates.
- Consumer spending reflects tariff impact: Inflation-adjusted spending growth decelerated from 0.7% in March to 0.1% in April, indicating cautious consumption patterns amid tariff uncertainties. Goods imports contracted by 20%, the largest decline on record. The Federal Reserve's (Fed) preferred inflation gauge, core Personal Consumption Expenditures (PCE) index, rose 0.1% from March, in line with expectations.
- US-China tensions escalate: The US intensified scrutiny of visa applications for students from mainland China and Hong Kong. Additionally, Washington advanced efforts to constrain China's semiconductor ambitions by prohibiting Huawei's Ascend chip use and restricting chip design software sales to China.
Markets in focus
US Tech 100 trades within range as momentum plateaus
Despite continuous tariff-related headlines throughout the week, investors demonstrated increasing fatigue towards policy flip-flopping developments. The positive market reaction to the trade court's ban proved considerably more subdued than previous responses to UK and Chinese trade agreements. Similarly, equity markets exhibited minimal reaction when the ban was subsequently averted. Market participants now recognise the rapid pace of policy changes and are adopting a more cautious observational approach before reacting.
From a technical analysis perspective, the US Tech 100 Index maintained firm support above its 200-day simple moving average (SMA) and continued its upward trajectory along the 20-day SMA, although momentum appears to be plateauing. The index is likely to trade within a defined range between resistance at 22,223, established by February's peak, and support around 20,500, unless a decisive breakthrough above the historic peak occurs.
Figure 1: US Tech 100 index (daily) price chart
Hang Seng Index navigates mixed corporate earnings
Individual corporate developments served as the primary driver of Hang Seng Index (HSI) performance during the previous week.
Meituan shares declined as much as 5% despite quarterly profits exceeding expectations with an 87% year-on-year (YoY) surge. The group's chief executive pledged to win the food delivery competition against JD and Alibaba at any cost. Conversely, Kuaishou shares surged 8% following an 11% YoY revenue growth driven by monetisation of its artificial intelligence tools. The company's overseas operations achieved profitability for the first time.
Following CATL and Hengrui Pharma's successful listings earlier this month, additional positive developments have emerged for Hong Kong's initial public offering (IPO) market. According to Reuters, the prominent fast-fashion retailer Shein is planning to list on the Hong Kong Stock Exchange this year after experiencing delays in China's regulatory approval for a London listing. The company was valued at $66 billion in a 2023 assessment. HKEX shares have appreciated over 15% during the past month.
Technical analysis of HSI reveals a narrow trading range between 22,650 and 24,000, which is likely to persist absent major market catalysts. With current levels receiving support from the 50-day simple moving average (SMA), the index may test the upper boundary of this range, which also represents an important psychological barrier. Should the index cross and sustain above 24,000, it may continue its bullish trajectory. Conversely, a breach below the range may drive the index towards 21,700.
Figure 2: Hang Seng Index (daily) price chart
Gold awaits breakout from compressed trading range
Gold prices retreated further during the previous week amid US Dollar strength and improving US consumer confidence according to the Conference Board's latest survey. However, this development should not detract from the medium to long-term prospect for gold, as gold exchange-traded fund (ETF) holdings remain at elevated levels and central bank demand continues robustly as they seek to diversify their reserves.
Technical analysis indicates that gold prices are compressed between converging trendlines, forming a descending triangle from April's peak and an ascending trend that commenced at the beginning of the year. The uptrend should provide material support around $3,170, though a decisive breakthrough above the falling trendline at $3,340 is required before the recent correction can be reversed. A clear directional signal is advisable before initiating positions in gold.
Figure 3: Spot gold (daily) price chart
The week ahead
The forthcoming week features two significant central bank meetings, with the European Central Bank (ECB) and Bank of Canada (BoC) both deliberating interest rates decisions that could signal shifting monetary policy stances. Critical employment data dominates the US economic calendar, including Job Openings and Labor Turnover Survey (JOLTS) findings, ADP employment figures, and the closely monitored non-farm payrolls report, providing comprehensive insights into labour market dynamics. China's Caixin purchasing managers' index (PMI) releases will offer alternative perspectives on manufacturing and services sector health beyond official government data. As corporate earnings season concludes, technology firms Broadcom and CrowdStrike represent among the final major reports, offering visibility into semiconductor demand and cybersecurity growth trends amid an evolving economic landscape.
The probability of a 25 basis point (bp) cut at the upcoming ECB meeting has increased from 84% in mid-May to 97% this week, reflecting increasingly dovish sentiment following Trump's threat to increase tariffs on European goods to 50% last week. The June rate decision could mark the seventh consecutive reduction since June 2024, bringing the deposit facility rate to 2%.
Last month, ECB President Christine Lagarde indicated that US tariffs would likely prove more disinflationary than inflationary for Europe, driven by cooling energy prices resulting from slower global growth, US dollar depreciation, and excess supply as global goods are redirected to European markets. December bond futures currently price at 1.67%, indicating another one to two cuts by year-end following the June meeting. Markets will monitor the ECB press conference closely for guidance on future cut timing, as a pause exceeding two meetings could signal an end to accommodative policies.
Figure 4: Europe's inflation approaches ECB 2% target, allowing rates to go down further
Key macro events this week
Monday 2 June 2025
- 10.00pm (HK time) – US ISM Manufacturing PMI (May): previous 48.7, consensus 48.7
Tuesday 3 June 2025
- 9.30am (HK time) – Australia RBA Meeting Minutes
- 9.45am (HK time) – China Caixin Manufacturing PMI (May): previous 50.4, consensus 50.6
- 5.00pm (HK time) – EA Inflation Rate YoY Flash (May): previous 2.2%, consensus 2%
- 5.00pm (HK time) – EA Unemployment Rate (April): previous 6.2%, consensus 2%
- 10.00pm (HK time) – US JOLTs Job Openings (April): previous 7.192M, consensus 7.1M
Wednesday 4 June 2025
- 9.30am (HK time) – Australia GDP Growth Rate quarter-on-quarter (QoQ) (Q1): previous 0.6%, consensus 0.4%
- 8.30pm (HK time) – US ADP Employment Change (May): previous 62K, consensus 120K
- 9.45pm (HK time) – Canada BoC Interest Rate Decision: previous 2.75%, consensus 2.75%
- 10.00pm (HK time) – US ISM Services PMI (May): previous 51.6, consensus 52
Thursday 5 June 2025
- 9.30am (HK time) – Australia Balance of Trade (April): previous A$6.9B, consensus A$6.1B
- 9.45am (HK time) – China Caixin Services PMI (May): previous 50.7, consensus 51.1
- 8.15pm (HK time) – EA ECB Interest Rate Decision: previous deposit rate 2.25%, consensus 2%
Friday 6 June 2025
- 8.30pm (HK time) – US Non-Farm Payrolls (May): previous 177K, consensus 130K
- 8.30pm (HK time) – US Unemployment Rate (May): previous 4.2%, consensus 4.2%
Key corporate earnings
Tuesday 3 June 2025
Thursday 5 June 2025
Source: Trading Economics, AASTOCKS, Reuters (as of 31 May 2025)
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