General Market News

U.S. President Donald Trump threatened to raise tariffs on EU cars and trucks to 25% within a week, citing the EU's failure to remove duties on U.S. goods as agreed in a July 2024 trade deal. EU countries, particularly Germany, are pushing for swift implementation of the bloc's side of the agreement, though the European Parliament seeks additional safeguards before approval. Nine months after the deal, the EU has yet to lower tariffs on imported U.S. industrial goods due to parliamentary delays.

• German Chancellor Friedrich Merz urged rapid EU action, noting 'the Americans have it finalised, and the Europeans haven't,' as Germany faces the greatest impact from potential car tariff increases
• The EU-US trade deal was struck in July 2024 at Trump's Turnberry resort, but EU implementation was twice paused by parliament over Trump's threats regarding Greenland and other geopolitical tensions
• EU Parliament's trade committee seeks 'sunrise, sunset clauses and safeguards' before approval, though the centre-right European People's Party, the largest parliamentary group, supports swift conclusion this month

Kevin Warsh, President Trump's nominee to lead the Federal Reserve, has proposed distinguishing between 'monetary' and 'non-monetary' Fed functions, describing Fed independence as varying by area. His comments about negotiating a new Fed-Treasury accord have raised concerns among former Fed officials that the central bank could lose control of its balance sheet and critical crisis-management tools. The lack of clarity in Warsh's positions has left observers uncertain whether his plans represent minor procedural changes or significant limitations on Fed autonomy.

• Former Fed officials warn that Warsh's framework could result in the Fed losing control of its balance sheet, potentially requiring Treasury permission to purchase assets or limiting purchases to only treasurys instead of mortgages or corporate bonds during crises.
• Warsh's views on dollar swap lines remain unclear; Treasury Secretary Bessent indicated Persian Gulf countries have requested swap lines, raising concerns the Fed's balance sheet could become 'an arm of foreign aid' rather than a monetary policy tool.
• Warsh resigned as Fed governor in 2011 over objections to balance sheet expansion, and both he and Bessent have criticized the Fed's growing balance sheet as giving it power that should belong to Treasury and the administration.

Biopharmaceutical company Odyssey Therapeutics is seeking a valuation of up to $809.9 million in its U.S. initial public offering, aiming to raise up to $238.3 million by offering 13.2 million shares. The IPO comes as the U.S. market shows signs of reopening, with April marking the busiest month for new filings in over four years.

• Odyssey plans to raise up to $238.3 million through the sale of 13.2 million shares in its IPO
• The company will list on the Nasdaq Capital Market under the ticker symbol 'ODTX'
• April 2025 was the busiest month for U.S. IPO filings in over four years, signaling a potential pickup in market activity

Global Medical Response (GMR Solutions), a Texas-based emergency medical services company, announced plans for a U.S. initial public offering targeting a valuation of up to $5 billion. The company aims to raise up to $797.9 million by offering 31.9 million shares on the New York Stock Exchange under the ticker 'GMRS'.

• Investment firms KKR, Ares, and HPS are expected to purchase $350 million in private placement warrants alongside the IPO
• Major underwriters include J.P. Morgan, KKR, and BofA Securities
• The company, based in Lewisville, Texas, will trade on the NYSE under the symbol 'GMRS'

The SEC has delayed approval of over two dozen prediction-market ETFs from Roundhill, Bitwise, and Granite Shares that would allow retail investors to bet on elections, recessions, and other real-world events. The delay, which pushes back launches originally expected this week, stems from the SEC seeking additional information about product mechanics and investor disclosures, though sources indicate the hold-up is likely temporary.

• The ETFs would track binary 'yes/no' outcomes on CFTC-regulated exchanges like Kalshi, with products covering 2025 midterms, 2028 presidential election, tech layoffs, and recession odds
• Prediction markets have boomed since Trump's 2024 election win, with the CFTC clearing Kalshi rather than banning it, though markets on war events have drawn lawmaker scrutiny over violence incentives
• SEC filings warn of 'catastrophic' losses and 'heightened' insider trading risks, with investors having 'no recourse' if outcomes are later disputed or revised

A European Central Bank survey of 67 large euro zone companies reveals that firms anticipate a new inflation surge similar to 2022-23 levels if the war in Iran continues for months, disrupting supplies of fuel, hydrogen, and helium through the Strait of Hormuz. Companies in air travel, logistics, chemicals, plastics, and packaging have already implemented double-digit price increases in response to soaring oil prices since the conflict began.

• Air travel, logistics, chemicals, plastics, and packaging industries have already raised prices by double-digit percentages due to surging oil prices from the Iran conflict
• Broader price pass-through is expected to be more gradual than during Russia's 2022 Ukraine invasion because large companies have hedged against energy price swings, with impact mainly coming through smaller unhedged suppliers
• Mitigating factors compared to post-pandemic inflation include weak global demand (especially from China), absence of expected services boom, and lower fiscal stimulus levels

India's Securities and Exchange Board will soon issue an advisory to market intermediaries regarding emerging risks from AI tools, including Anthropic's products. The regulator is currently consulting with stakeholders on AI-related threats to financial markets.

• SEBI is actively engaging with market stakeholders to assess AI-related threats to India's financial markets
• The advisory will specifically address risks from tools like Anthropic's Mythos and other AI technologies
• This regulatory action reflects growing concerns among global regulators about AI's impact on market integrity and intermediary operations

Federal Reserve Governor Barr warned that stress in the $1.8 trillion private credit market could trigger 'psychological contagion' leading to a broader credit crunch. His concerns focus on the insurance industry's ties to private lenders and the potential for market participants to view private credit problems as indicative of wider corporate sector weakness. The warning comes after investors withdrew about $5 billion from private credit funds earlier this year amid liquidity concerns.

• The private credit market has reached $1.8 trillion in size, with investors withdrawing approximately $5 billion earlier this year as redemption demands surged for funds with limited liquidity
• Barr expressed concern about 'psychological contagion' where stress in private credit could cause investors to pull back from the broader corporate bond market, amplifying financial strain
• JPMorgan CEO Jamie Dimon echoed concerns, noting that the large number of companies in private credit combined with limited recent credit recession experience could lead to worse-than-expected outcomes during a downturn

Treasury Secretary Bessent warned that Americans should be concerned about AI-powered hacking of bank accounts following a meeting between government officials and Wall Street executives. The warning comes after Anthropic's Mythos AI model discovered thousands of high-severity vulnerabilities in major operating systems and web browsers. U.S. banks are being urged to use the Mythos model to identify and patch security weaknesses in their defenses.

• Bessent and Fed Chair Jerome Powell met with major banks like JPMorgan and Bank of America, directing them to use the Mythos AI model to find vulnerabilities in their systems
• Anthropic's Mythos has discovered thousands of high-severity security flaws, raising concerns about AI systems that can execute or orchestrate multistep cyberattacks at scale
• Officials emphasized the need to balance safety and innovation as AI capabilities advance, with cybersecurity risk evolving from targeted attacks to 'ambient exposure' where organizations face continuous automated scanning and probing

New Zealand's a2 Milk has initiated a recall of three batches of its a2 Platinum infant formula sold in the United States after testing detected cereulide, a toxin that can cause vomiting. The product was manufactured by associate company Synlait Milk, and while no illnesses have been reported, the company is consulting with the U.S. Food and Drug Administration.

• The recall affects three batches of a2 Platinum infant milk formula manufactured by Synlait Milk for the U.S. market
• Cereulide, the detected toxin, can cause vomiting in consumers who ingest contaminated products
• No illnesses have been reported to date, and a2 Milk is working with the FDA on the recall process

President Trump has nominated Kevin Warsh, a former Morgan Stanley banker and Fed Board member (2006-2011), to replace Jerome Powell as Federal Reserve chair. Warsh has been a vocal critic of the Fed's expanded role since 2008, particularly its massive balance sheet, market interventions, and forward guidance. Wall Street may regret this nomination as Warsh signals a more hawkish, less market-friendly approach that prioritizes inflation credibility over asset price stability.

• Warsh plans aggressive balance sheet reduction from current $6.8 trillion and may end the 'Fed Put' assumption that the central bank will rescue wobbling markets with liquidity and stimulus
• His stricter inflation focus resembles Paul Volcker's approach (who raised rates above 19% in 1981), prioritizing price stability over market comfort and potentially tolerating economic pain for long-term Fed credibility
• Reduced forward guidance and faster quantitative tightening could increase market volatility and remove the liquidity support that fueled the post-2008 'everything rally' in stocks, bonds, crypto, and housing

U.S. Attorney for D.C. Jeanine Pirro appears to be abandoning her planned appeal of a court ruling that blocked her criminal investigation of Federal Reserve Chair Jerome Powell. Instead of appealing by the Monday deadline, Pirro announced she would file a 'motion to vacate' the ruling, though legal experts question whether she has standing to do so. The original investigation into Fed building cost overruns was quashed by Chief Judge James Boasberg, who found it appeared designed to pressure Powell over interest rate decisions.

• Pirro's appeal was due Monday, but she now plans a 'motion to vacate' instead, effectively dropping her legal demand for Fed evidence on building renovation cost overruns
• Judge Boasberg previously ruled that 'a mountain of evidence' suggested the subpoenas were intended to harass Powell into cutting interest rates or resigning at President Trump's behest
• Pirro maintains she may reopen the investigation pending a report from Fed Inspector General Michael Horowitz, and has not committed to ending it even if no wrongdoing is found

Federal Reserve Governor Michael Barr warned that stress in the private credit sector could trigger 'psychological contagion,' potentially leading to a broader credit crunch. While direct bank-private credit links aren't currently alarming, Barr highlighted concerns about insurance sector overlaps with private lenders. The private credit market has faced strain from recent downturns, with investors pulling back due to valuation concerns and high-profile bankruptcies.

• Barr cautioned that problems in private credit could cause investors to perceive broader corporate sector weakness, potentially sparking pullbacks in corporate bond markets and creating wider financial strain
• Insurance sector connections to private lenders represent a key area of concern beyond direct bank exposures to the private credit market
• Fed Chair Jerome Powell stated in March that officials are monitoring private credit developments but currently do not see systemic risks to the financial system

AI data centers are shifting from copper to optical networking as copper wiring cannot handle the massive data transfer demands beyond short distances. This transition is creating a rapidly expanding market opportunity, with the optical networking sector projected to grow from $14 billion to $73 billion by 2030 at a 39% annual rate. Supply constraints are expected to persist through 2027 as the entire supply chain operates at full capacity.

• Copper wiring becomes impractical beyond 30 meters for AI data centers, while optical networking uses light pulses through fiber to transmit data with one-third the power consumption and minimal signal loss
• The networking hardware cost per AI chip cluster is projected to increase 29x from $315,000 today to $9.4 million by 2028, with major tech companies like Nvidia investing $4 billion in laser suppliers to secure optical components
• Supply chain bottlenecks center on indium phosphide wafers produced in Taiwan, Japan, and Germany, with Goldman Sachs predicting tight supply conditions lasting through 2027

The Iran conflict is disrupting the global electronics supply chain by cutting off key materials used in printed circuit boards (PCBs), leading to sharp cost increases that are expected to reach consumers within months. Circuit board prices have surged up to 40% in April, while copper foil costs have climbed 30% this year. Experts warn that higher prices and potential product shortages could hit shoppers during back-to-school and holiday shopping seasons.

• An Iranian strike on Saudi Arabia's Jubail petrochemical complex in early April halted production of critical resin used in circuit boards, with lead times for some chemicals stretching from 3 weeks to 15 weeks
• Price increases are expected to materialize for consumers in summer and fall 2025, coinciding with peak retail periods, as companies can only absorb costs temporarily before passing them through
• The disruption compounds existing supply pressures from AI infrastructure demand competing with consumer electronics for limited components, potentially causing product shortages and 'out of stock' issues

Kevin Warsh, President Trump's nominee to replace Jerome Powell as Federal Reserve Chair when Powell's term ends May 15, advocates a major shift in Fed policy focused on aggressive inflation-fighting and balance sheet reduction. Warsh defines price stability as when 'no one's talking about' inflation and wants to shrink the Fed's $6.8 trillion balance sheet more aggressively than Powell's gradual approach. This transformation could end the 'Fed put' and create tighter financial conditions that markets may find uncomfortable.

• Warsh wants stricter inflation control, arguing the Fed lost credibility by declaring victory too early after inflation peaked at 9.1% in June 2022, despite current core PCE remaining at 2.8% year-over-year
• Aggressive balance sheet reduction from $6.8 trillion could push Treasury yields higher and tighten market liquidity, pressuring growth stocks and corporate borrowing costs while the federal deficit exceeds $1.5 trillion annually
• The new Fed chair may prioritize price stability over employment support, signaling willingness to tolerate slower growth or higher unemployment to fight inflation expectations and ending Wall Street's expectation of Fed intervention during downturns

Fed chair nominee Kevin Warsh is characterized as instinctively hawkish on inflation but likely to favor rate cuts due to a productivity boom, according to analyst Axel Merk. With core PCE inflation elevated but Q1 2026 GDP showing strong investment and export growth driven by supply-side expansion rather than demand, Warsh may have cover to ease policy despite consumer sentiment near recessionary levels at 53.3.

• Q1 2026 GDP grew 2% with gross private investment up 9% and exports surging 13%, while consumption rose only 2%, indicating productivity-driven expansion rather than demand-pull inflation
• Core PCE inflation index reached 129.28 in March 2026 (92nd percentile of 12-month range) and WTI crude sits near $99.89, creating tension with Warsh's hawkish instincts
• Fed funds rate has held at 4% since December 2025 after 75 basis points of cuts from the September 2025 peak of 5%, with markets pricing neither aggressive cuts nor hikes

The Federal Reserve held rates steady at 3.50-3.75% on May 7, 2026, but the decision featured four dissents—the most divided vote since 1992. Markets have now priced out rate cuts for 2026, prompting investors to rotate into earnings-driven, AI-linked stocks that can grow without monetary easing. Five companies are emerging as leaders in this 'higher for longer' environment.

• Fed's split decision (four dissents) signals deep policy uncertainty, with traders now betting on zero rate cuts in 2026 versus earlier optimistic expectations.
• Investors are favoring AI infrastructure plays: Micron trades at 7.8x forward earnings with surging AI memory demand; Amazon's AWS grew 28% to $37.6B while ads hit $70B TTM; Palantir posted 70% revenue growth to $1.41B.
• Broadcom forecast over $100B in AI chip sales for next year with a Google partnership through 2031, while GE Vernova raised guidance on data center power demand, citing a $163B backlog.

Global markets face a complex mix of risks and opportunities in May 2026, driven by oil prices surging above $120 due to the Iran conflict and Strait of Hormuz closure, alongside weak US jobs expectations and growing Federal Reserve resistance to rate cuts. Political uncertainty in the UK and diverging central bank policies add to volatility, while strong corporate earnings in energy and tech sectors provide some support.

• Oil briefly topped $120/barrel as the Iran conflict enters its third month with the Strait of Hormuz disrupted, raising stagflation fears globally and prompting Japan to intervene in currency markets
• US April payrolls expected to show only 73,000 jobs added versus 178,000 in March, while three Fed policymakers dissented against maintaining an 'easing bias', signaling resistance to near-term rate cuts
• UK PM Keir Starmer faces heavy electoral losses in local elections amid political controversy, with UK 10-year gilt yields worst among G7 peers since the Iran conflict escalated

Gold prices fell nearly 2% for the week, declining from around $4,685 to close at $4,614 per ounce, pressured by rising oil prices, a stronger dollar, and elevated Treasury yields that reinforced expectations for higher-for-longer interest rates. Despite late-week rebounds driven by geopolitical uncertainty and safe-haven demand, the precious metal faced headwinds from hawkish Federal Reserve signals and persistent inflation concerns. Market participants are now looking to a potential Iran peace deal and April's jobs report for direction.

• The Kitco News Weekly Gold Survey showed Wall Street and Main Street evenly split, with 50% expecting higher prices next week and 31% predicting further declines, as traders weigh Iran conflict resolution prospects against elevated oil prices
• Gold hit a weekly low near $4,510 per ounce mid-week following Fed policy signals highlighting divisions among policymakers and dampening near-term rate cut expectations, though analysts note underlying drivers like global debt and currency risks remain intact
• Next week's key economic calendar includes the April employment report on Friday, preceded by ISM Services PMI, JOLTS data, ADP employment figures, and jobless claims, with analysts warning gold could test support at $4,400-$4,500 if current levels fail