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Why tariffs may trigger rally instead of crash?

The current panic in the markets may be overblown. If tomorrow's tariffs prove to be less damaging than expected, we could witness a short but sharp rebound, particularly in the S&P 500. However, any long position at this stage would be countertrend and require strict risk management.

As the first quarter draws to a close, the stock market remains under intense pressure. Investors are holding their breath ahead of tomorrow's announcement on reciprocal tariffs, a decision that could set the tone for the start of the second quarter. In such a climate of fear, opportunities for a rebound often emerge. The question is where to find support and when to act.

Current situation: no safe haven for indices
The S&P 500 is currently trading near 5,590 points, while the Nasdaq 100 is hovering around 19,260. Both indices have come under pressure in recent weeks not only due to geopolitical and tariff-related concerns but also because of structural weakening in demand for US equities.

The S&P 500 entered technical correction territory and declined 10% from its mid-February peak. The Nasdaq is showing similar signs of weakness.

CFTC data confirms the trend: net long positions in both indices have been shrinking for several weeks. The market is under pressure not only from tariff concerns but also from fears of a longer-term capital shift toward European assets.

For the S&P 500, the nearest support lies at 5,535, the local low from last week and the lower boundary of the current channel. Below that is 5,480, which corresponds to the 38.2% Fibonacci retracement of the rally since October.

Resistance levels are located at 5,650 and 5,705.

Bullish scenario: if the S&P 500 manages to hold above 5,535 after the tariff announcement and forms a bullish daily candle, this could be the first signal of a rebound toward the 5,650–5,705 range.

Bearish scenario: a drop below 5,480 would pave the way for a move down to the 5,400–5,350 zone, where medium-term support levels from late last year are located.

For the Nasdaq 100, the nearest support stands at 19,120, a trendline extending from early October. The next key level is 18,800, which combines Fibonacci support with an area of interest for institutional investors.

Resistance could be found at 19,500 and 19,800.

Entry points: for short-term traders looking to play a bounce, the market's reaction to 19,120 will be critical. If the level holds and a reversal pattern forms, this could present an opportunity for a short-term long position targeting 19,500.

A break below 18,800 would open the door to a full-fledged bearish trend, with targets in the 18,000–18,200 range.

Fundamental perspective: risk or opportunity?
The central question of the week is tomorrow's tariff announcement. It is known that the United States will introduce aggressive measures, but the scope and scale of the tariffs remain unclear. If it turns out that the new tariffs are less severe than feared and if some companies, such as TSMC, receive exemptions, this could become the catalyst for a market reversal as early as Wednesday or Thursday.

This is especially relevant given the current state of capitulation. Defensive sectors are also under pressure, gold is retreating after recent gains, and investor positioning remains heavily reduced.

That said, the long-term trend continues to pose challenges for the market. The potential for sustained capital outflows to Europe, growing protectionist rhetoric, and a lack of international allies could continue to weigh on US indices into the second quarter.

The trade war has hit Europe: stock indexes are in the red

Shares of European banks and retail companies came under pressure after Donald Trump announced the introduction of new tariffs on imports. Trump announced a 10% tariff on all foreign imports to the United States, and tariffs will be even higher for some trading partners. This decision is aimed at combating alleged unfair trade practices.

The European Union was among the countries that are subject to the «retaliatory» tariffs of the United States. The White House considers them unscrupulous players in international trade, and has imposed 20% tariffs on the EU. Against the background of this news, the index of eurozone creditors fell by 2.8%, and analysts warned of a possible recession if the policy of duties continues. They also believe that the ECB may accelerate interest rate cuts to stimulate the economy.

The broader European stock indexes were in the red zone: the German DAX lost 2.3%, the French CAC 40 declined by 2.2%, and the British FTSE 100 sank by 1.5%.

Shares of banks in Italy and Spain, including Banco Santander, Banca Monte dei Paschi di Siena and Unicredit, lost more than 2%. Luxury goods manufacturers such as Pandora, Richemont, LVMH and Kering are also under pressure as the EU and Switzerland face new US tariffs.

Ripple plans to acquire Hidden Road for $1.25 billion

Ripple has announced the acquisition of multi-asset prime broker Hidden Road for $1.25 billion. This will be one of the largest acquisitions in the history of the cryptocurrency company.

This is the second time this year that a cryptocurrency firm has been involved in a deal worth over a billion dollars. This event is taking place against the backdrop of the growing popularity of digital assets such as bitcoin, which is associated with the efforts of US President Donald Trump, who has promised to become a "cryptocurrency president."

Ripple CEO Brad Garlinghouse noted that the American market is actually open for the first time, thanks to overcoming regulatory pressure from the former SEC, and it is ready to meet the needs of traditional financial institutions. Prime brokers such as Hidden Road play a key role in day-to-day operations, including clearing, securities lending, and margin transactions. These services are in demand by large hedge funds and institutional investors.

Today, Hidden Road processes $3 trillion annually in various markets and serves more than 300 institutional clients. The acquisition of Ripple will allow Hidden Road to significantly expand its operations using the company's balance sheet and become the largest non-bank prime broker in the world.

After the completion of the transaction, which is expected in the coming months, Ripple will become the only cryptocurrency company that owns and operates a global multi-asset prime broker.

In addition, this acquisition will increase the importance of Ripple USD (RLUSD), as Hidden Road uses stablecoin as collateral for its prime brokerage services. Ripple launched RLUSD, pegged to the US dollar, last year with the aim of disrupting the market dominated by Tether and USD Coin.

Commodity dependency: the United States and China in a trade war

The United States depends on China for supplies in 198 product categories, while China is similarly dependent on only 68 items. American imports from China exceed a third for many goods, which has increased the tension in the trade war after the introduction of «reciprocal» duties. For China, the rates reached 54%, and then rose to 145%, while for American products in China they increased to 125%, practically paralyzing trade.

For the United States, the main dependence on Chinese supplies is noted in phones ($50.9 billion), batteries ($17.9 billion), toys ($13.5 billion) and video game consoles ($7 billion). In some categories – umbrellas, thermoses, baby strollers, fireworks – the dependence exceeds 90%. China provides more than two thirds of the imports of chalk, manganese and rare earths to the United States.

China, in turn, is most dependent on American imports for petroleum products ($14 billion), turbojet engines and gas turbines ($6.6 billion), aviation equipment ($5.3 billion), as well as cotton fiber ($1.85 billion) and sorghum ($1.7 billion). For a number of categories, such as antibiotics, lighters, fodder roots, and meat products, the U.S. share of supplies reaches 60-93%.

China refuted the US statements about the negotiations on duties

China and the United States did not negotiate on duties, Chinese Foreign Ministry spokesman Guo Jiakun said at a briefing on Thursday. He denied the statements of the American side, stressing that no consultations on tariffs had been held, and rumors about a possible agreement were not true.

Earlier, White House spokeswoman Carolyn Levitt said that the United States had received 18 trade proposals after the imposition of duties and was planning talks with 34 countries this week. She noted that discussions with China are continuing, assessing them as promising for a deal.

Guo Jiakun called these statements false and recalled that the United States had started the trade war. He stated Beijing's unchanged position: if necessary, China is ready to fight to the end, but in case of negotiations, the country is open to dialogue. At the same time, he stressed that discussions are possible only on the basis of equality, mutual respect and mutual benefit.

The European Commissioner recognized Europe's dependence on Russian gas

Europe is still dependent on Russian gas, acknowledged European Commissioner for Energy Dan Jorgensen. In his opinion, such a situation is unacceptable, both from a political and moral point of view, as well as from a security perspective. A roadmap aimed at phasing out the use of Russian gas will be presented soon.

At the same time, the European Commissioner stressed that Europe's dependence on the supply of liquefied natural gas from the United States also exists. At the same time, he expressed confidence in the existence of opportunities to increase the volume of gas imported from the United States.

Earlier, in May 2022, the European Union launched the REPowerEU program, the ultimate goal of which is to end dependence on Russian gas by 2027.

On Monday, the price of LNG remains at $3,139.

The dollar is strengthening amid expectations of US economic data

The US dollar is noticeably strengthening against the euro, the pound sterling and the yen on Wednesday amid expectations of important economic data. Investors are waiting for the publication of reports on the dynamics of US and eurozone GDP for the first quarter, as well as March figures on Americans' incomes and expenses, including a key inflation indicator monitored by the Fed.

The DXY index, which reflects the dollar's exchange rate against six major world currencies, is adding 0.04%, while the WSJ Dollar Index is increasing by 0.02%. The euro/dollar pair is trading at $1.1375, down from $1.1387. The pound weakened to $1.3389 against $1.3409 the day before. Against the yen, the dollar rose to 142.64 yen from the previous 142.35 yen.

The Bank of Japan has started a two-day meeting at which it is likely to maintain its current monetary policy to assess the effects of the US tariffs. At the same time, in March, the country's industrial production decreased by 1.1% after rising by 2.3% in February, and retail sales fell by 1.2%, which was a record decline in six months.

Switzerland may return to negative rates

The Swiss National Bank (SNB) has declared its readiness to take decisive measures to prevent inflation from falling below the target level necessary to ensure price stability. The head of the bank, Martin Schlegel, during a speech in Zurich, noted that currency interventions and lowering interest rates to negative values are considered among possible steps.

Although the use of negative interest rates is not popular, Schlegel stressed that the SNB is ready to resort to this tool again if necessary to maintain the stability of the economy. According to him, the bank strives to avoid such decisions, but its willingness to act remains unchanged.

This position underscores the SNB's commitment to its primary goal of maintaining price stability. The willingness to engage in currency interventions and further rate cuts demonstrates the bank's determination to take any necessary measures to protect the economy from the threats posed by falling inflation.

Sweden invites the EU to join the largest free trade area

At a meeting of EU foreign ministers on May 15, Sweden plans to invite the association to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) agreement, which unites more than a dozen Pacific Rim countries.

Swedish Foreign Trade Minister Benjamin Dusa noted that this would create the largest free trade area in the world, strengthening the economic positions of the parties in the face of challenges such as US tariffs.

CPTPP was founded in 2018 after the United States withdrew from the Trans-Pacific Partnership in 2017. It includes Australia, Brunei, Canada, Chile, Japan, Mexico, Malaysia, New Zealand, Peru, Singapore and Vietnam. At the end of 2024, the United Kingdom joined the agreement, and China expressed its intention to join.

Sweden considers this partnership to be strategically important, as it opens up new markets for exporters, which is critical for financing social services. However, not all EU countries will support this initiative. France, which has traditionally taken a protectionist position, especially in the agricultural sector, may be among the opponents. Earlier, Paris actively resisted the conclusion of an EU trade agreement with the Mercosur bloc.

The pound sterling reached the maximum of 2022

The pound reached its highest level since February 2022 amid the weakness of the US dollar caused by another sharp reversal of Trump's trade policy. The British currency rose to $1.3589.

On Friday, the US president alarmed global markets by announcing his intention to impose 50% duties on all imports from the European Union from June 1. However, on Sunday he softened his position, postponing the introduction of tariffs to a later date — until July 9.

This happened after a telephone conversation with European Commission President Ursula von der Leyen, who said the EU needed more time to reach an agreement.

Despite the fact that the UK already has a trade agreement with the United States, the pound also strengthened against the background of general market optimism. Since the beginning of the year, the currency has gained more than 8% against the dollar, which is the best result for sterling in the first five months of the year since 2009.

The strengthening of the pound is largely due to the fact that traders expect a more cautious monetary policy of the Bank of England against the background of steady inflation and stable economic growth, unlike other central banks, which are preparing for an early rate cut.

The growing US debt: a threat to the confidence of international markets

The crisis of American assets, which depend on funds from foreign investors, may manifest itself as early as next year. Analysts believe that 2026 will be a turning point when international investors will decide whether to continue financing the growing U.S. debt.

Over the past decade, the US external debt has increased, and now the country's economy is heavily dependent on foreign capital. Any reluctance by investors to buy Treasury bonds or support the dollar will inevitably affect financial stability.

The yield on 10-year bonds decreased by 15 bps, while the dollar index fell by 8%. The recent bill passed by the Senate is unlikely to solve the deficit problem, but rather exacerbate it. The risks will lead to an increase in risk premiums for dollars and bonds, which may deter investors even with a decrease in asset values.

Against the background of weak domestic savings, the confidence of foreign investors is becoming a key factor. Analysts note that even the Fed's rate cuts may not attract foreign participants if risk premiums continue to rise.

The ECB Will Face Increasing Challenges

The euro is rising ahead of a significant event. The European Central Bank is expected to cut interest rates this Thursday before increasingly complex inflation prospects risk bringing internal disagreements to the forefront.

As price risks have diminished, officials have cut rates seven times over the past year without major friction within the 26-member Governing Council. An eighth cut is expected on Thursday, bringing the deposit rate to 2%.

However, while some would prefer this to be the bottom — fearing overspending by European governments — others want deeper cuts to support fragile economic growth in their countries.

The main sticking point is Donald Trump's tariffs, particularly their chain reaction effect on eurozone prices. The ECB is working on various scenarios to better understand what may come next, but there is little confidence in any specific outcome.

As a result, the ECB is transitioning from fighting elevated inflation to a phase characterized by unpredictability, similar to what was seen during the Covid period. A similar situation is now unfolding within the U.S. Federal Reserve. This means central banks must be prepared for inflation risks in both directions.

It is quite possible that the macroeconomic outlook justifies short-term cuts to support the economy during this period of uncertainty, but higher rates may be necessary later if other policy levers, such as fiscal measures, come into play. At the same time, it will be important for the ECB to remain vigilant against the risk of a return to too-low inflation.

With prices returning to the 2% target, investors still believe there will be another rate cut after this week, but they are uncertain when exactly it will occur. Economists in a recent survey were more confident, predicting cuts in June and September, bringing the final rate to 1.75%.

However, as noted earlier, Trump's actions could alter these expectations. Although most EU goods are currently subject to a 10% U.S. tariff, this could rise to 50% in July. The ECB's scenario analysis, expected to be presented in the quarterly forecast, highlights this uncertainty.

The evolution of prices will depend on potential retaliatory measures from Brussels and how U.S.-China relations unfold. In the long term, European spending on defense and infrastructure, disrupted supply chains, and an aging workforce could fuel inflationary pressures.

Against this backdrop, Executive Board member Isabel Schnabel warned against further easing, stating that the ECB is well-positioned to assess the likely future evolution of the economy and act as needed. Dutch central bank head Klaas Knot and Bundesbank President Joachim Nagel also warned that the medium-term inflation outlook remains unclear.

But one thing is already certain: from now on, each additional cut will be much more difficult. Resistance will grow, and everything will depend on the data. This will lead to complicated discussions after the summer.

Technical Outlook for EUR/USD:

Buyers now need to aim to capture the 1.1420 level. Only this will allow a test of 1.1460. From there, a move to 1.1490 is possible, but achieving it without the support of major players will be challenging. The furthest target is the 1.1520 high. If the pair declines, serious buyer activity is only expected around 1.1400. If no buyers are found there, it would be better to wait for a dip to 1.1380 or open long positions from 1.1347.

Technical Outlook for GBP/USD:

Pound buyers need to target the nearest resistance at 1.3555. Only then can they aim for 1.3602, above which a breakout will be difficult. The furthest target is the 1.3640 level. If the pair falls, bears will attempt to take control at 1.3505. A break of this range would seriously damage the bulls' positions and push GBP/USD down toward 1.3480, with a prospect of reaching 1.3450.

US Market News Digest for June 5

US indices range-bound as investors await jobs data
Major US stock indices ended the trading session with minimal changes: the S&P 500 edged up 0.01%, the Nasdaq gained 0.32%, while the Dow Jones slipped 0.22%. Market participants adopted a cautious stance ahead of the release of US jobs data.

Low activity and narrow index fluctuations reflect investor prudence, with labor market statistics seen as a key metric for assessing the Federal Reserve's next policy moves.

Optimism builds on expectations of Fed easing
US equity markets posted a third consecutive day of gains, buoyed by hopes of a potential shift toward a more dovish stance from the Federal Reserve. Barclays upgraded its 2025 forecast for the S&P 500, citing reduced tariff-related risks.

Still, analysts warn that the growing optimism may be premature. A lack of confirming macroeconomic data could swiftly alter market sentiment.

Mixed dynamics: services sector weakness worries investors
US stock indices delivered mixed results: the Dow Jones slipped 0.22%, the S&P 500 closed virtually flat (+0.01%), and the Nasdaq rose 0.32%. Against this backdrop, investors turned their focus to data from the services sector.

May marked the first monthly decline in business activity in this segment in nearly a year, raising concerns about the resilience of economic growth in the months ahead.

Market slows ahead of key economic data
Signs of a slowdown are emerging across US markets as investor activity tapers off amid anticipation of upcoming employment figures and weakness in the services sector. Indices are losing momentum, while economic uncertainty is fueling apprehension.

The contraction in services and signs of investor fatigue cast doubt on the sustainability of the rally, especially as corporate earnings soften and macroeconomic indicators remain volatile.

Oil continues to rise in price

Oil prices continued to rise on Tuesday morning. On the London ICE Futures exchange, the price of August Brent futures reached $67.38 per barrel.

WTI futures on the New York Mercantile Exchange also rose to $65.44 per barrel after rising 1.1% the day before. Brent ended trading at its highest level since the end of April, and WTI – since the beginning of the month before last.

The main support for the market is provided by the ongoing trade negotiations between the United States and China in London. Market participants hope for a successful deal, which can improve global economic growth and fuel demand.

Negotiations will continue today. U.S. Commerce Secretary Howard Lutnick described them as «fruitful.» Analysts suggest that the market has already taken into account some successes in the negotiations, and prices are likely to remain stable until the results are announced.

The depreciation of the dollar also supported oil prices: the DXY index fell 0.3%, which made commodities more attractive to holders of other currencies.

Trump earned over $600 million in 2024

Donald Trump has reported revenue of over $600 million generated from various businesses, including cryptocurrency, golf clubs, and licensing deals. The financial statements, signed on June 13, disclose data for the period up to the end of 2024. This period does not take into account a significant portion of the profits from the family's cryptocurrency projects, which started in early 2025.

The $TRUMP meme coin brought in about $320 million in commissions, but the distribution of this amount between Trump's structures and his partners remains unknown. In addition, the family earned more than $400 million through World Liberty Financial, a company in the field of decentralized finance. Of this amount, $57.35 million was received from the sale of tokens, while Trump owns 15.75 billion management tokens.

According to the report, Trump's assets are estimated at at least $1.6 billion. The successful expansion into the cryptocurrency sector has strengthened its fortunes by adding significant revenue from commissions and new initiatives.

Oil prices fell by more than 5% against the background of the agreement between Israel and Iran

Oil prices increased their decline on Tuesday, with Brent crude dropping below $68 per barrel for the first time in two weeks. August Brent futures on the London ICE Futures Exchange fell 5.2% to $67.76 per barrel. At the same time, WTI futures fell 5.18% to $64.96 per barrel.

During morning trading, Brent recorded a minimum of $ 67.50, and WTI — $64.79 per barrel.

The reason for the decline in quotes was the news from Washington: earlier, US President Donald Trump announced that Israel and Iran had reached a full ceasefire agreement. Later, Israeli Prime Minister Benjamin Netanyahu confirmed his country's readiness to end the military conflict.

Investors see this as an important signal for the stabilization of the situation in the region, which reduces the risks of disruptions in oil supplies from the Middle East. The day before, on Monday, prices fell by more than 7% in response to Tehran's strike on the American base in Qatar — it was perceived by the market as a symbolic reaction of Iran to the US attack on its nuclear facilities.

European stock indexes strengthen on the background of corporate reports

On Thursday, European stock indexes showed growth, helped by fresh corporate reports and the publication of economic statistics from Germany. According to the latest trading data, the British FTSE 100 rose to 8,754.75 points. The French CAC 40 rose to 7,573.91 points, while the German DAX strengthened at 23,628 points.

The shares of the Swedish retail chain Hennes & Mauritz (H&M) stood out among the large companies, which grew by more than 5% in Germany. Despite a 16.7% decrease in the company's operating profit for the second quarter compared to the same period last year, the total amount was 5.914 billion crowns ($620 million), which was close to the forecast of 5.88 billion crowns.

In addition to corporate news, investors' attention was attracted by data from the research company GfK regarding consumer confidence in Germany. As of July, the confidence index dropped to minus 20.3 points compared with the revised June value of minus 20 points. However, the same indicator, reflecting current economic expectations, showed steady growth, reaching 20.1 points against 13.1 points a month earlier.