Lots of news, lots of noise…

02 June 2025

The week starts with geopolitical relief

AT A GLANCE

Last week started and ended with breaking news on tariffs, with data and events in between
Bottom-line, tariffs are here to stay and their impact on growth and inflation is yet to be seen
The coming days will provide important top-down data, before our monthly investment committee next week.

Last week was shortened by a US market holiday but was intense and extremely volatile, with markets reacting to back-and-forth headlines on trade tensions.

On Monday, the White House extended the deadline for aggressive tariffs on Europe from a few days to a full month, to July 9th. Markets rallied and it only accelerated when the US Court of International Court stated that a large majority of President Trump’s tariffs were illegal and should be stopped within 10 days. Euphoria didn’t last long however as the ruling was immediately challenged by the administration and as the court of appeal dismissed the 10-day delay. Trade tensions then intensified on Friday, with the White House accusing China of violating the terms of their temporary trade deal and announcing an intention to double tariffs on global steel and aluminium, from 25% to 50%.

Let’s cut through the noise: there are several legal ways to impose tariffs, which are a key pillar of President Trump’s policy. We will assume that a 10% universal baseline is here to stay, with most probably some additional tariffs for China and some sectors. The question is not about their occurrence, but about their impact on growth and inflation, which is yet to be seen. Indeed, between record high US consumer confidence and core PCE inflation at a 2.5% annual pace at the end of April -the Fed’s preferred measure of inflation, against which their 2% target applies, the backward-looking picture looks fine. The FOMC minutes confirmed that the Fed will wait before acting, and the rich data from the week ahead (regional PMIs, US job report…) should provide clues on the path ahead.

This matters, especially as the month of May was good for markets overall. US stocks are back to where they traded before Liberation Day, helped by a solid Q1 earnings season. We will analyse data from the coming days before our monthly investment committee next week. We wish you a great week and a wonderful Eid al-Adha holiday.

The week starts with geopolitical relief

Cross-asset Update

So far in 2025, our recommended positioning has not dramatically evolved, in a context where political uncertainty exacerbates volatility. We had started the year fully invested, with an overweight in gold and government bonds (the latter being quite contrarian at the time), funded by an underweight in hedge funds as we thought that the first moves of the US administration could generate more instability than reliable trends.

Our main change was implemented 10 days after the now infamous “Liberation Day” and it was not radical. We reduced our allocation to stocks from developed markets by -2% while keeping a full exposure to emerging markets. This was more a repositioning of risk than an outright bearish call: indeed, we also increased our allocation to high yield within fixed income. The last move proved beneficial, and we closed it, back to neutral, in our May committee. We are now modestly defensive.

We reckon that there is no genius in our tactical allocation – we would have loved to be able to predict the massive rebound of US stocks for example. Still, in terms of results, our three profiles are all up 5% (in US$) or more over the first five months of 2025, outperforming global multi-asset benchmarks. The Emirates NBD Asset Management funds of funds that implement our strategies are also very well ranked within their international peer groups. Again, let’s be humble: this is not because we were tactically excellent, as most of it comes from the quality of our strategic asset allocation (SAA).

As many of our readers know, our SAA profiles are built quantitatively, using long-term models, with a simple objective: minimizing the probability of capital loss over respectively 3,5 and 7 years while trying to deliver the best possible expected returns. The SAA is about long-term factors, from economy and inflation to asset class returns, risks and correlations. As a result, our SAA profiles are stable over time. We review their relevance every year, during our Long-Term Capital Market Assumptions exercise, but we only changed them a couple of times in the last 7 years, especially following the disruptions of 2022.

Now, looking forward, the time may come again to adjust our strategic positioning. The short-term remains highly unpredictable: political uncertainty is high, and one can assume that part of it is deliberate, as part of the negotiation tactics developed in President Trump’s “Art of the Deal”. The direction of travel for the long-term, however, could be more exploitable. We can forecast a different globalization, affecting the growth/inflation mix. Massive amounts of public debt and the end of “business as usual” in terms of fiscal deficits, especially in the West, will have to be fixed, another significant change. Finally, AI will boost productivity but also affect labor markets. If confirmed, the long-term backdrop could prove more favourable to alternatives and commodities than to “traditional” asset classes over the long run. Some fine tuning may be needed.

Academic studies are very clear: the strategic allocation drives at least 80% of a portfolio’s returns and risks. This is what we will be working on – a lot- in the second half of 2025.

The week starts with geopolitical relief

Fixed Income Update

The global bond sell-off of the previous week eased slightly last week as the yield curves across developed markets bull-flattened. The long-end of the curve went down 7 to 8 bps while front-end of the curve went down 3 to 5 bps. US 7-year bond auctions happened smoothly last week. The end-user demand at 95% is a record. This supports our duration positioning of 5 to 7 years in bond portfolios. Bid-to0cover ratio was well above average at 2.69. This week’s rally was also supported by expectation that Japan could look at reducing long-debt issuance given weaker demand in recent times. US Core PCE at 2.5% and Q1 GDP growth of -0.2% added to the positive backdrop for treasuries. This week’s NFP data assumes key significance.

Fed governor Chritopher Waller has mentioned that he continues to see a path to interest-rate cuts later this year amid his expectations that tariffs will boost unemployment and temporarily increase inflation. Waller had previously outlined two tariff scenarios with the high one at 25% tariff and the lower one at 10% tariff. In both scenarios, Waller expects the impact of tariffs on inflation would be temporary. He also anticipates the levies will cause an increase in the unemployment rate that will “probably linger.” That said, job cuts would likely be “modest,” he said, under the smaller-tariff option. He is widely considered to be one of the two top candidates in the run to succeed Chairman Powell. The market is pricing in 52 bps of rate cuts till the year end 4 rate cuts in the next 12 months.

Spreads remained relatively calm last week. IG spreads traded in a tight range of 2 bps last week. Yields moving higher has not impacted the spreads much till now. Ideally, any sharp jump in yields results in widening of spreads but lower yields due to economic weakness results in prolonged wider spreads. Fund flow into IG bonds has been positive garnering $4bn per week due to high all-in yields in May. High Yield bond spreads have also come down by 9 bps last week. Moderation of the labour market and slowdown in growth would affect the spreads negatively.

Last week, the GCC bond market saw several issuances. Aramco successfully tapped the market with a multi-tranche bond offering across 5-, 10-, and 30-year maturities priced at 4.83%, 5.39% and 6.51%, raising a total of $5 billion. Mamoura Diversified Global Holding (MDGH), a subsidiary of Abu Dhabi’s Mubadala, issued a $1 billion 10-year senior unsecured sukuk priced at 5.10%. In the banking sector, Sharjah Islamic Bank issued a $500 million perpetual AT1 sukuk, non-callable for 5.5 years, at a pricing of 6.125% with an order book exceeding $1 billion.

The week starts with geopolitical relief

Equity Update

Global equities found their footing last week, with gains led by a fresh burst of enthusiasm around a rebound in consumer confidence, AI and strong showings from developed markets. The MSCI ACWI rose 1.4%, as U.S. stocks climbed and Japan extended its outperformance. The S&P 500 gained 1.9%, closing above the 5900 mark, capping off the strongest May for the index since 1990, and the tone felt distinctly risk-on once again. Nvidia posted another massive quarter, with revenue hitting $26 billion and a new forecast that pointed even higher. There was a clear message in the numbers: demand for AI infrastructure remains relentless. Even with an $8 billion drag from China, the top-line beat and margin strength were enough to reignite confidence in the AI story. Tech stocks rallied around it, and analysts wasted no time lifting price targets. Earnings outside of chips also offered support. Salesforce raised its outlook, riding a wave of enterprise interest in AI tools. Costco and Abercrombie delivered better-than-expected results, signaling that pockets of U.S. consumption remain firm. But not all names kept up. HP warned on slowing device sales, and Gap flagged tariff pressures, showing that macro headwinds haven’t disappeared.

Europe edged higher as well. The MSCI Europe index rose 0.7% and closed out its best month since January. Markets brushed off soft economic data and focused on the disinflation narrative. German CPI aligned with expectations, keeping hopes alive for a June ECB rate cut. Financials and utilities led the gains, and semiconductor stocks found renewed interest after the Nvidia print. In Japan, the TOPIX rose 2.4%, continuing its run as one of the year’s top performers. A weaker yen helped exporters, and chip-related names moved in lockstep with U.S. peers. There was also a shift in the policy conversation. Tokyo called on companies to do more than buy back shares and instead put capital toward growth. The idea of a more dynamic, investment-led corporate strategy is gaining traction. Markets took it in stride.

China reversed the most. The MSCI China index dropped 2.6%, giving back recent gains. Regulatory headlines resurfaced, stimulus traction remained questionable, and fresh U.S. restrictions weighed heavily. Nvidia’s China revenue collapse underscored the impact. In the EV space, BYD slashed prices, triggering another round of margin worries. Sales from Li Auto and Zeekr held up, but sentiment didn’t follow. Even a rush of Hong Kong IPOs wasn’t enough to turn the tide. Indian markets paused. The MSCI India index slipped 0.2%, extending a quiet stretch of consolidation. While local news was supportive, monsoon forecasts and a record RBI dividend among them, investors held back, waiting for policy clarity from the central bank. In Dubai, the market saw its first IPO of the year. Dubai Residential REIT jumped 14% on debut, one of the strongest openings on the DFM in years. By its third trading day, the listing was holding firm, with foreign investors starting to take notice.

Equities have shaken off the worst of May’s anxieties. AI remains the headline driver, but under the surface, markets are shifting. Earnings are no longer enough on their own. Visibility, capital discipline, and a clearer macro path are starting to matter again.

The week starts with geopolitical relief

Written by:

Maurice Gravier Chief Investment Officer , [email protected]
Anita Gupta Head of Equity Strategy , [email protected]
Satyajit Singh Fixed Income Analyst , [email protected]
Giorgio Borelli Head of Asset Allocation , [email protected]

Disclaimer

This document is prepared by Emirates NBD Bank (P.J.S.C) (“the Bank” or “Emirates NBD”), a public joint stock company incorporated in Dubai, United Arab Emirates (UAE) and licensed to provide various financial services including promotion, financial consultation, securities portfolio management, managing investments of investment funds, etc. Emirates NBD is regulated supervised and controlled by the Central Bank of the UAE (“Central Bank”) and the Securities and Commodities Authority of the UAE (“SCA”), having its head office at Baniyas Road, Deira, PO Box 777, Dubai, United Arab Emirates. This document may be distributed and/or made available by the Bank and its affiliates and subsidiaries, including Emirates NBD Capital KSA CJSC (“ENBD Capital”) (through its website, its branches or through any other modes, whether electronically or otherwise).

Emirates NBD and its affiliates, subsidiaries and group entities, including its shareholders, directors, officers, employees and agents are collectively referred to Emirates NBD Group.

This publication is prepared without regard to the individual financial circumstances and objectives of persons who receive it. Data/information provided in this publication are intended solely for illustrative purposes for the general information or its recipients, irrespective of their customer classification as an Ordinary Investor or Professional Investor under the SCA Regulations.

Any person (hereinafter referred to as “you”, “your”) who has received this document or have access to this document shall acknowledge and agree to the following terms.

Reliance

This publication may include data/information taken from stock exchanges or other third-party sources from around the world, which Emirates NBD reasonably believes to be reliable, fair and not misleading, but which have not been independently verified. The provision of certain data/information in this publication may be subject to the terms and conditions of other agreements to which Emirates NBD is a party. Opinions, estimates and expressions of judgment are those of the writer and are subject to change without notice. Emirates NBD or any member of Emirates NBD Group makes no representation or warranty and accepts no responsibility or liability for the sequence, accuracy, completeness or timeliness of the information or opinions contained in this publication. Nothing contained in this publication shall be construed as an assurance by Emirates NBD that you may rely upon or act on any information or data provided herein, without further independent verification of the same by you.

The contents of this document are prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors, including those relevant to the determination of whether a particular investment activity is advisable. Emirates NBD does not undertake any obligation to issue any further publications or update the contents of this document. Emirates NBD may also, at its sole discretion, update or change the contents herein without notice. Emirates NBD or any member of Emirates NBD Group does not accept any responsibility whatsoever for any loss or damage caused by any act or omission by you as a result of the information contained in this publication (including by negligence).

References to any financial instrument or investment product in this document are not intended to imply that an actual trading market exists for such instrument or product. Certain investment products mentioned in this document may not be eligible for sale in some jurisdictions, and they may not be suitable for all types of investors. The information and opinions contained in this publication is provided for informational purposes only and have not been prepared with any regard to the objectives, financial situation and particular needs of any specific person, wherever situated. If you wish to rely on or use the information contained in this publication, you should carefully consider whether any investment views and investment products mentioned herein are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You should also independently verify and check the accuracy, completeness, reliability and suitability of the information and should obtain independent and specific advice from appropriate professional advisers or experts.

Confidentiality

This publication may be provided to you upon request (and not for distribution to the general public), on a confidential basis for informational purposes only, and is not intended for trading purposes or to be passed on or disclosed to any other person and/or to any jurisdiction that would render the distribution illegal.

Solicitation

None of the content in this publication constitutes a solicitation, offer, recommendation or opinion by Emirates NBD to buy, sell or trade in any security or to avail of any service in any jurisdiction. This document is not intended to serve as authoritative legal, tax, accounting, or investment advice regarding any security or investment, including the profitability or suitability thereof and further does not provide any fiduciary or financial advice. This document should also not be used in substitution for the exercise of the prospective investor’s judgment.

Third Party

This publication is not intended for use by, or distribution to, any person or entity in any jurisdiction or country where such use or distribution would be contrary to law or regulation. It is the responsibility of any person in possession of this publication to investigate and observe all applicable laws and regulations of the relevant jurisdiction. This publication may not be conveyed to or used by a third party without the express consent of Emirates NBD or its affiliates, subsidiaries or group entities distributing this document. You should not use the data in this publication in any way to improve the quality of any data sold or contributed by you to any third party.

Liability

Notwithstanding anything to the contrary set forth herein, Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries shall not, directly or indirectly, be liable, in any way, to you or any other person for any: (a) inaccuracies or errors in or omissions from this publication including, but not limited to, quotes and financial data; or (b) loss or damage arising from the use of this publication, including, but not limited to any investment decision occasioned thereby. Under no circumstances, including but not limited to negligence, shall Emirates NBD, its suppliers, agents, directors, officers, employees, representatives, successors, assigns, affiliates or subsidiaries be liable to you for direct, indirect, incidental, consequential, special, punitive, or exemplary damages even if Emirates NBD has been advised specifically of the possibility of such damages, arising from the use of this publication, including but not limited to, loss of revenue, opportunity, or anticipated profits or lost business.

This publication does not provide individually tailored investment advice and is prepared without regard to the individual financial circumstances and objectives of person who receive it. The appropriateness of an investment activity or strategy will depend on the person’s individual circumstances and objectives and these activities may not be suitable for all persons. In addition, before entering into any transaction, prospective investors should: (i) ensure that they fully understand the potential risks and rewards of that transaction; (ii) determine independently whether that transaction is appropriate given an investor’s investment objectives, experience, financial and operational resources, and other relevant circumstances; (iii) understand that any rates of tax and zakat or any relief in relation thereto, as may be referred to in this publication may be subject to change over time; (iv) consult their advisers on the legal, regulatory, tax, business, investment, financial and accounting implications of the investment; (v) understand the nature of the investment and the related contract (and contractual relationship) including, without limitation, the nature and extent of their exposure to risk; and (vi) understand any regulatory requirements and restrictions applicable to the prospective investor.

Where this publication provides any information about Shariah compliant products, the Bank will not have engaged a Shariah board (or similar body) to determine independently whether or not such products are compliant with Shariah principles. The Bank accepts no liability with respect to the fairness, correctness, accuracy, reasonableness or completeness of any such determination or guidance by any Shariah board that has certified or otherwise approved such products as Shariah compliant. Nothing contained in this publication shall be construed as a recommendation by the Bank to invest in such product. In deciding whether to invest in Shariah compliant products, you should satisfy yourself that investing in such products will not contravene Shariah principles. You should consult your own Shariah advisors as to whether investing in such products is compliant or not with Shariah principles.

Forward Looking

Past performance is not necessarily a guide to future performance and should not be seen as an indication of future performance of any investment activity. The information contained in this publication does not purport to contain all matters relevant to any particular investment or financial instrument and all statements as to future matters are not guaranteed to be accurate. Certain matters in this publication about the future performance of Emirates NBD or members of its group (the Group), including without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, constitute “forward-looking statements”. Such forward-looking statements are based on current expectations or beliefs, as well as assumptions about future events, made from information currently available. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “seek”, “believe”, “will”, “may”, “should”, “would”, “could” or other words of similar meaning. Reliance should not be placed on any such statements in making an investment decision, as forward-looking statements, by their nature, are subject to known and unknown risks and uncertainties that could cause actual results, as well as the Group’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Estimates of future performance are based on assumptions that may not be realized.

Risk

Data included in this publication may rely on models that do not reflect or take into account all potentially significant factors such as market risk, liquidity risk, and credit risk. Emirates NBD may use different models, make valuation adjustments, or use different methodologies when determining prices at which Emirates NBD is willing to trade financial instruments and/or when valuing its own inventory positions for its books and records. The use of this publication is at the sole risk of the investor and this publication, and anything contained herein, is provided "as is" and "as available." Emirates NBD makes no warranty of any kind, express or implied, as to this publication, including, but not limited to, merchantability, non-infringement, title, or fitness for a particular purpose or use.

Investment in financial instruments involves risks and returns may vary. The value of investment products mentioned in this document may neither be capital protected nor guaranteed and the value of the investment product and the income derived therefrom can fall as well as rise and an investor may lose the principal amount invested. Investment products are subject to several risks factors, including without limitation, market risk, high volatility, credit and default risk, illiquidity, currency risk and interest rate risk. It should be noted that the value, price or income of securities denominated in a foreign currency may be adversely affected by changes in the currency rates. It may be difficult for the investor to sell or realise the security and to obtain reliable information about its value or the extent of the risks to which it is exposed. Furthermore, the investor will not have the right to cancel a subscription for securities once such subscription has been made. Prospective investors are hereby informed that the applicable regulations in certain jurisdictions may place certain restrictions on secondary market activities with respect to securities.

Before making an investment, investors should consult their advisers on the legal, regulatory, tax, business, investment, financial and accounting implications of the investment. In receiving this publication, the investor acknowledges it is fully aware that there are risks associated with investment activities. Moreover, the responsibility to obtain and carefully read and understand the content of documents relating to any investment activity described in this publication and to seek separate, independent financial advice if required to assess whether a particular investment activity described herein is suitable, lies exclusively with the investor.

Intellectual property

This publication has been developed, compiled, prepared, revised, selected, and arranged by Emirates NBD and others (including certain other information sources) through the application of methods and standards of judgment developed and applied through the expenditure of substantial time, effort, and money and constitutes valuable intellectual property of Emirates NBD and such others. All present and future rights in and to trade secrets, patents, copyrights, trademarks, service marks, know-how, and other proprietary rights of any type under the laws of any governmental authority, domestic or foreign, shall, as between the investor and Emirates NBD, at all times be and remain the sole and exclusive property of Emirates NBD and/or other lawful parties.

Except as specifically permitted in writing, you should not copy or make any use of the content of this publication or any portion thereof or publish, circulate, reproduce, distribute or offer this publication for sale in whole or in part to any other person over any medium including but not limited to over-the-air television or radio broadcast, a computer network or hyperlink framing on the internet or construct a database of any kind. Except as specifically permitted in writing, you shall not use the intellectual property rights connected with this publication, or the names of any individual participant in, or contributor to, the content of this publication, or any variations or derivatives thereof, for any purpose. This publication is intended solely for non-commercial use and benefit, and not for resale or other transfer or disposition to, or use by or for the benefit of, any other person or entity. By accepting this publication, you agree not to use, transfer, distribute, copy, reproduce, publish, display, modify, create, or dispose of any information contained in this publication in any manner that could compete with the business interests of Emirates NBD. Furthermore, you should not use any of the trademarks, trade names, service marks, copyrights, or logos of Emirates NBD or its subsidiaries in any manner which creates the impression that such items belong to or are associated with you, except as otherwise provided with Emirates NBD’s prior written consent. You shall have no ownership rights in and to any of such items.

IMPORTANT INFORMATION ABOUT UNITED KINGDOM

This publication was prepared by Emirates NBD Bank (P.J.S.C) in the United Arab Emirates. It has been issued and approved for distribution to clients by the London branch of Emirates NBD Bank (P.J.S.C) which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority in the UK. Some investments and services are not available to clients of the London Branch. Any services provided by Emirates NBD Bank (P.J.S.C) outside the UK will not be regulated by the FCA and you will not receive all the protections afforded to retail customers under the FCA regime, such as the Financial Ombudsman Service and the Financial Services Compensation Scheme. Changes in foreign exchange rates may affect any of the returns or income set out within this publication.

IMPORTANT INFORMATION ABOUT SINGAPORE

This publication was prepared by Emirates NBD Bank (P.J.S.C) in the United Arab Emirates. It has been issued and approved for distribution to clients by the Singapore branch of Emirates NBD Bank (P.J.S.C) which is licensed by the Monetary Authority of Singapore (MAS) and subject to applicable laws (including the Financial Advisers Act (FAA) and the Securities and Futures Act (SFA). Any services provided by Emirates NBD Bank (P.J.S.C) outside Singapore will not be regulated by the MAS or subject to the provisions of the FAA and/or SFA, and you will not receive all the protections afforded to retail customers under the FAA and/or SFA. Changes in foreign exchange rates may affect any of the returns or income set out within this publication. Please contact your Relationship Manager for further details or for clarification of the contents, where appropriate. For contact information, please visit www.emiratesnbd.com.

IMPORTANT INFORMATION ABOUT EMIRATES NBD CAPITAL KSA CJSC

Emirates NBD Capital KSA CJSC (“ENBD Capital”), whose registered office is at P.O. Box 341777, Riyadh 11333, Kingdom of Saudi Arabia, is a Saudi closed joint stock company licensed by the Saudi Arabian Capital Market Authority (“CMA”) under License number 37-07086 dated 29/08/2007G (corresponding to 16/08/1428H) to deliver a full range of quality investment products and related support services to individuals and institutions in the Kingdom of Saudi Arabia. ENBD Capital is subject to Capital Market Law, and Implementing Regulations in the Kingdom of Saudi Arabia

ENBD Capital’s contact details are T +966 (11) 299 3900 and F +966 (11) 299 3955.

This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Investment Funds Regulations issued by the Capital Market Authority.

The Capital Market Authority does not make any representation as to the accuracy or completeness of this document, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective subscribers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities offered. If you do not understand the contents of this document, you should consult an authorised financial adviser.

more app