US indices ended the day with the Dow Industrial Average staying the same. Canada and the US discussed economic and security issues, while Canadian consumer spending held steady in May. Crude oil prices climbed 4.88% to $68.15. The US sold 10-year notes at a yield of 4.421%, which was slightly below expectations. Most major European indices closed lower, while US oil inventories fell by 3,644K, much worse than the expected decrease of 1,960K. Oil prices increased as Trump expressed skepticism about the Iran deal, and 30% tariffs on China could remain in place. In Canada, building permits dropped 6.6% in April, contrary to an expected 2.0% rise. The US core CPI for May increased by 2.8%, slightly below the anticipated 2.9%. Trump confirmed the completion of a deal with China to supply rare earths for six months. The US continued to collect a 55% tariff from China, with some tariffs possibly extending longer. US headline CPI rose 2.4% year-over-year, matching some forecasts but falling short of the overall consensus. US yields and the dollar weakened, with 2-year yields down by 6 basis points and 10-year yields down by 5.2 basis points. The dollar showed mixed results against other currencies. Concerns about security in the Middle East pushed oil prices higher, marking the highest levels since April 3. Gold prices also rose as investors sought safety amid market volatility. Yields fell following weak inflation data, with both headline and core readings coming in below estimates. This slight miss on CPI suggests pricing pressures may not rise as quickly as previously feared. Consequently, Treasury markets saw a modest rally, making bonds more appealing and flattening the short end of the curve. Rate expectations eased further, indicating a slower approach to tightening than anticipated just two weeks ago. The strong rally in oil shifted focus back to geopolitics. The significant decrease in inventories provided an initial boost, but doubts regarding negotiations with Iran and strong messaging about trade barriers drove the market later in the session. These issues are seen as long-term sources of pricing tension—not just about supply, but also about who controls it and the rhetoric surrounding their policies. While gold prices rose, it wasn’t dramatic. Investors sought safety—not out of panic but as a hedge against various uncertainties. As volatility across assets remains low, there’s a concern that a rise in stress could spread quickly. The gains in crude oil futures were linked to this broader narrative. Commodity traders reacted to stockpile data and political risks, driving up energy contracts amid expectations of disruptions from key producers. The market is no longer just focused on demand; supply chain issues are now in the spotlight. In Canada, the recent drop in building permit data indicates a cautious approach in property markets, at least for now. This unexpected decline could negatively impact construction-related stocks and alter rate expectations if the trend continues. It’s not a sign of weakness, but it does hint at hesitance. The US auction of 10-year notes went smoothly, though yields were softer than expected. This may suggest that buyers are more attuned to inflation expectations rather than just nominal rates. The key takeaway is that demand for duration remains strong, especially as real returns stay steady despite fluctuating nominal rates. Foreign exchange markets reflected complexity rather than clarity. The dollar showed inconsistent movement against other currencies, which is typical when data sends mixed signals—soft inflation but tight employment, caution from policymakers yet strong consumer metrics. In such conditions, markets often lack a clear direction, resulting in a mix of reactive trades and opportunistic strategies. European indices generally fell, weighed down by weak growth data and ongoing trade concerns. While sentiment hasn’t collapsed, it feels sluggish, with little on the immediate horizon to spark optimism. However, the energy sector saw some positive momentum, benefiting not just oil prices but also related stocks tied to US production. This marks the third time in five weeks where demand for oil-related investments has outperformed broader sectors. Interestingly, metals had an engaging session too. Gold saw support from risk aversion, while industrial metals like copper remained stable despite broader risk-off trends. This divergence indicates a preference for safe-haven assets without completely dismissing cyclical commodities, a trend worth monitoring in the coming days. We are monitoring for short-term fluctuations in implied volatility across rate and commodity markets. Current pricing does not reflect wider possible outcomes—a situation that could shift quickly with escalating geopolitical risks or if upcoming economic data deviates from forecasts. Watch the relative rate spreads following the CPI data, especially the 2s10s curve, as it is a reliable measure of future sentiment in fixed income. We have seen it flatten further—not dramatically, but steadily—which is a clear sign of market caution without triggering a panic.

here to set up a live account on VT Markets now