"In case of emergency, break glass" – there is something of that about President Trump's latest international swipe, this time at Mexico, where he appears to be opening yet another front in the trade war. When a belligerent White House in this trading-blows mood meets a stock exchange that is quite ready to "sell in May and go away," one can hardly be surprised at the results. And they were clear. After a four-month rally that carried some indices to new record highs, most stock markets ended May heavily in negative territory. The MSCI All Country World Index (ACWI) (total return) lost 5.8%, a third of the ground it had gained previously year-to-date. Oil, meanwhile slid, the West-Texas-Intermediate (WTI) price was down by as much as 16.2%. The bond markets also took Trump's latest ballistics badly. The yield on 10-year U.S. government bonds plummeted in May from just over 2.5% to 2.12%, below the key interest rate of the U.S. Federal Reserve (the federal funds rate). The markets are now pricing in two rate cuts by the Fed before the end of the year. In Europe, the 10-year bund yields again fell below the zero line and even recorded a new historic low of -0.21% on May 31.
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