CNBC Daily Open: Markets see slim gains – but dark clouds loom as yields spike, trade talks turn testy

U.S. stocks mostly eked out slim gains overnight, as investors look past Moody’s downgrade of the U.S.’s credit rating last Friday. This extends the markets’ rally from last week on the U.S.-China’s temporary trade truce.

But there are dark clouds on the horizon. Moody’s downgrade continues to grip the bond market with the 30-year Treasury yield surging past 5% Monday, hitting levels not seen since November 2023. Bridgewater Associates founder and billionaire Ray Dalio warned that the U.S.’s lower sovereign credit rating understates the threat to U.S. Treasurys, saying the credit agency isn’t taking into account the risk of the federal government simply printing money to pay its debt. 

JPMorgan CEO Jamie Dimon also cautioned that markets are too complacent on tariffs, and expects S&P 500 earnings growth to collapse as companies pull or lower guidance amid trade policy uncertainty.

On the trade negotiations front, China accused the U.S. of undermining the two countries’ preliminary trade agreement, after the U.S. issued an industry warning against using Chinese chips that singled out Huawei. Beijing has demanded that the U.S. President Donald Trump administration “correct its mistakes,” a spokesperson for China’s Ministry of Commerce told a reporter, calling the U.S. Commerce Department’s guidance “discriminatory” and “market distorting.”

Pound rallies on Brexit’s exit
The British pound rose against the U.S. dollar after the U.K. and the European Union came to a landmark deal to reset their post-Brexit relations. The agreement covers a range of matters including security, energy, trade, travel and fisheries. Both sides said they would continue working toward a deal addressing unresolved issues such as allowing young people to work and travel freely in Europe again. 

U.S. markets eke out slim gains
The S&P 500 rose slightly Monday as investors looked past Moody’s downgrade of the United States’ credit rating. The benchmark added 0.09% to mark its sixth consecutive winning session. The Nasdaq Composite inched up 0.02%. The Dow Jones Industrial Average rose 137.33 points, or 0.32%, due in part to UnitedHealth’s stock rebounding by an 8% jump after a recent bout of hard selling. European stock markets were unchanged Monday, with the pan-European Stoxx 600 closing flat. 

China says U.S. undermined trade talks with Huawei chip warning 
China accused the U.S. of undermining the two countries’ preliminary trade agreement after the U.S. issued an industry warning against using Chinese chips that singled out Huawei. Beijing has demanded that the U.S. President Donald Trump administration “correct its mistakes,” a spokesperson for China’s Ministry of Commerce told a reporter.

Trump’s tariffs drive customs fraud
The U.S.’s new tariffs have pushed Chinese exporters to increasingly commit an existing shipping fraud, which works by significantly understating the value of goods or mislabeling them, often both. Shipments are then routed through shell companies that will fail to pay tariffs, default and cease operation. Experts warn that U.S. businesses are underestimating civil and criminal risks by partnering with such exporters.

[PRO] BlackRock’s Rick Rieder says he’s found the ‘sweet spot’ in bonds right now even as the market flinches
Rick Rieder, Blackrock’s chief investment officer, said he has found a “sweet spot” to invest in the bond market that comes with high returns and is high in quality. This specific segment trades rich since it gets crossover buyers from investment grade, he explained. Read more about his strategy here.

Trump wants a ‘one-stop shopping’ deal with South Korea on trade and defense, but there is a cost

South Korea is trying to strike a deal to escape the U.S. President Donald Trump’s tariffs, but the latter is “shopping” for more. He has pitched to share the costs of hosting U.S. troops in the allied country — bundling negotiations on trade, tariffs, and defense cost-sharing into a single comprehensive deal.

Seoul has been sharing defense costs since 1991 in three areas, namely logistics, local labor, and military construction. In October 2024, Seoul agreed to raise its contribution for hosting U.S. troops by 8.3% in 2026, to 1.52 trillion won ($1.13 billion).

While South Korean officials have reportedly said that defense payments are off the table, the country’s two leading presidential candidates, Lee Jae-myung and Kim Moon-soo, have hinted that they are open to discussing a defense cost-sharing agreement.

However, such a transactional approach will damage the U.S.’s credibility, Hoshik Nam, assistant professor at the Department of Sociology and Political Science at Jacksonville State University, said. “In the long term, this position could reframe the U.S. as an isolated superpower.”