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Good morning and welcome back to FirstFT, your early morning business briefing from the Financial Times. Today we’re covering:
The investor switch from long-term to short-term US debt.
Nvidia regaining its status as world’s most valuable company
Reaction to Zohran Mamdani’s stunning victory
The seeds of the next financial crisis
And why fish are getting smaller
Net outflows from long-dated US bond funds, spanning government and corporate debt, hit $11bn in the second quarter — the most since the severe market turbulence linked to the Covid-19 pandemic five years ago. By contrast, more than $39bn of money poured into funds that hold US bonds maturing in the near future, according to Financial Times calculations based on EPFR data.
Why is this happening? America’s soaring debt load is causing jitters among the institutional investors that use these funds. President Donald Trump’s “big, beautiful” tax bill, which is under consideration in Congress, is forecast to add trillions of dollars to US debt over the next decade, forcing the Treasury department to sell more bonds. At the same time investors are braced for a surge in inflation linked to Trump’s tariffs.
Why it matters: The outflow “reflects concerns over the longer-run outlook for [US] fiscal sustainability”, said a Goldman Sachs analyst, and represents a powerful shift from the trend over the previous 12 quarters when inflows averaged $20bn. Although fund flows data capture only a sliver of the vast US bond market, they provide a proxy for investor sentiment. One asset manager said as a result of the weakening returns investors might opt to diversify their long-term bond holdings internationally and start demanding “more compensation to invest further out the curve” when it comes to new Treasury bonds, pushing up borrowing costs for the US government. Read more on the exodus from long-term US bonds.
Here’s what else we’re keeping tabs on today:
Economic data: Releases include the final estimate of US first-quarter growth, advanced goods trade balance and core personal consumption expenditure, a measure of consumer spending and inflation. Brazil’s national statistics agency, IBGE, is set to release mid-June inflation data.
Interest rates: The Bank of Mexico is scheduled to lower its benchmark rate by 50 basis points to 8 per cent.
EU: A two-day European summit begins in Brussels with leaders expected discuss their response to Donald Trump’s aggressive trade tariffs. European Commission president Ursula von der Leyen is facing a no-confidence vote linked to a Covid-19 pandemic scandal.
Companies: Nike and Walgreens Boots Alliance report earnings. Nvidia begins trading as the world’s most valuable company after last night reclaiming the title from Microsoft.
Five more top stories
1. The dollar hit a three-year low earlier today after a report that Donald Trump was considering nominating the next Federal Reserve chair early, because of the US president’s frustration at the slow pace of interest rate cuts. Jay Powell’s term does not expire until May 2026 but the president has attacked the Fed chair repeatedly since returning to the White House. Here’s the latest on the dollar’s moves.
2. Shell said that it had “no intention” of making an offer for rival BP following months of speculation about a landmark tie-up between the UK’s two largest oil companies that would create a global energy group worth more than £200bn, capable of pumping close to 5mn barrels of oil and gas per day. Tom Wilson explains why Shell walked away from a bid for its rival.
3. Trump has branded Zohran Mamdani “a 100% Communist Lunatic” after the New York mayoral hopeful won a surprise victory in the city’s Democratic primary. Trump’s post came hours after the 33-year-old leftwing candidate emerged from obscurity to shock the national Democratic establishment.
4. Nato allies have pledged to meet Donald Trump’s demand to raise defence spending to 5 per cent of GDP by 2035, in a historic rearmament shift aimed at convincing him to maintain US commitments to protect Europe from attack. Trump assured his 31 allies he was “with them all the way” during the summit in The Hague and supported a joint statement that reaffirmed Nato governments’ “ironclad commitment to collective defence”.
5. Meta has won a copyright case over its artificial intelligence models, with a US federal court ruling that its use of millions of books to train them was “fair”. The tech group had argued the titles had been used to develop a transformative technology, which was fair “irrespective” of how it acquired the works.
From the FT Magazine
A US housing bubble fuelled partly by “subprime” home loans was considered one of the main culprits of the last financial crisis. Fears are growing that property markets could again be roiled, this time not by risky lending practices but by rising numbers of climate-related disasters putting pressure on insurers and other critical financial institutions.
We’re also reading . . .
Israel-Iran: The extent of the damage from strikes in both countries has been hotly contested, but satellite images offer a picture.
Sleepless Kyiv: Millions of residents are losing sleep to Russia’s night-time attacks as the sounds of sirens, drones and explosions rock the city.
Summer market fling: As temperatures rise, make sure you don’t get burnt by unpredictable flare-ups in financial markets, writes Katie Martin.
Shrinking fish: Eastern Baltic cod have evolved to be smaller and slip through nets, according to landmark research that links overfishing to changes in marine species’ DNA.
Chart of the day
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The recent war between Iran and Israel has focused investor attention once again on the oil price. In this latest game of draw your own chart test your knowledge of how oil prices were affected by previous crises in the Middle East.
Take a break from the news
It’s a strange, unsettled moment in fashion, writes HTSI’s Alexander Fury, with geopolitical tensions affecting demand. The overwhelming complexity of the world may be why menswear at this year’s Milan Fashion Week sometimes resembled a pyjama party — an embrace of a gentler, simpler aesthetic.
