LONDON, May 29 (Reuters) - What matters in U.S. and

global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial

Markets

World markets and the U.S. dollar have surged this morning

after a shock U.S. court ruling overnight that said the bulk of

President Donald Trump's sweeping import tariff hikes were

outside his authority.

I'll discuss the implications of this below along with the

rest of the morning's market news before getting into today's

deep dive, where I explain why Germany may not remain long in

its new role as the world's top creditor.

Today's Market Minute

* A U.S. trade court blocked most of President Donald Trump's

tariffs in a sweeping ruling on Wednesday that found the

president overstepped his authority by imposing across-the-board

duties on imports from U.S. trading partners.

* Billionaire Tesla CEO Elon Musk is leaving the Trump

administration after leading a tumultuous efficiency drive,

during which he upended several federal agencies but ultimately

failed to deliver the generational savings he had sought.

* NATO will ask Germany to provide seven more brigades, or some

40,000 troops, for the alliance's defence under new targets for

weapons and troop numbers that its members' defence ministers

are set to agree on next week.

* In the faceoff between heavily indebted developed economies

and increasingly wary investors, Japan has blinked first,

announcing that it will reconsider its debt profile strategy.

The U.S. could soon follow. Read the latest from Reuters

columnist Jamie McGeever.

* The U.S. power system is on track to produce more electricity

from clean power sources than from fossil fuels for the third

straight month in May, a record-long stretch. Find out more in

the latest piece from Reuters columnist Gavin Maguire.

Trump tariffs thwarted

The Manhattan-based Court of International Trade ruled on

Wednesday that the U.S. Constitution gives Congress exclusive

authority to regulate commerce with other countries, and that

this authority is not overridden by the president's emergency

powers.

In response, the White House quickly set an appeal process

in motion, one that could go all the way to the Supreme Court.

But the trade court has, at least temporarily, invalidated

all of Trump's orders on tariffs since January that were rooted

in the International Emergency Economic Powers Act, a law meant

to address "unusual and extraordinary" threats during a crisis.

While the ruling doesn't cover sector-specific tariffs on

steel or autos, analysts said it does invalidate the 10%

universal tariff, the global 'reciprocal' tariffs, levies on

Canada and Mexico and the new China levies.

At the very least, the tariffs are in limbo for now.

Appeals are pending and there may be other legal routes to

reinstate the levies, but, as it stands, the ruling effectively

freezes bilateral trade negotiations with Europe, China and

other countries that needed to be concluded by July 9.

Stock markets - which were already cheering a decent set of

Nvidia ( NVDA ) results that came out shortly before the court

announcement - zoomed higher ahead of today's bell on the

prospect of frustration, delay and possible suspension of the

central plank of Trump's trade war.

U.S. futures jumped between 1.5% and

2% ahead of Thursday's bell. Bourses in Europe and Asia rose

too, with Japan's Nikkei leading the way with gains of

almost 2%.

The S&P 500 is currently about 4% below an all-time

high touched on February 19, having rebounded from a near 20%

decline last month.

For individual stocks, Apple ( AAPL ) climbed 3.6%

overnight, while Meta and Alphabet added more

than 2%.

Shares of Nvidia ( NVDA ) were up more than 5% as the chip

giant beat estimates again for first-quarter sales, driven by

customers stockpiling AI chips ahead of restrictions on U.S.

exports to China. Markets seemed relaxed even as the company

warned that the new curbs were expected to cut $8 billion from

current-quarter sales.

The Nvidia ( NVDA ) gains appeared to hold even after news emerged that

Washington had ordered a broad swathe of companies to stop

shipping goods to China without a license and revoked licenses

already granted to certain suppliers.

Products affected include design software and chemicals for

semiconductors, butane and ethane, machine tools, and aviation

equipment, Reuters sources said.

But the tariff ruling has since dominated headlines.

The dollar, which had fallen as the tariffs were

rolled out over the past few months, initially climbed, hitting

its best levels in a week. But it gave back much of these gains

as the New York open neared.

Crude oil prices pushed higher and gold fell.

In the midst of a heavy week of new debt sales, U.S.

Treasury yields nudged higher and the yield on

long-bonds held above 5%.

Federal Reserve futures are now pricing in less than two

rate cuts through the end of the year, with barely 40 basis

points of easing now expected before December.

Minutes from the U.S. Fed's latest policy meeting released

on Wednesday indicated that policymakers felt they could face

"difficult tradeoffs" in coming months in the form of rising

inflation alongside rising unemployment.

A second estimate for first-quarter GDP is due out later,

and the latest update on the Fed's favoured inflation gauge is

slated for Friday. Big retailers top the earnings calendar on

Thursday.

And now onto today's column, where I explain how Germany's

re-emergence as the world's top creditor may affect

international capital flows in a time of international economic

upheaval.

Germany's return as world's top creditor may be fleeting

Germany is reprising its role as the world's biggest

creditor for the first time since 1991 - but seismic global

policy changes suggest it might not be back in the seat for

long.

As the United States has soaked up the vast bulk of global

savings over the past two decades, the stability of ballooning

global trade and investment imbalances has become one of the

biggest market issues - especially now, as trade wars unfold.

For everyone plotting the map, Japan's Ministry of Finance

this week recorded a remarkable milestone.

For the first time in 34 years, Germany overtook Japan last

year as the biggest net provider of investment capital to the

rest of the globe.

While exchange rates had something to do with the ranking

switch, Germany's unenviable top spot - borne of weak growth and

a lack of investment opportunities at home - speaks volumes

about the state of world savings, investment and demographics.

The three top net creditors - Germany, Japan and China -

have one major thing in common. They are all large aging

economies where populations have already peaked and are set to

decline over the remainder of the century - dampening domestic

demand in the process and generating outsized savings pools.

But, as Deutsche Bank Chief Economist Robin Winkler points

out, the German and Japanese investment positions are quite

different in nature.

Much to the chagrin of U.S. President Donald Trump's new

administration, both countries have run chronic trade surpluses

with the United States and the rest of the world for years,

relying on exports for growth amid depressed local demand.

And they have both banked the lion's share of the resulting

savings into overseas investments, mostly in the faster-growing

America.

In the process, these flows generated more than a decade of

U.S. asset booms and dollar appreciation - something Trump's

team claim had clobbered U.S. manufacturing competitiveness and

eliminated good-paying jobs in the process. Trade tariffs will

help to redress the imbalance, according to Trump, and so too

would a weaker dollar.

FICKLE OR STICKY?

But Winkler points out that much of the rise in Japan's

surpluses over the years has been in direct investments -

company acquisitions, new overseas plants and job creation.

Unlike Japan, Germany's trade surpluses have been mostly

recycled into portfolio investments such as stocks and bonds -

making them far less "sticky" and easily reversed.

For Germany, this could be a double-edged sword.

"It makes Germany more susceptible to criticism that its

trade surpluses vis-à-vis certain countries have not directly

generated jobs in these countries," Winkler wrote, adding this

could be a problem in trade talks under way.

"On the other hand, the low share of direct investment makes

Germany's net asset position more liquid and fungible than

Japan's," he added. "This should be an advantage at a time of

geopolitical fragmentation as it is easier to reallocate or even

repatriate foreign assets quickly should it become necessary."

Of course, the flipside of Trump's trade and diplomatic wars

in Europe this year has been a transformative fiscal boost in

Germany aimed at both re-arming and rebuilding the economy -

changing its domestic growth trajectory as well as potential

choice of investment destination for its savers.

Capital needs in Europe are rising fast and incentives for

savers and investors to stay at home will come with that.

This creates substantial risks for Wall Street - and not

just dollar depreciation, which the administration appears to be

encouraging.

While Japanese investors make up the single biggest group of

overseas investors in U.S. government bonds, Europe was the

source of $7 trillion of overseas equity investment since 2012.

As the past week revealed, the stakes in U.S.-European trade

talks - which now only have six weeks to square numerous thorny

issues - are very high on both sides of the Atlantic.

Chart of the day

Global economic surprise indexes that measure incoming

economic data against consensus forecasts are at their highest

levels in a year. And after three months in negative territory,

the U.S. surprise index is back in positive territory too,

reaching its best level since February. Of course, much of the

data being released covers the period before U.S. tariffs came

into effect, meaning they may be flattered by front-loading to

beat the tariffs. But these figures are another sign that 'hard'

data is continuing to hold up. But now that the whole trade

outlook has been upended once again, the picture may get even

foggier.

Today's events to watch

* U.S. first quarter GDP revision and Q1 corporate profits

(8:30 AM EDT), weekly jobless claims (8:30 AM EDT), April

pending home sales (10:00 AM EDT); Canada Q1 current account

(8:30 AM EDT)

* Federal Reserve Board Governor Adriana Kugler, San

Francisco Fed President Mary Daly, Dallas Fed President Lorie

Logan, Chicago Fed chief Austan Goolsbee and Richmond Fed boss

Thomas Barkin all speak. Bank of England governor Andrew Bailey

speaks

* U.S Treasury sells $44 billion of 7-year notes

* U.S. corporate earnings: Costco, Best Buy, Hormel Foods,

Dell, NetApp, Cooper, Ulta Beauty

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

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