Markets surged on Tuesday as traders welcomed a temporary reprieve from US-EU trade tensions. President Trump’s decision to delay a planned 50% tariff on European goods until July sparked a wave of relief buying across equities. The Dow jumped more than 700 points to lead the recovery, while the S&P 500 and Nasdaq also posted strong gains. Broad market participation and a strong showing in technology and small-cap stocks helped snap a four-day losing streak. Optimism was also lifted by a sharp rebound in consumer confidence and hopes for additional trade breakthroughs this week.

Key Takeaways:

  • Dow Surges Over 700 Points on Tariff Reprieve: The Dow Jones Industrial Average soared 740.58 points, or 1.78%, to close at 42,343.65, snapping a four-day losing streak. The index was lifted by relief over delayed tariffs and a broad-based recovery across industrial and tech names.
  • S&P 500 Posts Strong Rebound: The S&P 500 rallied 2.05% to end the session at 5,921.54, with more than 90% of its components closing in positive territory. Gains were led by technology, industrials, and consumer discretionary sectors amid easing trade concerns and upbeat consumer sentiment.
  • Nasdaq Jumps Nearly 2.5% on Tech Strength: The Nasdaq Composite jumped 2.47% to 19,199.16, powered by sharp advances in Tesla, Nvidia, and Apple. Tesla surged 7% after CEO Elon Musk vowed to focus back on company operations.
  • Europe Rallies as DAX Hits Record and Defence Stocks Surge: European equities climbed as US-EU tariff tensions eased. Germany’s DAX jumped 0.83% to a new record high of 24,226.49, while the FTSE 100 gained 0.69% and Italy’s FTSE MIB rose 0.34%. The CAC 40 in France ended nearly flat, dipping 0.02%. The pan-European Stoxx 600 advanced 0.33%. Defence names like Hensoldt led gains amid geopolitical tensions and a €150 billion EU arms package. French inflation cooled to 0.6% in May, while UK food prices rose 2.8%, marking the fourth straight month of acceleration.
  • Asia Ends Mixed as Economic Data Weighs on Sentiment: Asia-Pacific markets posted a mixed finish as investors reacted to a wave of regional data. Japan’s Nikkei rose 0.47% to 37,160.47, helped by a 3.5% jump in core inflation and ongoing BOJ policy speculation. The Kospi in South Korea closed flat at 2,592.09, while the Kosdaq fell 0.24%. Australia’s ASX 200 added 0.15%, but Chinese indices were flat as market players digested a diplomatic update on US-China communication. Singapore’s core inflation rose more than expected, while South Korea’s PPI and New Zealand retail data added to the cautious tone.
  • Oil Falls on OPEC+ Output Expectations: Oil prices retreated amid rising expectations of an OPEC+ output hike. Brent settled at $64.21, down 0.82%, and WTI fell 0.81% to $61.05. Traders are eyeing the May 28 ministerial meeting, where output for July is expected to rise by over 400,000 barrels per day. Russian officials signalled no formal hike had been discussed yet, keeping some uncertainty alive.
  • Treasury Yields Dip on Trade Optimism: US Treasury yields declined as tariff relief improved market sentiment. The 10-year yield slipped 7 basis points to 4.44%, while the 30-year dropped 9 basis points to 4.943%. The 2-year yield was little changed at 3.979%, as bond traders reassessed fiscal risks post-holiday.
  • US Confidence Jumps but Business Investment Weakens: May consumer confidence surged as the Conference Board’s index climbed 12.3 points to 98.0, well above forecasts, driven by optimism around trade de-escalation. However, business investment softened sharply, with core capital goods orders falling 1.3% in April. Shipments dipped 0.1%, pointing to uncertainty in corporate spending amid ongoing tariff volatility.

FX Today:

  • EUR/USD Retreats from Multi-Week High on Dollar Comeback: EUR/USD settled at 1.1286 on Tuesday, declining 0.41% and reversing part of its recent rebound after touching an intraday high of 1.1351. The euro began the session on a firm footing but lost ground steadily through the New York trading hours as the US dollar regained strength. The reversal came after three consecutive daily gains that had lifted the pair to its best level in nearly four weeks. Despite Tuesday’s pullback, the pair remains in a short-term uptrend. Price is still holding above its 50-day SMA at 1.1151, with the 100-day and 200-day SMAs sitting below at 1.1042 and 1.0969 respectively. If EUR/USD continues lower this week, key support comes in at 1.1250, followed by a stronger zone around 1.1200. To resume upward momentum, the pair needs to reclaim the 1.1350 area and push toward the April high near 1.1400. 
  • GBP/USD Slips After Reversal from Recent Highs: GBP/USD closed at 1.3509, falling 0.40% and snapping a four-day winning streak. The pair had reached as high as 1.3587 during the Asian session but encountered profit-taking and broader dollar strength through the day, dragging it steadily lower by the US close. The overall trend remains bullish, with price action still comfortably above the 50-day SMA at 1.3186. The 100-day and 200-day SMAs at 1.2871 and 1.2895 offer deeper layers of dynamic support, and those levels remain well below current price, underscoring the strength of the recent rally. If the pullback deepens, initial support lies at 1.3400, followed by the 1.3300 handle. On the upside, a sustained break above 1.3600 would reopen the path toward 1.3680 and potentially 1.3750. 
  • USD/JPY Reclaims 144 as Rebound Gains Momentum: USD/JPY settled at 144.26 on Tuesday, climbing 1.00% and staging a strong recovery from recent lows as buyers returned with conviction. The pair opened at 142.84 and slipped briefly to 142.11 before reversing higher in a steady climb through the day. The move helped the pair break a two-day losing streak and reestablish footing above the 144.00 level. Despite Tuesday’s gain, the pair remains technically vulnerable. It continues to trade below its 50-day SMA at 145.48, while the 100-day and 200-day averages remain further above at 148.98 and 149.45. If the recovery extends into midweek, bulls will look to challenge 145.00 first, with the 50-day average marking a critical battleground. On the downside, renewed weakness below 143.00 would re-expose the 142.00 region. 
  • USD/CAD Rebounds Above 1.3800 as Oil Softens: USD/CAD closed at 1.3806 on Tuesday, rising 0.52% and snapping a six-session winning streak for the Loonie as trade headlines dominate the market cycle. Canadian Gross Domestic Product (GDP) growth is due later this week, on Friday, and serves as this week’s only noteworthy Canadian data point. USD/CAD marked a second day of modest recovery after last week’s sharp selloff. The pair found strong buying interest near 1.3720 early in the session and moved steadily higher, supported by a retreat in oil prices and renewed dollar strength. Tuesday’s move helped reinforce a short-term floor just above the 1.3700 threshold. However, USD/CAD continues to trade below all three key SMAs, with the 50-day at 1.3953, the 100-day at 1.4169, and the 200-day at 1.4016. Immediate resistance now stands at 1.3850, followed by a more critical barrier near 1.3900. On the downside, a break below 1.3720 would reintroduce bearish momentum toward the 1.3650 area. 
  • Gold Falls Back Below $3,310 as Bulls Lose Traction: Gold declined 1.52% on Tuesday, reaching $3,306. The metal opened strong but met firm resistance near $3,350 once again, triggering a wave of selling pressure that pulled prices down to an intraday low of $3,285. The longer-term outlook remains intact, supported by the 100-day and 200-day SMAs at $3,015 and $2,816 respectively. However, the repeated failure to break above the $3,350 region has created a firm cap, and momentum is beginning to slow just below that resistance. If the current softness continues, key support comes in at $3,250 followed by $3,200 and the 50-day average. A decisive break below that could lead to a deeper retracement toward $3,200. 

Market Movers:

  • Chinese Auto Stocks Drop on Price War Fears: Shares of Li Auto and Nio fell 2% and 3% respectively after BYD announced price cuts on 22 electric and hybrid models, sparking renewed fears of aggressive competition in the Chinese EV market.
  • AMC Soars After Record Memorial Day Weekend: AMC Entertainment surged 24% as strong box office numbers from new releases pushed Memorial Day weekend revenues to an all-time high, with trading volume more than double its 30-day average.
  • SoundHound AI Pops on Coverage Initiation: SoundHound AI rose 16% after Piper Sandler began coverage with an overweight rating, highlighting new expansion opportunities for its conversational AI tech in automotive.
  • CoreWeave Rallies Despite Downgrade: CoreWeave rose 21% even after Barclays downgraded the stock, with investors continuing to pile into AI infrastructure names following its recent post-IPO momentum.
  • Trump Media Slides on Bitcoin Deal: Trump Media & Technology fell more than 10% after announcing a $2.5 billion capital raise to purchase bitcoin, raising investor concerns about strategic focus and liquidity risk.

Tuesday’s rally helped restore market confidence after last week’s tariff-fuelled volatility, but the path ahead remains data-dependent and event-driven. With most S&P 500 earnings now in the rearview, attention is shifting back to macro and policy risks. Investors will be closely watching for further updates on US-EU trade talks, especially ahead of the July 9 tariff deadline. Meanwhile, upcoming GDP data from Canada, key earnings from retailers and chipmakers, and OPEC+ output decisions may determine whether the rebound has staying power. Despite broad gains, sentiment remains fragile and sensitive to geopolitical headlines and fiscal developments.