The Morning Edge: US Steel, Aluminium Tariffs Rattle Key Trading Partners

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Global Sentiment: Risk-off
Factors:  Tariff Negotiations, US PMI Data

TODAY’S WATCHLIST
- ECB interest rate decision
- US April Trade data

THE BIG STORY
As the US doubled tariffs on steel and aluminium imports Wednesday, tensions rippled through global trade corridors—from Ottawa to Brussels to New Delhi. Canada, the top exporter of both metals to the US, signalled it is ready to retaliate if talks with Washington fail to unwind the levies. Prime Minister Mark Carney warned that Ottawa “is prepared to strike back,” while EU negotiators reported cautious progress after high-stakes meetings in Paris.

The latest tariff hike raising duties from 25% to 50% adds new urgency to trade talks ahead of the July 8 deadline, when a broader wave of tariffs could come into effect. Amid the pressure, the US is actively seeking “best offers” from its trading partners. While Britain has secured a temporary reprieve, others are racing to close deals.

India may be among the first to finalise a new agreement. US Commerce Secretary Howard Lutnick hinted that a US-India deal could be wrapped up before the 90-day tariff pause expires, praising New Delhi's swift engagement. As one deadline looms and another approaches, the global trade landscape is shifting quickly and unpredictably. 

DATA
The US services sector shrank in May for the first time in nearly a year, highlighting growing economic fragility amid lingering inflation pressures. The Institute for Supply Management’s non-manufacturing PMI slipped to 49.9 its lowest since June 2024 from 51.6 in April, marking a move below the 50 threshold that signals contraction. The report pointed to rising input costs and pervasive uncertainty, with businesses citing President Donald Trump's shifting trade policies as a major source of disruption. The reading adds to signs that the economy may be entering a phase of stagnation paired with elevated inflation risks.

WHAT HAPPENED OVERNIGHT
US stocks ended mixed on Wednesday as investors digested weak economic data underscoring the impact of President Donald Trump’s trade policies. The Dow Jones Industrial Average fell 0.22%, to 42,427.74, while the S&P 500 was nearly unchanged, up 0.01%, to 5,970.81. The Nasdaq Composite gained 0.32%, to close at 19,460.49, supported by strength in select tech names. Hewlett Packard Enterprise rose 0.8% after second-quarter results topped expectations, driven by strong demand for AI servers and hybrid cloud solutions. GlobalFoundries added 2.3% following its announcement to raise capital spending to $16 billion. Shares of Wells Fargo slipped 0.4% despite briefly hitting a three-month high after the Federal Reserve lifted its $1.95 trillion asset cap on the bank.

US Treasury yields fell sharply on Wednesday following softer-than-expected economic data, as investors monitored tariff negotiations and awaited the upcoming payrolls report for further insight into the labour market. The benchmark 10-year yield dropped 10.1 basis points to 4.359%, down from 4.46% the previous session. The 30-year bond yield declined 10.2 basis points to 4.8806%, while the 2-year note yield—sensitive to Fed policy expectations—slipped 8.6 basis points to 3.871%. The move reflects growing caution about the economic outlook and potential shifts in monetary policy. 

The US dollar weakened across the board on Wednesday as disappointing economic data pointed to a softening labour market and a contraction in the services sector. The dollar index, which tracks the greenback against a basket of major currencies including the yen and the euro, fell 0.29% to 98.87. The euro gained 0.36% to $1.1411, while the dollar slipped 0.78% against the Japanese yen to 142.87.

Brent crude oil prices fell just over 1% on Wednesday after US government data revealed a larger-than-expected build in gasoline and diesel inventories, fuelling concerns about weakening demand. The bearish stockpile data came amid OPEC+ plans to increase output and persistent trade tensions that continue to cloud the global energy demand outlook. Brent crude futures settled 77 cents, or 1.2% lower, at $64.86 a barrel.

Day’s Ledger

Economic Data:

• Germany April factory orders data 
• US April trade data
• US weekly jobless claims data
• US Global Services PMI for May
• EIA weekly natural gas storage report

Corporate Actions

• Jan-Mar earnings: Kore Digital, Balaji Phosphates, KR Rail Engineering, Agro Phos India, Panth Infinity.
• Blue Cloud to consider raising of funds
• MRC Agrotech to consider preferential issue shares

Policy Events

• ECB interest rate decision
• ECB President Lagarde speaks
• US FOMC Member Harker speaks 
• UK Bank of England Deputy Governor Sarah Breeden speaks
• US President Donald Trump meets German Chancellor Friedrich Merz

TICKERS

• FLIPKART exits Aditya Birla Fashion with ₹5.9 billion bulk sale
• CESC arm signs deal with Envision Energy for 1 GW wind project
• CA Dawn sells ₹14.5 billion worth of INDEGENE shares via bulk deals
• WAAREE ENERGIES to offload 1.15% stake in Indosolar via offer for sale
• BAJAJ AUTO to raise stake in Pierer Bajaj, move closer to controlling KTM
• CLEAN SCIENCE invests ₹330 million in subsidiary Clean Fino-Chem
• ICRA revises Aadhar Housing Finance's rating outlook to positive
• ESCORTS KUBOTA launches 'BLX 75' backhoe loader for domestic market
• HONASA CONSUMER gets NCLT nod to merge Fusion Cosmeceutics, Just4Kids
• HAL says GE414 engine talks for LCA MK2 on track, denies other negotiations
• KEC INTERNATIONAL wins new orders worth ₹22.11 billion across verticals

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