Markets snapshot
- Everything red. On Friday Wall Street knocked everything down at once, stocks, bonds, gold and bitcoin. This is not sector rotation, it is a liquidity drain.
- Nasdaq -4.2% to 25,709, the worst day this year. Semiconductors led the drop, about a trillion dollars evaporated from the market.
- S&P 500 -2.6% to 7,384, Dow -1.3% to 50,867. The indices that set records a week ago are now giving back a month’s gain in a single session.
- Gold fell almost 4%, dropping below 4,370 USD an ounce and erasing the entire year’s gain. Bitcoin fell more than 5% to its lowest level in more than a year.
- WTI oil holds near 93 USD, after a 3.1% drop in the previous session. It is held up by the Middle East risk premium and uncertainty over the US-Iran talks.
- DXY at 99.4, ending the week in the green. The dollar strengthens not from confidence, but because real rates are rising and money is flowing back to the US.
- The 10-year bond yield jumped to 4.54% (+6 basis points), the 2-year to 4.16% (+10). It was the bond market that dictated everything this week.
Lithuania and the Baltics
- The PM’s chair wobbles. Aurelijus Veryga says he has indications that the Social Democrats plan to replace the prime minister. President Nausėda replied that the party must decide for itself, he has no complaints about the current head.
- Deposits grew 2.25 billion euros. In April the volume of Lithuanian residents’ deposits rose by this amount. People are saving in cash rather than buying, a signal about caution, not about confidence.
- The real estate market will cool, but without catastrophe. Analysts say the rise in rates will cool the property market, but will not trigger the worst-case scenario. The question, is this a forecast or a consolation formula.
- Janulevičius on the EU talks. The head of the industrialists urges Lithuania to be tougher in talks with the European Commission, because the country has committed to defending Europe and must demand corresponding terms.
Europe
- Tragedy off Malta. At least 10 people died when a migrant boat capsized. The Mediterranean route is open again, and EU policy still has no answer for it.
- Armenia’s election matters to Brussels. The EU is watching the vote’s outcome, because the Caucasus is becoming a new zone of influence between Russia, Turkey and the West.
Ukraine
- The drone war expands. Russia claims to have shot down 376 Ukrainian drones overnight over 16 regions, including St. Petersburg and Crimea. St. Petersburg residents were urged not to leave their homes.
- Putin rejected a meeting. Zelensky offered direct face-to-face talks, Putin replied that there is no point and that there is no need to halt the fighting for negotiations. Diplomacy stays theater, the front stays reality.
- The front burns. Russia presses the fortified cities of eastern Ukraine, the fighting is already in the streets of Dobropillia, Vovchansk and Kostiantynivka. Ukraine uses drones to wreck Russian logistics up to 20 km behind the line.
Geopolitics
- OPEC+ turned on the tap. The cartel raised July production quotas. More oil on the market at a time when the Middle East premium holds it high is a fight between politics and fundamentals.
- The US weighs Iran’s assets. Reports emerged that Washington may use frozen Iranian assets to rebuild the Persian Gulf. This is a new lever in talks and a new precedent for how sanctioned reserves are treated.
- Taiwan and China at sea. Taiwan’s coast guard reports collisions with Chinese ships in disputed waters. The gray zone between provocation and conflict keeps narrowing.
- North Korea won’t negotiate. Kim Yo Jong stated that nuclear status is not a subject of negotiation. Trump meanwhile urges further strikes on “Hezbollah”.
Central banks
- A rate hike is back on the table. After a strong labor market reading the CME market now prices more than a 57% chance that the Fed will raise rates this year. Just a week ago the market expected a cut.
- New chairman, new tone. Kevin Warsh, known as a hawk, will hold his first meeting and press conference as Fed chief on June 17. It is a forecast-update month, so the dot plot will say more than words.
IPO radar
- Anthropic goes public. The company confidentially filed an IPO application after raising 65 billion dollars at a 965 billion dollar valuation, overtaking OpenAI (730 billion). The annual revenue run rate crossed 47 billion dollars, a market debut is possible as soon as this fall.
- OpenAI prepares a prospectus. The competitor is preparing to file its confidential IPO document in the coming weeks. The race to Wall Street between two AI giants has begun in earnest.
- SpaceX with xAI too. Musk’s merged company filed a prospectus with the SEC, its valuation reaches 1.25 trillion dollars. For private capital these giants are becoming too big, it is the public market’s turn.
Analyst voices
- Lyn Alden, new monthly. The June newsletter is titled “The Wild West”, on the theme of growing uncertainty in markets. Source
What to watch tomorrow
- Monday’s open. Whether Friday’s selloff continues, or there is a bounce. After a day like this the first move shows whether it is panic or a beginning.
- The 10-year yield. If it rises above 4.6%, stocks will have it even harder. The bond market is the driver now.
- Fed June 17. Warsh’s debut with new forecasts. Any hint of a hike will reprice everything again.
- Lithuania’s political drama. Whether the Social Democrats officially move the PM question, or it stays corridor talk.
- Oil and Iran. Signals from the US-Iran talks and OPEC+ quotas will decide whether 93 USD holds.
Meška’s note
Friday was a pure lesson in how the late cycle works. A strong labor reading should have been good news, but to the market good news is bad news, because it closes the door to rate cuts and raises real rates. When real rates rise, everything that earns no income falls, so gold and bitcoin slid together with stocks. This is not risk rotation, it is a liquidity drain, and liquidity is the only real currency in this system.
Structurally the most important thing is that the Fed ends up in a trap. The fiscal deficit demands low rates so the debt can be serviced, but a hot economy and energy inflation demand high ones. Warsh inherits this contradiction, and his hawk reputation will collide with the reality that the state can no longer afford an expensive dollar. On June 17 we will see whether the new chairman understands this, or is still learning.