Asian equity markets mostly declined on Monday amid escalating trade tensions, after the US announced plans to double steel tariffs to 50% and China accused Washington of breaching the recent trade truce. Caution in regional markets was also driven by anticipation of key US employment data and a widely expected interest rate cut by the European Central Bank. In China, PMI data pointed to a fragile recovery, with weak domestic demand and lingering uncertainty. Japan’s Nikkei 225 fell by 1.30%, while Hong Kong’s Hang Seng slipped 0.68%. Chinese markets were closed for a public holiday, though China’s 10-year government bond yield dropped to around 1.70% as investors moved towards safer assets.

The US dollar index extended its decline, falling below 98.7 points at the start of June 2025 and nearing the three-year lows last seen in April, after a weaker close in May. The drop was driven by renewed trade uncertainty and a wave of risk-off sentiment following disappointing economic data. US stock markets also ended lower, with the Dow Jones down 0.39%, closing at 42 106.69, the S&P 500 slipping 0.18% to end at 5 900.80, while the Nasdaq gained 0.19% with a 26.31 points move. The latest ISM Manufacturing PMI revealed a sharper-than-expected contraction, marking a third consecutive monthly decline.

Trade tensions intensified as China accused the US of breaching a recent deal and pledged to retaliate—echoing similar claims made by President Donald Trump. Meanwhile, US-EU relations worsened after President Trump announced plans to double tariffs on steel and aluminium. The dollar weakened broadly, particularly against the yen, euro, and Australian dollar.

European markets closed lower on Monday with the Stoxx 50 declining by 0.30%, while the Stoxx 600 slipped 0.10%. In the UK, the FTSE 100 ended the day at 8 776.67 up by 0.05%. The EU’s warning of potential retaliation against the US’s planned tariff increases hit the automotive sector, with Stellantis tumbling 5% and Mercedes, BMW and Volkswagen falling up to 2.70%. Luxury and media stocks also declined. Conversely, oil stocks rose 1.40% following a smaller-than-expected OPEC+ output hike. Defence firms Babcock and QinetiQ surged on news of the UK’s plans to expand its nuclear submarine fleet. Sanofi dropped 1.80% after announcing a $9.1 billion acquisition of Blueprint Medicines. On the data front, Eurozone manufacturing PMI indicated signs of stabilisation, though Germany remained weak. Investors now turn their focus to the European Central Bank’s (ECB) expected rate cut decision on Thursday.

The South African rand traded around R17.85 to the US dollar, recovering from a more than one-week low of R18 reached on 30 May. The rebound was supported by rising gold prices amid growing safe-haven demand, driven by renewed trade and geopolitical tensions. Economists expect a weak GDP report, likely confirming ongoing economic stagnation. Meanwhile, the seasonally adjusted Absa Purchasing Managers’ Index (PMI) fell to 43.1 in May 2025 from 44.7 in April, marking the seventh consecutive month of contraction in factory activity. Absa noted that trade disruptions with neighbouring countries, policy uncertainty, tariffs, and persistent logistical challenges continue to weigh heavily on the sector.

Commodities saw notable gains, with gold rising by 2.16% to trade at $1 372.19 per ounce, reflecting heightened safe-haven demand amid the global uncertainties. Brent crude oil also increased, closing at $65.16 per barrel, up 3.79%, supported by supply concerns and a smaller-than-expected output increase from OPEC+. These movements underscore growing investor caution.