LONDON, June 4 (Reuters) - What matters in U.S. and

global markets today

Despite all the trade and geopolitical tensions, markets

have a spring in their step today, due to hopes that U.S.

bilateral tariff deals will soon emerge, expectations that

interest rates will fall in Europe, and signs of economic

resilience and tech demand in the U.S.

I discuss all this and the rest of today's market news below.

Plus, check out today's column, where I explain why the euro's

potential growth in reserve holdings could generate significant

capital flows, even if it doesn't dethrone the dollar as the

dominant global currency.

Today's Market Minute

* The U.S. tariff rate on most imported steel and aluminum

doubled on Wednesday as President Donald Trump ratchets up a

global trade war on the same day he expects trading partners to

deliver their "best offer" in bids to avoid punishing import tax

rates on other goods from taking effect in early July.

* Billionaire Elon Musk plunged on Tuesday into the

congressional debate over Trump's sweeping tax and spending

bill, calling it a "disgusting abomination" that will increase

the federal deficit.

* Trump is set to use emergency powers and slash legal

requirements relating to the Defense Production Act to lift U.S.

production of critical minerals and weapons, according to a

document seen by Reuters.

* It is widely believed that investors around the world have a

disproportionately high exposure to U.S. assets, an imbalance

that could roil U.S. markets if corrected. But Reuters columnist

Jamie McGeever explains why those fears may be overblown.

* If 'American exceptionalism' truly is coming to an end, the

key question for many investors is where capital may flow now.

While Europe may be the obvious destination, Manishi

Raychaudhuri, CEO of Emmer Capital Partners, argues that

relative value metrics may favour emerging Asia.

Global stocks hit record highs

MSCI's all-country equity index hit a record

high on Wednesday, a whopping 23% surge from the intraday trough

of April 7 hit after the initial U.S. tariff sweep. The world

index is now almost 6% higher for the year.

Wall Street continues to lag, but the S&P 500 is

positive again for the year and the Nasdaq is within a whisker

of breaking even in 2025. Stock index futures are up again ahead

of today's bell, with stocks in Europe and Asia also rising

smartly.

By contrast, U.S. Treasuries and the dollar both fell

back, with the long bond yield now back near 5% and

the euro briefly re-capturing $1.14 against the

greenback.

But is the coast really that clear for stocks?

Part of the week's seeming optimism hinges on hopes that the

fast approaching deadline on the 90-day pause in U.S.

'reciprocal' tariffs will focus minds and deliver deals. Despite

the hoopla over a UK agreement last month, no deals have been

signed and sealed so far.

Central to hopes of some trade detente is the planned phone call

between President Donald Trump and China's President Xi Jinping.

The White House claims it's happening this week, though it's

unclear exactly when. And Trump posted on Wednesday that Xi was

"very tough and extremely hard to make a deal with."

Washington officially doubled its tariffs on steel and

aluminum imports on Wednesday, exempting Britain for now. The

Trump administration also expects negotiating countries to make

"best offers" by today to avoid additional import levies kicking

back in next month.

Maros Sefcovic, the trade negotiator for the European Union,

met U.S. Trade Representative Jamieson Greer in Paris on

Wednesday, with the 27-nation bloc set to make its case for

cutting or eliminating threatened tariffs on European imports.

But concern about auto sector disruption from the U.S.-China

trade standoff has also risen by several notches.

Global automakers joined U.S. counterparts to complain that

restrictions by China on exports of rare earth alloys, mixtures

and magnets could cause production delays and factory outages

without a quick solution.

Trump, meantime, is set to use emergency powers and slash legal

requirements relating to a law aimed at lifting U.S. production

of critical minerals and weapons, according to a document seen

by Reuters.

But despite the very real disruption in manufacturing, there

were other signs that the wider U.S. economy is weathering the

storm reasonably well, with job openings unexpectedly increasing

in April as a week of labor market updates unfolds.

That helped Wall Street stocks move higher on Tuesday, but

the rally is mostly being driven by Big Tech once again.

Information technology stocks rose 1.5%, boosted by

2.9% gains by Nvidia ( NVDA ), which is back to being the

world's most valuable firm. Chipmaker Broadcom hit a

fresh record high after the company said it has begun to ship

its latest networking chip.

Service sector survey readouts for May are due later, and

European equivalents out earlier showed upward revisions to

earlier flash readings.

European stocks and the euro were higher ahead of the

expected European Central Bank rate cut on Thursday, now seen as

a done deal as euro zone inflation fell back below target in

May.

Markets reckon there's a 50-50 chance the Bank of Canada also

cuts rates later today. The Canadian dollar held firm ahead of

the decision.

Elsewhere, South Korea's stocks jumped almost 3% and the

won rallied 1% after the victory of liberal candidate Lee

Jae-myung in the presidential election there.

In today's column, I consider how a global reserve holdings

shift in favor of the euro could generate massive amounts of

additional investment in euro assets, even if the euro doesn't

supplant the dollar.

Chart of the day

Switzerland is flirting with deflation yet again as a

supercharged Swiss franc feeds off rising global tensions and

depresses import prices. Swiss consumer prices fell 0.1% on an

annual basis in May, the first negative print for more than four

years.

The Swiss National Bank is now widely expected to cut its

main interest rate back to zero later this month, with markets

pricing a one-in-three chance of policy rates returning to

negative territory, where they languished for eight years until

2022. The SNB refuses to rule out a return to negative rates and

may also have to resume heavy currency intervention to cap the

franc to boot. The franc's nominal effective exchange rate index

is up 5% since February and has appreciated by almost 30% over

the past six years.

Today's events to watch

* Bank of Canada policy decision (9:45 AM EDT)

* U.S. May private sector payrolls from ADP (1:15 PM EDT),

May service sector business survey from ISM (10:00 AM EDT)

* Federal Reserve publishes Beige Book on economic

conditions. Atlanta Fed President Raphael Bostic speaks

* NATO Secretary General Rutte convenes NATO Defence

Ministers meeting in Brussels

* European Commission President Ursula von der Leyen speaks

in Brussels

* U.S. corporate earnings: Dollar Tree

Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.

(By Mike Dolan; Editing by Anna Szymanski.)