Trump reignites trade conflict… US stocks, Treasuries, and the dollar all fall

Steel tariffs raised by 50%—US and China accuse each other of "violating trade agreement"

Manufacturing activity in May contracts for four consecutive months

On June 2nd (local time), the first trading day of June, heightened trade tensions led to declines in US stocks, Treasuries, and the dollar. US manufacturing activity for May contracted for the fourth consecutive month.

Around 10 a.m. Eastern Standard Time, the S&P 500 index fell 0.8%, the NASDAQ Composite dropped 0.6%, and the Dow Jones Industrial Average declined 0.9%.

While long-term US Treasuries led the decline, the yield on the 10-year Treasury note rose by 3 basis points (1bp=0.01%) to 4.43%. Bond prices and yields move in opposite directions. The yield spread between the 5-year and 30-year notes approached 100bp, hitting the highest level since 2021.

The Bloomberg Dollar Spot Index fell by 0.4% as the dollar weakened against most major currencies. The Japanese yen strengthened by 0.7% against the dollar, reaching 143.01 yen per dollar.

Shares of BioNTech surged 14.5% on news that Bristol-Myers Squibb will pay up to $11.1 billion for an oncology license from BioNTech.

News of Trump's 50% steel tariff increase sent shares of Cleveland-Cliffs and Nucor soaring by 27% and 11%, respectively.

Tesla, which saw its European sales drop significantly again, fell 2.3%, while NVIDIA rose 0.9%.

Market uncertainty increased as the US and China traded accusations of violating the trade agreement and President Trump declared plans to double tariffs on steel and aluminum imports.

Ulrike Hoffmann-Burchardi of UBS Global Wealth Management said, “Ongoing market volatility is likely as new tariff-related news and US economic data are released,” adding, “Fiscal concerns persist, and geopolitical tensions are intensifying.”

The manufacturing index released that day by the Institute for Supply Management (ISM) came in at 48.5, down 0.2 points from last month. A reading below 50 indicates contraction. This marks the fourth consecutive month of contraction. As companies withdrew in the face of tariff hikes, the import index hit its lowest level in 16 years.

Federal Reserve Board Chair Jerome Powell is scheduled to deliver a speech, and this Friday will conclude with the Department of Labor’s National Employment Report.

Guest reporter Kim Jung-ah kja@hankyung.com