by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with the announcement of another big output boost by the Organization of the Petroleum Exporting Countries (OPEC) and its Russian-led partners. We next review several other international and US developments with the potential to affect the financial markets today, including a slew of important election results in Asia and Europe and a hint by President Trump that he may keep some of his controversial tariffs permanent.

Global Oil Market: One month after the OPEC+ group announced an unexpectedly large production boost of 411,000 barrels per day, members of the group announced another output boost of the same magnitude over the weekend. The new output boost is scheduled for June. With global economic growth slowing, the output boosts have driven oil prices sharply lower so far today. At this writing, Brent crude is down 1.9% to $60.13 per barrel, and WTI is down 2.2% to $57.02.

China: Several articles in state media last week argued for China to conduct mass purges of corrupt military officials to better prepare the People’s Liberation Army for war or a major crisis. The sudden appearance of such articles may signal that General Secretary Xi will soon ratchet up his ongoing purge of high-level officers and defense industry officials. We discuss these purges and put them into context in our upcoming Bi-Weekly Geopolitical Report to be published on May 12, 2025, titled, “Update on the US-China Military Balance of Power.”

China-United States: According to new data from Juwai IQI, the US in 2024 lost its position as the top destination for mainland Chinese purchasers of homes costing $5 million or more. The data show that the US ranking dropped below those of Thailand, Australia, and Canada last year as US-China geopolitical tensions worsened and Washington and China took steps to restrict bilateral investments. The report said Chinese investment in US high-end residential properties last year was down about 50% from its peak in 2017.

South Korea: The ruling People’s Power Party on Saturday chose conservative hard-liner Kim Moon-soo to be its candidate for the June 3 presidential election. In his acceptance speech, Kim vowed to take a hard line against North Korea and develop new incentives for business, while also pledging stronger support for young workers and the underprivileged. However, opinion polls suggest Lee Jae-myung and his liberal Democratic Party retain a huge advantage.

• In the latest polls, about 50% of voters support the DP’s Lee, while just 15% support the PPP’s Kim.
• The PPP has lost considerable support since the previous president, Yoon Suk Yeol, attempted to declare martial law late last year and was thrown out of office.

Singapore: In parliamentary elections yesterday, Prime Minister Wong and his long-ruling People’s Action Party won handily with 65.6% of the vote, up from 61.2% in the 2020 elections. Observers on the ground said the improved performance mostly reflected safe-haven voting as citizens accepted the PAP’s message that political stability and retaining trusted officials would help the city-state defend itself in the US tariff war. The election results suggest global investors will continue to see Singapore as an attractive, stable investment destination.

Australia: In parliamentary elections on Saturday, Prime Minister Albanese and his center-left Labor Party retained power with a win over the center-right Liberal Party. The election mirrored the recent Canadian and Singaporean balloting, where the ruling party secured another majority by tagging the opposing candidate as too similar to US President Trump or unable to stand up to Trump’s tariff war. Indeed, Treasurer Jim Chalmers yesterday said the Albanese government will now prioritize protecting Australians from the “dark shadow” of US tariff policies.

United Kingdom: Illustrating the UK’s sluggish investment, new data from the Department for Transport show the country built no more than 65 miles of new highways over the last decade and just 422 miles since 1990. In contrast, some other European countries have built thousands of miles of new motorways. Observers ascribe the UK’s weak investment to many issues, from local opposition and strict environmental rules to a hangover from robust building in the 1960s. In any case, weak investment is seen as a key cause of the UK’s slow economic growth.

Romania: In the first round of Romania’s presidential election re-run yesterday, right-wing nationalist George Simion came in first with more than 40% of the vote, while the centrist mayor of Bucharest, Nicusor Dan, appeared to be on track to grab second place. If confirmed when the counting is finished, the two will meet in a run-off on May 18. In contrast to the elections in Canada and Australia, the success of Simion in the first round shows that Europe’s right-wing populists appear to benefit from their ideological association with President Trump.

Israel-Hamas: The Israeli security cabinet has formally adopted a plan to occupy and hold the Gaza Strip, shifting from its previous strategy of attacking the Hamas militants governing the territory and then retreating. Besides requiring Israel to commit significantly more military and economic resources to its war against Hamas, occupying Gaza over the long term may well produce ongoing international political costs for Israel and ensure continued instability in the energy rich region.

US Monetary Policy: The Fed begins its latest policymaking meeting tomorrow, with its decision due on Wednesday at 2:00 pm ET. Based on interest rate futures trading, investors are nearly unanimous in expecting officials to hold their benchmark fed funds rate steady at the current target range of 4.25% to 4.50%. The next rate cut is expected only at the meeting in late July. However, investors will be paying close attention to any hints Chair Powell may give on the trajectory of rates and any change in the Fed’s bond-buying program.

US Tariff Policy: In a television interview aired yesterday, President Trump said he may keep some import tariffs permanent to ensure continued incentives for firms to invest and produce in the US. As the administration negotiates with other nations and responds to corporate lobbying for relief, the slightest news of tariff rollbacks has recently encouraged investors to jump back into stock buying. Trump’s statement is a warning against such complacency, since he is likely to keep some level of market-disrupting tariffs despite limited or temporary rollbacks.

• Separately, Trump last night announced that he is imposing 100% tariffs on foreign-made films to protect the US movie industry.
• US movie industry officials said they were given no prior warning of the move and were scrambling to figure out how it would affect their business. Along with the threat of foreign retaliation, US movie-making companies have seen their stock prices fall significantly so far this morning.

US Stock Market: At the Berkshire Hathaway annual meeting on Saturday, chief executive and investing icon Warren Bufffett announced that he will retire from the company by year’s end and recommend his chosen successor, Greg Abel, take over. According to Buffett, “I would still hang around and could conceivably be useful in a few cases, but the final word would be what Greg said in operations, in capital deployment, whatever it might be.”

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