This followed Moody’s downgrade of the U.S. credit rating, citing escalating debt levels and a widening fiscal deficit. Moreover, Federal Reserve officials reiterated on Tuesday their concerns regarding the economic impact of the Trump administration’s trade policies. St. Louis Fed President Alberto Musalem warned of a deteriorating labor market and rising inflation, while Cleveland Fed President Beth Hammack emphasized the risk of stagflation. Investors now turn their attention to the forthcoming U.S.-Japan bilateral talks between Treasury Secretary Scott Bessent and Finance Minister Katsunobu Kato, scheduled to take place during this week’s G7 finance summit in Canada.

In the United Kingdom, annual inflation accelerated to 3.5% in April 2025, which is the highest level since January 2024, up from 2.6% in March and surpassing the 3.3% market forecast. The rise was mainly driven by increased prices in housing and household services, transportation, and recreation and culture, although declines in clothing and footwear prices provided some offset. On a monthly basis, consumer prices rose by 1.2%. Core inflation also picked up, rising to 3.8% from 3.4%.

Meanwhile, the U.S. Commerce Department concluded that Chinese producers of electric vehicle battery materials had benefited from unfair government subsidies, potentially resulting in import duties of up to 721%. These measures could significantly increase production costs for U.S.-manufactured EVs, particularly as concerns grow over potential reductions in consumer credit. A separate pricing investigation remains ongoing. These tariffs are distinct from those imposed during the Trump administration and unrelated to the latest duties on other imports.

In the bond markets, U.S. 10-year Treasury yields rose to 4.52%. In Japan, 10-year yields also moved higher to 1.52%, as expectations for interest rate cuts grew stronger.

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