TL;DR

Moody’s downgrades U.S.; global yields, gold, and Bitcoin surge; U.S.-China tariff truce agreed.

Highlights

• Moody’s downgraded the U.S. sovereign credit rating to Aa1, citing persistent fiscal deficits; U.S. 30-year Treasury yields briefly hit 5%117, S&P 500/Nasdaq 100 futures fell, gold surged to $3,25018, and the dollar weakened118.
• Japan’s 40-year government bond yield reached a 20-year high of 3.48% as PM Ishiba warned of fiscal stress; U.S. and Japanese bond markets sold off in tandem817.
• U.S. and China agreed to a 90-day tariff truce; Walmart will absorb some levies but expects price hikes, while China imposed up to 74.9% anti-dumping duties on engineering plastics from the U.S., EU, Japan, and Taiwan19.
• China’s April industrial output rose 6.1% YoY (above forecast), but retail sales and home prices declined; property investment fell further7.
• European Commission cut 2025 EU GDP growth forecast to 1.1%, with Germany now expected to see zero growth6.
• UK and EU reached a post-Brexit deal: 12-year fishing access, reduced food trade friction, and a new defense pact; formal approval expected today5.
• EU agreed to launch a €150B joint borrowing defense initiative (SAFE), allowing non-EU participation; Germany reversed its anti-nuclear stance to support EU energy policy1011.
• Russia launched a record 273-drone attack on Ukraine ahead of Trump-Putin talks; Finland will supply Ukraine with €90M in heavy ammunition using frozen Russian assets320.
• Nvidia announced a major AI supercomputer project in Taiwan, new chip technologies, and expanded regional operations13; Alibaba shares fell up to 4.8% amid U.S. scrutiny of an Apple AI partnership15.
• Bitcoin reached a record weekly close above $107,000, with JPMorgan projecting further upside16; gold and other precious metals rallied on haven demand18.
• Iran reaffirmed its commitment to 60% uranium enrichment4; UK moved to proscribe Iran’s IRGC as a terrorist group amid security concerns12.
• Brazil secured a $27.7B currency swap with China and $4.5B in new trade and investment deals19.

Commentary

Global markets opened under pressure as Moody’s U.S. credit downgrade and a synchronized sell-off in U.S. and Japanese long bonds drove yields higher, reigniting concerns about sovereign debt sustainability. The U.S. 30-year yield briefly breached 5%117, while Japan’s 40-year yield hit its highest in two decades8. These moves weighed on global equities and increased demand for safe havens, with gold surging to $3,250 and the dollar softening118. The downgrade and yield spike highlight ongoing fiscal challenges and set a cautious tone for risk assets.

In Europe, the outlook remains subdued. The European Commission’s downward revision of 2025 GDP growth, especially Germany’s zero-growth forecast, underscores persistent economic headwinds6. However, the UK-EU post-Brexit agreement—restoring frictionless food trade, extending fishing access, and deepening defense ties—offers some stability for regional trade and defense sectors5. The EU’s €150B SAFE defense initiative10, along with Germany’s policy shift on nuclear energy11, signals increased focus on security and energy resilience, likely benefiting related equities.

China’s April data showed robust industrial output but continued weakness in retail and property, reflecting an uneven recovery7. The 90-day U.S.-China tariff truce provides temporary relief1, but China’s new anti-dumping duties on engineering plastics signal ongoing trade friction9. Alibaba ’s share drop amid U.S. scrutiny of its AI partnership with Apple highlights the persistent risk of tech decoupling15, even as Nvidia ’s new AI investments in Taiwan reinforce Asia’s importance in the global tech supply chain13.

Geopolitical risks remain prominent. Russia’s record drone attack on Ukraine3 and Israel’s expanded offensive in Gaza keep defense and energy markets in focus2. The EU’s military funding for Ukraine, Finland’s ammunition supply using frozen Russian assets20, and the UK’s move against Iran’s IRGC all point to heightened security concerns12. Meanwhile, Brazil’s deepening economic ties with China, including a large currency swap, could support EMFX and trade flows19.

Commodities and crypto are benefitting from the risk-off environment and inflation hedging. Gold and Bitcoin both hit new highs, with further upside projected by major banks1618. Traders should monitor further moves in global rates, U.S.-China trade developments, and geopolitical headlines for near-term market direction.