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[HFM]

Date: 3rd June 2025.


Global Markets Under Pressure: Japanese Outflows, China’s Slump, and Trade War Fallout Shake Sentiment.



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Global markets are facing renewed uncertainty as a combination of trade tensions, weak economic data, and policy recalibrations fuel volatility across equities, currencies, and bonds.


Japan: Historic Fund Outflows and Rebalancing Pressures


Japanese equity funds witnessed their largest weekly outflows in nearly 18 years, with $7.49 billion pulled in the week to May 28, according to LSEG Lipper data. This marked the heaviest withdrawal since July 2007.


Analysts attribute the exodus to profit-taking after April’s market dip and May’s rebound, along with cautious sentiment around forward earnings. Domestic investors were the primary drivers, accounting for $7.55 billion of the outflows, while foreign funds saw a modest $59 million in inflows.


Daisuke Motori of Morningstar Japan noted this pattern of ‘buying the dip and selling the rally’ has repeated in recent months. Rebalancing by large institutional investors such as pension funds and life insurers likely added to the sell-off.


A strengthening yen—up 10% against the dollar year-to-date—is also clouding Japan’s export outlook. LSEG data shows analysts have downgraded forward 12-month earnings forecasts by 1.8% in the past 30 days.


Meanwhile, Bank of Japan Governor Kazuo Ueda reaffirmed the central bank’s commitment to tapering its bond-buying and cautiously normalizing policy, even as uncertainty looms large. While inflation reached 4.6% in April, underlying inflation remains below the BOJ’s 2% target. The next rate-setting meeting on June 16–17 is expected to review the bond tapering plan extending into fiscal 2026.


Ueda also flagged concerns about US tariffs and their impact on Japan’s economy, warning of potential hits to exports, corporate profits, and wage negotiations heading into winter.


Australia: Tariff Warnings and Rate Cuts


The Reserve Bank of Australia (RBA) is also on high alert. Assistant Governor Sarah Hunter warned that higher US tariffs could depress global trade, investment, and employment.


While the precise effects remain unclear due to policy unpredictability, Hunter confirmed that these downside risks were a key factor in the RBA’s recent rate cut to a two-year low of 3.85%. The central bank remains open to further easing, particularly if global trade deteriorates.


Interestingly, the RBA sees the tariff pressure as disinflationary for Australia, given cheaper imported goods as Chinese suppliers redirect exports. Headline inflation remained at 2.4% in Q1, with core inflation easing back into the target band for the first time since 2021.


China: Manufacturing Slumps Despite Tariff Truce


In China, the manufacturing sector endured its steepest decline since September 2022, according to the Caixin/S&P Global PMI, which fell to 48.3 in May, well below the 50 threshold signalling contraction.


The reading sharply diverged from the official PMI and surprised analysts, suggesting that smaller and medium-sized exporters, particularly in the private sector, are suffering disproportionately despite the recent US-China tariff truce.


Economists attributed the discrepancy to timing differences in data collection and methodology. Nonetheless, the Caixin results point to intensifying economic pressure, with falling export orders and production weighing on sentiment.


The trade war’s ripple effect extended to other Asian economies, with Vietnam, Indonesia, Taiwan, Japan, and South Korea all reporting declines in manufacturing output.





Currency Markets: Dollar Sinks on Trade War Woes


Currency markets reflected investor unease as the US dollar hit a six-week low on Tuesday amid signs of fragility in the US economy. The dollar index dropped to 98.58—its lowest level since late April—before partially rebounding.


Rodrigo Catril, senior FX strategist at National Australia Bank, said, 'Trade tensions are not really improving… we’ve seen the dollar getting hammered widely.’ The Aussie and Kiwi outperformed, with New Zealand’s dollar hitting a year-to-date high of $0.6054 before retreating.





The greenback weakened following a third straight month of US manufacturing contraction, while upcoming factory orders and jobs data may shed further light on the economic toll of ongoing tariff battles.


The euro briefly touched a six-week high of $1.1454 before retreating, while investors also await this week’s European Central Bank policy decision.


Adding further pressure, US tariffs on steel and aluminium are set to double to 50% this week, even as the Trump administration pushes for tougher trade negotiations globally.


The global economy is showing renewed signs of strain under the weight of trade uncertainty, export weakness, and policy recalibrations. While central banks across Japan, Australia, and China remain cautious, markets are increasingly sensitive to any signs of economic softness or policy missteps.


As the BOJ, ECB, and US data dominate the agenda in the coming days, traders will be watching closely for signs of stabilization—or deeper fragmentation—in an already fragile global landscape.


Always trade with strict risk management. Your capital is the single most important aspect of your trading business.


Please note that times displayed based on local time zone and are from time of writing this report.


Click HERE to access the full HFM Economic calendar.


Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!


Click HERE to READ more Market news.


Andria Pichidi
HFMarkets


Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

[HFM]

Date: 18th June 2025.


Global Markets Rattled by Escalating Middle East Tensions and Oil Price Surge.



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Global financial markets experienced heightened volatility so far today as escalating tensions between Israel and Iran spooked investors, pushing oil prices higher and sending mixed signals across equities, currencies, and bond markets.


Oil Prices Rise as Middle East Conflict Deepens


Oil prices edged higher on Wednesday, building on Tuesday’s sharp 4% surge. US benchmark crude climbed to $75 per barrel. Investors are increasingly concerned that the conflict could disrupt the Strait of Hormuz—a critical passageway for global crude exports. Although previous regional tensions have led to brief oil price spikes without long-term supply issues, the intensifying rhetoric this time is triggering stronger reactions.


Trump Issues Dire Warning to Iran


Investor fears were exacerbated after former President Donald Trump called for the immediate evacuation of Tehran, escalating tensions further. Within hours, Trump went from advocating a nuclear deal to demanding ‘UNCONDITIONAL SURRENDER,’ hinting at imminent US intervention. As geopolitical risks soared, demand for traditional safe havens such as the US dollar and Treasuries spiked.


Investors were also left disappointed by the lack of progress at the recent G7 summit in Canada. The group failed to make headway on trade issues, just weeks ahead of Trump’s July deadline for additional tariffs. Trump criticized both Japan and the EU for being ‘tough’ negotiators and for not offering satisfactory deals.


US Markets Close Lower; Asian Markets Mixed; Japan Shrugs Off Export Slump


Wall Street sank under the weight of surging oil prices and disappointing US retail sales data. The S&P 500 fell 0.8% to 5,982.72, the Dow dropped 0.7% to 42,215.80, and the Nasdaq slid 0.9% to 19,521.09. Weak consumer spending raised concerns that the backbone of the US economy might be faltering. Additionally, solar stocks took a hit after speculation that Congress may phase out clean energy tax credits. Enphase Energy dropped 24%, while First Solar lost 17.9%.


Asian equities painted a mixed picture. Tokyo’s Nikkei 225 rose 0.7% to 38,803.10 despite data showing an 11% drop in Japanese exports to the US, primarily due to tariffs on autos. Meanwhile, Hong Kong’s Hang Seng fell 1.2%, the Shanghai Composite slipped 0.2%, and Australia's ASX 200 lost 0.2%. South Korea’s Kospi managed a 0.6% gain.


Fed Meeting in Focus; Minimal Forecast Adjustments Expected


The Federal Reserve began its two-day policy meeting, with markets broadly expecting no rate changes. Forecast updates due Wednesday are likely to include modest GDP upgrades but little change to inflation and unemployment projections. The Fed’s previous dot plot suggested two rate cuts per year through mid-2027, and little deviation is expected in the June update.


Dollar Finds Footing Amid Global Jitters


The US dollar regained its safe-haven appeal, rebounding nearly 1% against the yen, Swiss franc, and euro since late last week. While structural challenges tied to Trump’s trade policies have weighed on the greenback in 2025, investors continue to favour the dollar in times of global stress. The dollar edged down 0.2% to 144.90 yen on Wednesday, while the euro ticked up 0.2% to $1.150, and the British pound strengthened to $1.346 following softer-than-expected UK inflation data.


Outlook: Risk Sentiment Hinges on Geopolitics and Fed Clarity


Markets remain on edge as geopolitical tensions in the Middle East show no sign of abating. Meanwhile, all eyes are on the Fed’s policy statement and projections for clues on the central bank’s outlook. As uncertainty swirls, volatility is expected to persist across commodities, currencies, and equities in the short term.


Always trade with strict risk management. Your capital is the single most important aspect of your trading business.


Please note that times displayed based on local time zone and are from time of writing this report.


Click HERE to access the full HFM Economic calendar.


Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!


Click HERE to READ more Market news.


Andria Pichidi
HFMarkets


Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.