For markets trying to navigate everything from creeping signs of labor market weakness to the latest European Central Bank easing, the spat between the U.S. president and the world's richest man proved more than a distraction. It remains to be seen if it overshadows the May payrolls report later on Friday.
The extraordinary sparring match drew in other major political and business figures and included potentially seismic accusations and threats. In turn, the share price of Musk's Tesla plummeted almost 20% at one point, dragging Wall Street stock indexes and crypto tokens deep into the red.
The public feud appeared to cool off somewhat overnight and allowed stock futures to regain some lost ground. But the fact that the spat overshadowed the other major events of the day was another marker of this administration's unpredictability.
The substance of the row was over Trump's "one big beautiful" fiscal bill that Musk thinks is a "disgusting abomination" due to the amount of spending. The bill, which has yet to be passed by the Senate, is expected to add $2.4 trillion to the U.S. debt over the next decade, based on CBO estimates. The vast bulk of this will likely be incurred over the next four years.
In the background, the call between Trump and China's President Xi Jinping delivered no breakthroughs in the trade row apart from warmer words and an agreement to resume talks. The Oval Office meeting with Germany's Chancellor Friedrich Merz was relatively positive about trade and diplomatic issues.
Earlier in the day, the ECB cut rates again as expected and suggested that there may be a pause at its next meeting and that it could be near the end of its easing cycle now that 'real' inflation-adjusted rates are back near zero. The euro hit a six week high on Thursday regardless, although it gave back those daily gains today.
Rising weekly U.S. jobless claims, meantime, cast a shadow over today's release of the May employment report. Consensus forecasts are for a slowdown in payroll growth to 130,000.
Treasury yields, which ebbed and flowed all day on the conflicting signals from the trade meetings and stock gyrations, are back hovering at the week's lows ahead of the jobs report.
Even though Federal Reserve officials continue to signal caution about the uncertain outlook ahead, markets are now priced for a resumption of Fed cuts by September.
Into the already confusing mix, the Treasury released its annual report on potential currency manipulation overseas, adding Switzerland and Ireland to its watchlist, which already includes China, Japan, Germany, South Korea, Taiwan, Singapore and Vietnam.
The list likely carries more heft than usual amid multiple tense trade negotiations. Markets assume the U.S. may pressure other countries to let their currencies appreciate versus the dollar as part of deals to avert severe tariffs being re-imposed next month.
The Swiss National Bank responded on Friday by saying it would intervene in currency markets where necessary to keep inflation on track. Intervention to cap a super-strong franc has been a critical monetary tool used over the past decade and may need to be tapped again now that Swiss inflation has returned negative just as the SNB's key interest rate is set to return to zero in June.
Elsewhere, China's yuan slipped against the dollar while falling to a near two-year low versus its major trading partners on Friday as the Trump-Xi call fell short of many expectations.
Stocks markets overseas were mixed on Friday as Wall Street remained on edge and the U.S. jobs report loomed.
In the euro zone, first-quarter GDP was revised higher to show twice the growth originally estimated: 0.6% quarter-on-quarter, leading to an annual rate of 1.5%.
India's central bank, meantime, cut key rates by a larger-than-expected 50 basis points to 5.5%, its steepest cut in five years. It also slashed its cash reserve ratio - funds that banks are required to hold - by 100 bps to 3% in a surprise move aimed at boosting lending and speeding up policy transmission.
In single stocks, Tesla shares recovered around 5% in Frankfurt on Friday, having closed down 14% in New York yesterday amid the Trump-Musk spat. It lost about $150 billion in market value yesterday, which caused the erstwhile member of the 'Magnificent Seven' megacaps to drop to ninth in the list of most-valuable firms behind Broadcom and Berkshire Hathawey.
Broadcom's shares, however, fell 4% in extended trading overnight as its forecast-beating earnings seemed to underwhelm the Street.
In Bank of America's weekly tally of fund flows, U.S. stocks saw outflows of $7.5 billion, the third week of exits, while European shares saw inflows of $2.6 billion, the eighth week of inflows.
