From big and beautiful to ugly and personal

Popcorn sales will pop — that’s my best prediction for today — as the world watches the incredible escalation of tensions between Donald Trump and his – once – best buddy, Elon Musk. Musk joined the mounting chorus of critics regarding Trump’s Big and Beautiful Tax Bill. But because nothing is reasonable anymore, the tweet war between the two turned very ugly, very quickly, and ended with Trump saying that ‘the easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts,’ while Musk claimed that Trump is involved in the ultra-sensitive ‘Epstein files.’

The latter exchange led to a 14% slump in Tesla’s stock price yesterday. The stock is still slightly above where it was just after Trump’s election, but we can now say that most of the gains have been given back. And of course, losing the White House’s support would be terrible for Tesla — which is being eaten alive in Europe and Asia by Chinese competition (and Elon Musk’s irritating involvement in politics) — especially since its self-driving cars and robotaxis need friendly legislation to thrive. Legislation is Trump. Q.E.D. The hype around Tesla is not looking good.

And Trump has a new friend! Well, maybe not friend friend, but apparently, Trump and Xi finally talked on the phone. They said nice things to each other. Xi agreed to relax export rules for rare earth metals that Trump’s America needs so badly to – Stay Great – while both leaders invited each other over, and both accepted. How nice! We’ll see how long this friendship lasts, but VanEck’s rare earth and metals ETF jumped nearly 4% yesterday, and close to 10% this week, climbing above the 50-DMA and leaving room to extend gains if tensions continue to ease.

Speaking of tensions, there is growing evidence — at least from this week’s job figures — that the US jobs market could be coming under pressure from trade uncertainties. While Tuesday’s job openings data hinted at more vacancies in April, Wednesday’s ADP data came in significantly softer-than-expected for May, and yesterday’s weekly update showed jobless claims rose to the highest levels since October. Today, all eyes are on the official jobs report. The US economy is expected to have added around 130K new nonfarm jobs in May, with average hourly earnings slightly higher month-on-month but slightly lower year-on-year. The unemployment rate is expected to remain steady around 4.2%.

A softer-than-expected report could further boost bets that the Federal Reserve (Fed) will cut rates sooner rather than later – if wage growth also remains soft. Another upside surprise would support optimism that the US economy is weathering the Trump shock quite well, and probably boost stock market sentiment. Fed funds futures currently price about a 1-in-3 chance of a rate cut in July. That probability — and the 2-year yield — are the ones to watch to see how investors digest today’s report. The US 2-year yield is sitting around 3.90%, well below the 4.40% level seen at the beginning of the year.

Either way, the pressure on the US dollar will likely continue amid expectations of weakening US growth and/or a dovish Fed. The EURUSD flirted with the 1.15 psychological level yesterday, after the European Central Bank (ECB) cut rates by 25bps — as widely expected — and signalled the end of its policy tightening cycle. The announcement significantly trimmed expectations of a summer cut but didn’t take the possibility of further support off the table, should trade tensions hit Eurozone economies. The ECB now expects inflation to ease to 1.6% next year and growth to stabilize around 1.1% — meaning it's giving itself room to do more if needed.

European equities welcomed the ECB decision: the Stoxx 600 added a meagre 0.16%, despite a sharp rise in short-term yields. Investors are ready to push the index higher if trade news sounds encouraging. Yesterday’s meeting between Trump and German Chancellor Merz went... not too bad. They still don’t agree on many things — starting with Ukraine — but Merz is being applauded for having ‘avoided public humiliation.’ That’s what diplomacy has come down to... avoiding public humiliation.

Elsewhere, the Nikkei is up and the yen is down this morning after data showed a much larger-than-expected decline in Japanese household spending, and a better-than-feared bond auction yesterday. In the UK, Cable traded above the 1.36 mark for the first time in more than three years, despite lingering nervousness about whether the ONS data is... accurate...

In energy, US crude has stalled around the $64.20pb mark for the fourth consecutive session and is slightly under pressure this morning. Inability to clear this resistance could trigger profit-taking into the weekend and send the barrel price below the 50-DMA, which stands near $62.40.

Elsewhere in commodities, silver rallied 10% this week. The sudden surge is being driven by ‘renewed interest from momentum traders’ as the price cleared a key resistance at $35/oz, touching a 13-year high. The mint ratio is being pulled lower due to silver's outperformance versus gold, which is stagnating near all-time highs. The mint ratio is around 93.50 right now. Historically, it has ranged between 60 and 80, and between 80 and 95 since 2022 — so there’s room for a further downward correction for the ratio to return to average levels.