The Morning Edge: OECD Cuts Global Growth Forecast Amid Rising Trade Tensions

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Global Sentiment: Risk-on
Factors: US-China Trade talks  

TODAY’S WATCHLIST
- India May S&P Services and Composite PMI
- US May S&P Services and Composite PMI
- US May ISM Non-Manufacturing PMI

THE BIG STORY
The global economy is losing steam faster than expected, with trade tensions largely driven by the Trump administration’s aggressive tariff strategy taking a growing toll on the US and beyond, the OECD warned on Tuesday. In its latest Economic Outlook, the Paris-based organisation cut its global growth forecast to 2.9% for 2025 and 2026, down from 3.3% last year and below its earlier projections made just months ago.

The slowdown is most pronounced in the United States, where growth is now expected to slip to 1.6% this year and 1.5% in 2026, assuming existing tariffs hold. But the OECD cautioned that the damage could deepen if protectionist policies escalate driving inflation, fracturing supply chains, and rattling already jittery markets.

“A lasting resolution to trade tensions through constructive dialogue is essential,” said OECD Secretary General Mathias Cormann, warning that a further 10-point increase in US tariffs could shave 0.3% off global output within two years. With tariff deadlines looming and truce deals in flux, the world economy stands at a precarious crossroads.

DATA
US job openings rose in April, but a sharp increase in layoffs signalled a softening labour market amid persistent tariff uncertainty. According to the Labor Department’s JOLTS report, job openings, a key indicator of labour demand increased by 191,000 to 7.391 million at the end of April. March data was also revised slightly higher to 7.200 million. However, layoffs jumped by the most in nine months, and the number of workers voluntarily quitting their jobs posted the largest decline since last November, suggesting waning confidence in job prospects. Notably, federal government job openings rose by 13,000 despite a hiring freeze enacted under the Trump administration. The job openings rate edged up to 4.4% from 4.3% in the prior month.

WHAT HAPPENED OVERNIGHT
US stocks ended the session with gains, with chips putting the tech-heavy Nasdaq out front following White House assurances that US President Donald Trump will likely meet Chinese President Xi Jinping this week to address trade disputes between the world's two largest economies. The Dow Jones Industrial Average rose 0.51% to 42,519.64, the S&P 500 rose 34.43 points, or 0.58%, to 5,970.37 and the Nasdaq Composite rose 0.81% to 19,398.96.  Nvidia, along with other chip stocks, helped drive this advance. The dominant maker of artificial intelligence chips advanced nearly 3%, extending Monday’s gains and passing Microsoft  in market cap for the first time since January.

Longer-dated US Treasury yields edged lower on Tuesday as investors remained cautious ahead of further developments in trade negotiations. However, yields were off their earlier lows following the release of economic data that tempered some of the market's pessimism. The benchmark 10-year yield dipped 1 basis point to 4.452%, while the 30-year yield fell 1.8 basis points to 4.9769%. In contrast, the 2-year yield, more sensitive to shifts in Fed policy expectations, rose slightly to 3.953%.

The US dollar rose on Tuesday, rebounding from a six-week low against the euro, even as concerns persisted over the potential economic fallout from President Donald Trump’s trade policies. The dollar index, which tracks the greenback against a basket of major currencies, climbed 0.71% to 99.28. The euro retreated 0.62% to $1.1371 after briefly touching a six-week high of $1.1454. Against the Japanese yen, the dollar strengthened 0.9% to 144.00. 

Brent crude oil prices rose about 2% on Tuesday, reaching a two-week high, as geopolitical tensions remained elevated. Ongoing conflicts between Russia and Ukraine, and strained US-Iran relations, reinforced expectations that sanctions on both OPEC+ members will persist, tightening global supply. Brent crude settled up 1.5%, at $65.63 per barrel.

Day’s Ledger

Economic Data:

• Australia Jan-Mar GDP data
• India May S&P Global Services PMI
• US May ADP Non-farm employment data
• US May S&P Global Composite PMI
• US May ISM Non-Manufacturing PMI
• US Crude Oil Inventories data

Corporate Actions:

• Earnings: Allied Digital Services, Arcotech, Ashapura Intimates Fashion, and Hardwyn India
• Deepak Builders & Engineers India to consider dividend
• Shree Marutinandan to consider raising funds

Policy Events

• US FOMC Member Bostic Speaks
• Bank of Canada interest rate decision

TICKERS

• ASHOK LEYLAND to use £45 mln investment in Optare for loan repayment, capex
• Hyundai Motor, Kia sell over 3% stake in OLA ELECTRIC; Citigroup buys nearly 2%
• KAYNES TECHNOLOGY to invest $8.8 million in subsidiary; issues ₹25 billion guarantees
• NLC INDIA sets up green energy JV with Rajasthan Rajya Vidyut
• PAYTM forms Singapore arm to expand tech-led financial services
• SUN PHARMA scraps SCD-044 trials after missing key efficacy goals
• TATA MOTORS launches electric Harrier at ₹2.15 million with lifetime battery warranty
• WIPRO inks multi-year tech deal with Entrust
• ZYDUS to acquire 2 US biologics units from Agenus for $75 mln; enters into multiple pacts

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