Stocks, oil, risk sentiment pulls back as Moody’s downgrades US’ credit score; Gold gains as safe-haven demand returns

📆 Monday, May 19

► European markets opened lower as risk sentiment soured following Moody’s downgrade of the US sovereign rating. The Stoxx 600 slid 0.65%, with losses across most sectors. Germany’s DAX slipped only 0.2% (benefiting from lower oil prices), while France’s CAC 40 and UK’s FTSE 100 both dropped more than 0.7%. Trump’s renewed tariff reshuffling and persistent budget uncertainty compounded investor fears. Energy stocks lagged as oil prices continued their slide (-1.4%), while bond yields rose across Europe (even more so in the US). The EUR rallied 1%, supported by inflows from the USD and optimism over the new post-Brexit agreement between the EU and the UK.

► US futures declined more significantly (in US pre-market trading), unwinding last week’s tech-led rally. S&P 500 and Nasdaq 100 futures fell 1.3% and 1.7%, respectively. The Moody’s downgrade to Aa1 — following previous cuts by Fitch and S&P — raised fresh concerns about long-term debt sustainability. The 30-year Treasury yield surged past 5% for the first time since November 2023, while the 10-year climbed to 4.55% (+10.5 bps !). Chips stocks such as Nvidia, Broadcom or AMD (some of last week's top gainers) dropped sharply (down near/more than 3%) and some other key tech companies, including Apple, Tesla, Netflix, Alphabet, Palantir dropped significantly in premarket trading. Losses are sharp in growth / high(er) risk stocks. UnitedHealth is up 4% recovering from last week's hefty plunge following a weak earnings report and reports of a DOJ Medicare fraud investigation. Traders now await key Fed speeches and macro data (but no major US data before Wednesday), including leading indicators and industrial production.

► Asian markets closed mixed, balancing China’s macro releases and the downgrade of US credit. The MSCI Asia Pacific Index dipped 0.15%. Japan’s Nikkei fell 0.7%, weighed by weak service sector data, despite a recently softer yen (not today – due to some increased safe haven demand for the JPY). Hong Kong’s Hang Seng traded flat. China’s industrial output beat forecasts, but retail sales missed, underlining a slow consumer rebound and giving a mixed picture of the US economy. Despite easing trade tensions, sentiment in the region remained cautious with flows shifting away from US assets amid debt and fiscal concerns.