Investors are diving for cover as a new month kicks off, and trade tensions pop up like moles.

“The bigger issue for markets is that firstly Trump is sending a message that perhaps he is prepared to tolerate a lower stock market,” Chris Weston, head of research at Pepperstone, told clients in a note that refers to a threat by the president to slap Mexico with tariffs. The threat, which caught most investors off guard last week, may turn into a costly “significant headwind” for U.S. businesses and markets, he says.

Note, Morgan Stanley is now warning that all those tensions could trigger a U.S. recession in less than a year, and Goldman Sachs is also apparently talking escalation. No surprise then, to see the probability of a Federal Reserve interest rate cut for July has leapt to 50%, according to the CME Group’s FedWatch tool.

Naturally, a boatload of data coming this week will be watched closely, starting with U.S. manufacturing numbers later.

Our call of the day comes from investment bank J.P. Morgan, which has slashed its forecast for where the yield on the 10-year Treasury note could end up this year.

That’s as investors move into the perceived safety of government bonds this morning and out of what they see as risky, such as stocks and oil.

The bank sees the 10-year yield hitting 1.75% by year-end, in a note sent out after President Trump’s Mexico tariff decision. Yields, which move inversely to price, have dropped sharply in the past month on rising worries that a global trade war will hit the U.S. economy. That has, in turn, put pressure on the U.S. Federal Reserve to anticipate any slowdown and cut interest rates.

The note, led by analysts Matthew Jozoff and Alex Roever, says “the damage to business confidence could be lasting,” regarding Mexico tariffs. They are penciling in a quarter point cut in their third quarter gross domestic product outlook to 1.5%.

“The greater worry — which could prompt a larger revision — is that capital spending weakness morphs into hiring caution, and from there into consumer spending,” the analysts said.

Last week, one recession predictor hit a level not seen since 2007. Yields on the 10-year note have fallen below those of the three-month — referred to as a inverted yield curve. That means investors fear the future and are willing to pay less for short-term bonds over long-term ones.

Read: Can Trump’s trade tussle sink a shot at the longest economic expansion in history?

The market


YMM19, -0.23%

S&P 500

ESM19, -0.22%

 and Nasdaq

NQM19, -0.41%

 futures are down after closing out the worst May since 2010.

The yield on the 10-year Treasury note

TMUBMUSD10Y, -0.53%

 is down to 2.10% and gold

GCQ19, +0.89%

is also firm. The dollar

DXY, -0.12%

 is flat, while oil prices

CLN19, +1.42%

 are down.

Europe stocks

SXXP, -0.26%

are off, and Asia was sluggish, led by the Nikkei

NIK, -0.92%

A private survey showed flat China factory activity.

The chart

Our chart of the day, from strategists Jim Reid and Craig Nicol at Deutsche Bank, sheds some light on that rough May for stocks. Their first chart shows the dismal May performance for many global financial assets. But the second chart rounds up the year-to-date performance, and shows 36 of the 38 assets they sampled are still seeing a positive return in U.S. dollar terms:

The buzz


FDX, -2.36%

 shares are down on news China is probing the parcel delivery firm over delays delivering items to Huawei Technologies. Meanwhile, Beijing released a report blaming the trade mess on the U.S., though hasn’t closed the door on more negotiations.

Shares of Cypress Semiconductor

CY, -0.39%

 are climbing after Germany’s Infineon Technologies

IFX, -7.81%

 said it would buy the fellow chip maker in a $10.1 billion deal. Elsewhere, Blackstone

BX, -3.57%

 is reportedly snapping up a group of U.S. industrial warehouses from Singapore’s GLP in a record $18 billion deal.


BA, -2.36%

 shares are dropping after U.S. air-safety regulators said the airplane maker must replace wing parts on more than 300 of their 737 jets, including the grounded Max versions, blamed for two deadly crashes in recent months.


GOOGL, -1.33%

 shares are off after a report the U.S. Justice Department is preparing an investigation of the tech group’s Google search engine.

A senior North Korean official reportedly executed after February’s failed summit between Trump and the country’s dictator Kim Jong Un has been seen in public.

The economy

Monday’s lineup includes the final Markit manufacturing purchasing managers index, the Institute for Supply Management’s manufacturing index, construction spending and auto sales.

Read: Mighty U.S. jobs market buoys economy amid China trade war, Mexico tariff threat

The stat

20% — That’s how many of Apple’s

AAPL, -1.81%

 iPhone users in the U.S. surveyed by analysts at Piper Jaffray (out of 1,000) said they would upgrade to a $1,200 5G mobile, which is expected to roll out next year. The interest level is “surprisingly high,” given the price tag, they say.

Note, Monday kicks off Apple’s Worldwide Developer Conference, which should deliver updates on software from an array of popular gadgets.

The chart

“He’s a stone-cold loser who should focus on crime in London, not me.” — That was President Trump tweeting about London Mayor Sadiq Khan minutes before landing for a week-long Europe visit. Khan protested Trump’s visit in a Sunday newspaper column, saying the U.K. shouldn’t be rolling out the red carpet for a leader who’s such a threat to liberal democracy.

Random reads

A toxic caterpillar that’s so hungry it eats its young is a global farmer’s worst nightmare

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“A giant trash receptacle.” LA Times columnist rages over his filthy city

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