Market navigator: week of 9 June 2025

Summary

• What happened last week: US-China tensions eased following presidential talks, while economic data showed manufacturing contraction and services weakness
• Markets in focus: Technology indices traded range-bound amid political volatility, while precious metals hit multi-year highs on supply deficits
• The week ahead: Critical inflation data from China and the US will guide monetary policy, with GDP releases from Japan and the UK

What happened last week

• US-China diplomatic engagement: President Trump and President Xi conducted a 90-minute discussion addressing trade restrictions, Taiwan disputes, and rare earth export limitations following escalated tensions. The leaders established a framework for continued negotiations in London and extended reciprocal state visit invitations.
• Deteriorating US economic indicators: Manufacturing activity contracted for the third consecutive month while the services sector unexpectedly entered contraction in May, confounding expectations. Input prices intensified amid trade tensions. Labour markets showed cooling with elevated layoffs and non-farm payrolls declining to 139,000 from April's 177,000, though unemployment remained stable at 4.2%.
• China economic deceleration: Caixin's composite purchasing managers' index (PMI) revealed a sharp deterioration in business conditions, declining from April's 51.1 to 49.6 in May. Modest services sector expansion proved insufficient to offset manufacturing production contraction, with both sectors experiencing diminished foreign demand. Intensified competitive pressures further compressed output pricing.
• Central bank monetary policy decisions: The European Central Bank (ECB) delivered its eighth consecutive rate reduction, lowering deposit rates to 2.00% following May's inflation deceleration to 1.9%. President Lagarde indicated a potential pause in July's meeting, with the easing cycle's trajectory contingent upon tariff impacts, infrastructure spending, and energy prices. The Bank of Canada maintained rates at 2.75%.
• South Korean presidential election: Opposition leader Lee Jae-myung secured the presidency on a progressive platform emphasising national unity and economic revitalisation. The KOSPI surged 4.0% following the electoral outcome.

Markets in focus

US Tech 100 maintains range-bound dynamics

Political developments dominated market sentiment last week, with the escalating Trump-Musk dispute generating significant equity volatility. The deteriorating relationship reached a crescendo when Musk criticised Trump's $3.8 trillion tax legislation. The confrontation intensified with Trump threatening to terminate Musk's $22.5 billion government contracts while Musk countered with potential Dragon spacecraft suspension. Tesla erased $150 billion in market capitalisation within a single session, extending year-to-date losses to -22%.

Economic fundamentals presented mixed signals. Weakening business activity initially fuelled Federal Reserve rate cut expectations, though stronger non-farm payroll data drove 10-year Treasury yield above 4.5%. Fed governors continued emphasising unemployment and inflation risks from tariffs, suggesting prolonged higher rates.

Technical analysis reveals the US Tech 100 Index maintaining robust support above its 200-day simple moving average (SMA) while continuing its upward trajectory along the 20-day SMA, albeit with diminishing momentum. The index appears positioned to trade within established parameters between resistance at 22,223 (February's peak) and support near 20,500, pending a decisive breakthrough above historical highs.

Figure 1: US Tech 100 index (daily) price chart

Hang Seng Index encounters significant resistance levels

The Hang Seng Index (HSI) generated modest 2.0% returns despite disappointing PMI data, with technology sectors leading gains. Xiaomi extended its rally following encouraging first-quarter results, with management expressing confidence in the electric vehicle division's path to profitability through its SUV launch. NetEase advanced 6.0% following new gaming announcements. Conversely, New World Development declined 6.0% after delaying bond interest payments.

Technical analysis identifies substantial resistance at 24,000, serving as both technical and psychological barrier. The index has established a narrow trading range between 22,650 and 24,000 over three weeks. Sustained advancement beyond 24,000 requires significant catalysts, though the 50-day simple moving average should provide robust support at the range's lower boundary. A decisive break above 24,000 could initiate bullish continuation consistent with Elliott Wave Theory's Wave V. Alternatively, a breach below current parameters may target 21,700.

Figure 2: Hang Seng Index (daily) price chart

Silver achieves 13-year high amid supply constraints

Silver recently surged above $36 per ounce, establishing a 13-year high and generating over 20% year-to-date returns. The advance reflects supply deficits as industrial demand (particularly from solar panels, electric vehicles, and AI electronics) exceeds production by over 100 million ounces.

Multiple catalysts have driven the rally including sustained supply-demand imbalances. Safe-haven demand amid economic uncertainty has provided additional support, while US dollar weakness and spillover from gold's historic rally have enhanced precious metals valuations. The gold-to-silver ratio remains extremely elevated at approximately 93:1, well above historical norms, suggesting silver remains significantly undervalued relative to gold with substantial catch-up potential, particularly considering the metal trades well below its historical peak near $50.

Technical analysis demonstrates silver's bullish trend over 12 months, with potential for further advancement testing the uptrend's upper boundary near $38.3. However, given June's steep rally, profit-taking appears likely at current levels. The relative strength index at 73 indicates overbought conditions, suggesting potential correction toward $34.3-$34.7 before trend resumption. The 200-day simple moving average should provide substantial support at $31.9.

Figure 3: Spot silver (daily) price chart

The week ahead

The upcoming week features critical inflation readings from the world's two largest economies, with China's data potentially signalling deflation concerns while US inflation figures will provide essential insights into Federal Reserve policy direction. China's trade statistics will reveal global demand patterns amid ongoing commercial tensions. Economic growth takes centre stage with Japan and the UK releasing GDP data. The University of Michigan's consumer sentiment reading concludes the week, offering insights into American household confidence.

China's consumer price index (CPI) declined 0.1% year-on-year in April, interrupting modest March improvements. This represents the third consecutive month of consumption deflation as China confronts weakening domestic consumption and mounting trade uncertainty. The producer price index (PPI) contracted 2.7% year-on-year in April, driven by substantial production materials cost declines, extending the deflationary streak to 31 consecutive months.

In May, central government authorities implemented comprehensive monetary easing measures, including policy rate reductions and reserve requirement ratio adjustments. Additionally, US tariffs on Chinese goods received temporary relief, declining from 145% to 30%. These interventions may help mitigate deflationary pressures. However, contradictory signals emerged from disappointing Caixin PMI data, as previously detailed.

Market consensus anticipates CPI declining 0.2% in May, while PPI deterioration accelerates to -3.2% year-on-year. Superior-than-expected data releases could potentially catalyse the Hang Seng Index to breach the psychologically significant 24,000 level.

Figure 4: China's economy continues to be under deflationary pressure

Key macro events this week

Monday 9 June 2025

• 7.50am (HK time) - Japan GDP Growth quarter-on-quarter (QoQ) (Q1): previous 0.6%, consensus -0.2%
• 9.30am (HK time) - China Inflation Rate YoY (May): previous -0.1%, consensus -0.2%
• 9.30am (HK time) - China PPI YoY (May): previous -2.7%, consensus -3.2%
• 11.00am (HK time) - China Balance of Trade (May): previous $96.18B, consensus $101.3B
• 11.00am (HK time) - China Exports YoY (May): previous 8.1%, consensus 5%
• 11.00am (HK time) - China Imports YoY (May): previous -0.2%, consensus -0.9%

Tuesday 10 June 2025

• 8.30am (HK time) - Australia Westpac Consumer Confidence Change (June): previous 2.2%
• 9.30am (HK time) - Australia NAB Business Confidence (May): previous -1
• 2.00pm (HK time) - UK Unemployment Rate (April): previous 4.5%, consensus 4.6%

Wednesday 11 June 2025

• 8.30pm (HK time) - US Core Inflation Rate MoM (May): previous 0.2%, consensus 0.3%
• 8.30pm (HK time) - US Core Inflation Rate YoY (May): previous 2.8%, consensus 2.9%
• 8.30pm (HK time) - US Inflation Rate MoM (May): previous 0.2%, consensus 0.2%
• 8.30pm (HK time) - US Inflation Rate YoY (May): previous 2.3%, consensus 2.5%

Thursday 12 June 2025

• 2.00pm (HK time) - UK GDP MoM (April): previous 0.2%, consensus -0.1%
• 8.30pm (HK time) - US PPI MoM (May): previous -0.5%, consensus 0.2%

Friday 13 June 2025

• 10.00pm (HK time) - US Michigan Consumer Sentiment Preliminary (June): previous 52.2, consensus 53.5

Source: Trading Economics, Reuters (as of 7 June 2025)