Share prices recovered during May as fears of a tariff-induced global recession receded. Nevertheless, markets remained jittery as the trade saga continued to unfold. Although President Trump announced a “reset” for the US/China relationship, relations between the two nations soured when the US announced plans to revoke Chinese students’ visas.
- President Trump’s “Big Beautiful Bill” triggered concerns
- The US lost its last triple-A credit rating
- Inflationary pressures intensified in Japan
Tariffs remain in the spotlight: share prices recovered during May as fears of a tariff-induced global recession receded. Nevertheless, markets remained jittery as the trade saga continued to unfold. Although President Trump announced a “reset” for the US/China relationship, relations between the two nations soured when the US announced plans to revoke Chinese students’ visas. He also revealed plans to impose 50% tariffs on imports from Europe, but subsequently suspended this measure until 9 July.
“The Court of International Trade ruled that the tariffs were illegal”
… but are the tariffs legal? President Trump’s trade policy was thrown into fresh disarray as the Court of International Trade ruled that the tariffs were illegal; nevertheless, they will remain in place while the Trump administration appeals the ruling. The Dow Jones Industrial Average Index rose by 3.9% in May, while the technology-rich Nasdaq Index climbed by 9.6%.
Not so beautiful? The US House of Representatives passed President Trump’s “One Big Beautiful Bill”, raising concerns about the potential impact on US national debt. The yield on the ten-year US Treasury bond yield rose from 4.18% to 4.4% over the month, while the 30-year Treasury bond yield increased from 4.69% to 4.92%.
Fed leaves rates unchanged: the US Federal Reserve maintained its key federal funds rate at a range of 4.25% to 4.5%, commenting that the uncertainty created by President Trump’s tariffs had made it “not at all clear what … (it) should do” with regard to monetary policy.
US loses its last perfect rating: credit ratings agency Moody’s downgraded the US’s top triple-A rating to “Aa1” and changed the outlook from “stable” to “negative”, citing the impact of rising government debt and interest costs. Fitch downgraded the US in 2023, while S&P Global Ratings downgraded it in 2011.
Better-than-expected growth for Germany: Germany’s economy expanded by a revised 0.4% over the first three months of 2025, compared with a contraction of 0.2% in the final quarter of 2024. Overall growth was boosted by activity in manufacturing and exports. The Dax Index rose by 6.7% over May.
Bank of Japan to cut again? Japan’s annualised rate of consumer price inflation remained unchanged at 3.6% in April. However, core inflation – which strips out the impact of fresh food – rose to 3.5%, stoking speculation that the Bank of Japan might seek to tighten rates again. During May, the Nikkei 225 Index rose by 5.3%.
To view the series of market updates through May, click here
