Bitcoin Falls as Trade, Geopolitical Worries Grow — Market Talk

0841 GMT - Bitcoin falls as concerns about trade and geopolitical tensions rattle risk sentiment, sending equity markets lower. Investors are concerned about the lack of detail emerging from this week's U.S.-China trade deal. Concerns about Middle East tensions are also growing after the U.S. ordered nonessential personnel out of parts of the region amid heightened security concerns. "Investor risk appetite has diminished overall due to the ongoing tensions in the trade conflict and geopolitical developments causing nervousness in the markets," says CMC's Jochen Stanzl in a note. Bitcoin falls 1% to $107,845, according to LSEG data. ([email protected])0830 GMT - Yields on U.K. government bonds, or gilts, fall after data showed the U.K. economy contracted by 0.3% in April as U.S. President Trump's tariff policy stung activity. This was a bigger drop than the 0.1% contraction that economists polled by The Wall Street Journal had expected and raises the chances of more interest-rate cuts by the Bank of England. The data suggest growth will be below the BOE's forecasts, although a rate reduction as early as this month looks unlikely, Citi analysts say in a note. The 10-year gilt yield falls around 5 basis points to a five-week low of 4.509%, Tradeweb data show. ([email protected])0823 GMT - The Bank of Korea is expected to pivot toward a more hawkish policy stance, Nomura economist Jeong Woo Park writes in a note. The central bank may deliver one more rate cut--rather than two--by end-2026, Park says. Gov. Rhee Chang-yong in his BOK anniversary speech earlier in the day reiterated concerns about rising home prices and emphasized structural reforms over stimulus to address the country's slowing growth. That suggests a shallower rate-cut path down the road, the economist says. Nomura forecasts one more 25-basis-point BOK rate reduction, possibly in February 2026, for the current easing cycle. ([email protected])0823 GMT - Deutsche Bank CEO Christian Sewing is hopeful Germany's new ruling coalition will spur consumers to spend more. Saving ratios among the lender's retail clients are running close to peaks seen during the Covid-19 pandemic. "The ratio of what has been saved from the net income of private clients, retail clients, was almost as high as the peak of Covid times," Sewing tells a Goldman Sachs conference in Berlin. Sewing expects the plans of the new German government to be net positive for Deutsche Bank. However, things are moving slowly and the benefits to economic growth of Chancellor Friedrich Merz's 500 billion-euro infrastructure fund will start to show up in 2026, Sewing says. Shares in Deutsche Bank fall 1.6%. ([email protected])0812 GMT - A weaker-than-expected U.S. CPI print leads Julius Baer to reaffirm its base case for the Federal Reserve to hold rates over the summer before cutting later in the year amid a slowing economy. Economist Julian Schaerer expects two 50bp rate cuts in September and October, anticipating that economic momentum will weaken more visibly in 2H. "While tariffs could exert some upward pressure on prices later this year, we view inflation risks as increasingly balanced," Schaerer says in a note. The Fed is likely to respond decisively once macroeconomic indicators, particularly those related to growth and the labor market, begin to turn. ([email protected])0805 GMT - The lack of clarity in tariffs between the U.S. and some top trading partners dents risk appetite among investors. They seek safety in safe-haven currencies such as the Japanese yen, the Swiss franc and even the euro, says MUFG's Derek Halpenny. "Investors' risk appetite has taken a hit with yen, Swiss franc and euro the top three performing G-10 currencies today," the head of research says in a note. The dollar also falls sharply against several Asian currencies, "highlighting a renewed deterioration in dollar sentiment," he says. The euro rises to a seven-week high of $1.1532. The dollar falls to a five-week low of 0.8145 Swiss francs and loses 0.5% to 143.84 Japanese yen, LSEG data show. ([email protected])0801 GMT - The Bank of Japan is expected to keep rates on hold next Tuesday amid heightened uncertainty due to tariffs and worries that Japan will enter into a technical recession, says Magdalene Teo at Julius Baer. The spotlight will likely be on any hints from the BOJ on the pace of its bond purchases, the fixed income analyst says in a note. The JGB yield curve has largely flattened in recent days on rising expectations that the finance ministry will adjust its issuance program as early as next month. Given that the expectations are built in, a lack of action by the government could result in JGB yields rising again, she says. The BOJ is likely to ease the pace of tapering its bond purchases, but most expect this to happen from 2Q 2026. ([email protected])0750 GMT - The immediate question arising from the China-U.S. London agreement is how much China will really relax its export controls, says Arthur Kroeber of Gavekal Research. "The best bet is that it will reopen rare-earth exports to commercial buyers enough for them to satisfy their ongoing need but not so much that they can stockpile," he writes. Beijing may be even stingier with buyers that feed into the U.S. defense supply chain. The U.S. and European auto and defense supply chains are deeply vulnerable to China's carefully-developed stranglehold on rare earths. Undoing that will take many years, Kroeber says, noting that Japan still relies on China for over half of its needs despite trying to reduce dependence for over a decade. ([email protected])0749 GMT - Gold futures rise on safe-haven demand. Futures are up 0.6% at $3,364.20 a troy ounce, having risen as high as $3,398.40/oz earlier in the session. The precious metal has gained after President Trump's negative commentary on negotiations with Iran over a nuclear agreement, Pepperstone's Ahmad Assiri says in a note. U.S. dollar weakness and high tariffs creating market uncertainty despite a tentative U.S.-China trade deal have also contributed to gold's gains. The U.S. delegation to Iranian negotiations is set to abstain from an intended meeting Sunday and the simultaneous evacuation of non-essential U.S. embassy personnel in Iraqi posts has reinforced perceptions of elevated tension, Assiri writes. ([email protected])0740 GMT - U.K. growth is pointing downward, ING's James Smith says. Data earlier showed the economy contracted more than expected at the start of the second quarter. April's 0.3% contraction points to more muted growth rates for the remainder of the year, particularly after this week's weak jobs data, Smith says in a note. Global uncertainty is exacerbating Britain's underyling problems and risks surrounding the U.K. growth outlook are building, he says.([email protected]; @joshualeokirby)0732 GMT - The unwinding of tariff front-running after the imposition of U.S. levies widened the U.K.'s trade deficit in April, Pantheon Macroeconomics economists say in a note. Goods exports to the U.S. fell 2.0 billion pounds on the month in April, with sales to the European Union dropping too. "Exports should begin to stabilize in May now that the front-running has unwound and after President Trump began walking back some of his more ruinous tariffs," the economists say. However, the U.K.-U.S. trade agreement in May has yet to fully come into force so there could be weakness ahead, they say. ([email protected])0730 GMT - China-U.S. talks in London probably leave everything back to where it was a month ago, says Arthur Kroeber of Gavekal Research. As far as Gavekal can tell, the London agreement annuls the moves that lead to the breakdown of the prior truce but leaves in place the tariff structure. That implies an effective average tariff on China of 30% to 50%--enough to cause pain, but not much, since transshipment channels via third countries remain wide open, Kroeber writes. To sign a deal, China's two big asks will be a rollback of U.S. tech export controls, and more space for Chinese investment in the U.S. Both would require Trump to overcome resistance within Congress and the defense bureaucracy, Kroeber says, suggesting that the deal space remains narrow. ([email protected])