5 June 2025
Trump, Xi Agree to Resume Talks Soon
A review of the week’s top global economic and capital markets news
AUTHOR
Jamie Coleman
Senior Strategist, Strategy and Insights Group
For the week ending 5 June 2025
As of midday Thursday, global equities were higher on the week amid hopes for renewed US – China trade talks. The yield on the US 10-year note declined 4 basis points from last Friday, to 4.38%, while the price of a barrel of West Texas Intermediate crude rose $3.15, to $63.65. Volatility, as measured by futures contracts on the CBOE Volatility Index (VIX), fell to 18.95 from 20.15 last Friday.
MACRO NEWS
Trump, Xi spoke Thursday
A long-awaited phone call between US President Donald Trump and Chinese President Xi Jinping took place on Thursday, Chinese state media first reported. According to Xinhua News Agency, the two leaders agreed to start a new round of talks as soon as possible, and Xi said Trump is welcome to visit China again. According to the Chinese readout, Xi told Trump that China has implemented the agreement the two countries reached in Geneva in May, something US officials dispute. Xi also said the US should remove negative measures against China, and the two sides should avoid conflict over Taiwan. Trump called the conversation “very good” and, in turn, invited Xi to visit the US. According to Trump, the call was entirely focused on trade, and teams from the two countries will be meeting shortly. He said progress was made on rare earth minerals and that the call resulted in a positive conclusion for both countries.
Data hint at softening US labor demand
Ahead of Friday’s nonfarm payrolls, investors focused on several second-tier bits of labor market data such as a very weak ADP employment report and an uptick in weekly US jobless claims. Those data, along with sub-50 ISM manufacturing and non-manufacturing PMIs, sent bond yields lower this week and pushed up the odds of a Fed rate cut in September.
Fed downgrades Beige Book outlook
The US Federal Reserve released its Beige Book in preparation for the 18 June FOMC meeting, saying that economic activity declined slightly and that the outlook remains slightly pessimistic and uncertain. Prices increased at a moderate pace, the report showed, with businesses planning to pass along tariff-related costs to customers within three months. It described employment as flat and wage growth as modest, with hiring being delayed in many regions because of uncertainty.
ECB cuts nearing the end of the line
The European Central Bank cut its deposit rate 0.25%, to 2%, on Thursday as markets expected. ECB President Christine Lagarde was relatively upbeat in her commentary, saying defense and infrastructure spending should bolster economic growth and that a strong labor market and rising incomes should help the economy, although survey data point to weaker near-term prospects. Tariffs and a stronger euro will make exports harder, Lagarde said. Most importantly, Lagarde closed out the press conference saying that the ECB is getting to the end of the easing cycle with today’s cut.
QUICK HITS
Global purchasing managers indices largely idled in May, with most measures fractionally above or below the neutral level of 50. US measures were weaker than forecast while prices paid firmed.
| Country or Region | Manufacturing PMI | Services PMI | Composite PMI |
| US (ISM) | 48.5 from 48.7 | 49.9 from 51.6 | N/A |
| Eurozone | 49.4 from 49.0 | 49.7 from 50.1 | 50.2 from 50.4 |
| United Kingdom | 46.4 from 45.4 | 50.9 from 49.0 | 50.3 from 48.5 |
| Japan | 49.4 from 48.7 | 51.0 from 52.4 | 50.2 from 51.2 |
| China | 49.5 from 49.0 | 50.3 from 50.4 | 50.4 from 50.2 |
Japanese Prime Minister Shigeru Ishiba said this week he may visit President Trump to talk trade prior to the mid-June G7 summit.
This week, the OECD warned that advanced economies could face significant GDP losses from rapid supply chain localization. The group downgraded its US growth forecast to 1.6% for this year and 1.5% in 2026, citing tariffs and policy uncertainty.
The Dutch government collapsed on Tuesday after the Party for Freedom left the ruling coalition over lack of support for the party’s anti-asylum policies.
After months of political turmoil, South Korea elected the left-leaning Lee Jae-myung as president.
President Trump followed through on a threat he made over the weekend to raise the tariffs on steel and aluminum to 50%, from 25%, effective 4 June.
Ukraine launched drone attacks on air force bases inside Russia, some thousands of miles away from Ukraine, destroying a significant portion of Russia’s strategic bomber fleet. Ukraine also reportedly struck and severely damaged a bridge connecting Crimea and Russia.
The Wall Street Journal reported that China’s chief trade negotiator, Vice Premier He Lifeng, is seen as taking a harder line in trade talks with the US than his predecessors by requiring the US to loosen restrictions on technology exports to China in exchange for access to critical minerals.
The US JOLTS tally of job openings rose to 7.391 million in April, from 7.2 million in March. The job openings rate rose a tick to 4.4% while the quits rate fell 0.1%, to 2%. Taken together, the data suggest that labor market dynamism remains muted.
The White House sent a rescission package to Capitol Hill on Tuesday, asking Congress to claw back $9.4 billion that is already in the budget. The cuts include $1.1 billion for the Corporation for Public Broadcasting and $8.3 billion in foreign aid. More rescissions are expected before the end of the fiscal year.
Trump called for elimination of the US debt limit, a decades-long political football that has more than once brought the US to the brink of default.
Trump instituted a full ban on travel to the US from 12 countries and raised visa restrictions on an additional seven nations. Most are in the Middle East and Africa.
The US Senate confirmed Michelle Bowman as Fed Vice Chair for Supervision.
The latest (5 June) Atlanta Fed GDPNow model update estimates a Q2 growth rate of 3.8%.
The Congressional Budget Office estimates that the budget bill passed last week by the House of Representatives will increase the national debt by $2.4 trillion over the next 10 years. It also projects that the tariffs in place since mid-May will raise $2.8 trillion in additional revenue over the same period. Neither estimate accounts for potential changes in economic growth or interest rates as a result of the policy shifts.
THE WEEK AHEAD
Monday: China CPI and PPI, US NY Fed inflation expectations survey
Tuesday: UK unemployment
Wednesday: US CPI
Thursday: UK GDP, industrial production; US PPI
Friday: Japan industrial production; eurozone industrial production; US University of Michigan survey
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your investment professional, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual or quarterly report. Full holdings are also available on the individual Fund Summary tab in the Products section of mfs.com.
The views expressed in this article are those of MFS and are subject to change at any time. No forecasts can be guaranteed.
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.
48666.2