Wall Street stock futures increased. The dollar became stronger against safe-haven currencies on Monday. Signs of progress in U.S.-China trade talks boosted hopes. A global recession might be avoided, but specifics were still lacking.
Geopolitical tensions also seemed to be easing. A fragile ceasefire held between India and Pakistan. Ukrainian President Volodymyr Zelenskiy said he was ready to meet Vladimir Putin in Turkey on Thursday for talks.
U.S. Treasury Secretary Scott Bessent touted “substantial progress” in trade discussions in Geneva. Chinese officials said the sides had reached “important consensus” and agreed to launch another new economic dialogue forum.
A joint statement is expected later on Monday. Neither side mentioned tariff rates specifically, which was notable.
Michael Brown, a senior research strategist at Pepperstone, said, “What we seem to have here, then, is a broad framework under which the two nations can conduct further talks, with the aim of reaching a broader trade agreement.”
He added, “Not the worst case outcome that was possible from this weekend’s talks, far from it, but not a concrete deal either. Does this progress allow for any tariffs to be paused, reduced, or rolled back, and if so for how long?”
Investors are hoping the White House will soon scale back the 145% tariff on Chinese goods. They hope it will go back to the 60% first flagged by President Donald Trump, even if only temporarily.
Trump still seems wedded to keeping broad tariffs in place no matter what. This will drag on economic growth and push up prices. Any trade progress could help dodge a sharp downturn.
Markets reacted by pushing S&P 500 futures up 1.2%. Nasdaq futures rose 1.4%. EUROSTOXX 50 futures firmed 0.9%, FTSE futures added 0.4%, and DAX futures 0.7%.
Japan’s Nikkei edged up 0.3%. South Korea gained 0.4%.
Chinese blue chips firmed 0.8%. Data over the weekend showed factory-gate prices posted the steepest drop in six months in April, and consumer prices fell for a third month.
The dollar added 0.4% on the safe haven yen, reaching 145.90. However, it was off an early five-week peak of 146.31. The euro dipped 0.2% to $1.1224, and the dollar index edged up 0.2% to 100.60.
The dollar also dipped 0.2% on the offshore Chinese yuan to 7.2278. It moved back toward last week’s low of 7.1846.
Trump’s erratic trade policies have put the dollar under pressure in recent weeks. It gained some support last week when the Federal Reserve signalled it was in no rush to cut interest rates again.
Data on U.S. consumer prices for April is due this week and could offer an early hint of the impact of import levies on inflation. Retail sales are seen flatlining in April after a pre-tariff surge the month before.
Earnings from retail giant Walmart on Thursday should provide color on demand. We will learn how soon shelves might start to empty of Chinese goods.
Analysts at ANZ wrote in a note, “We expect it will not be until the May CPI data are out before we see broad evidence of tariffs showing up in inflation data.”
They added, “In this regard, we think June is too early for the Fed to cut rates and maintain our view that Q3, and most probably September, is a more realistic time frame. That would give the opportunity to observe the impact of higher tariffs on both the price level and inflation persistence.”
Markets further trimmed the outlook for easing on Monday. Fed fund futures were down between 3 and 7 ticks. The chance of a rate cut in June is now only 17%, down from more than 60% a month ago. A July move is seen as a 59% chance.
A host of Fed officials speak this week. Chair Jerome Powell leads them on Thursday.
The general increase in risk appetite hurt gold. Gold has been on a tear in recent weeks as investors sought safety in the physical metal. Gold was off 1.7% at $3,268 an ounce, short of the April all-time peak of $3,500.
Oil prices went the other way on hopes progress in trade talks would lessen the risk of a major economic downturn. Plans for increased supply by OPEC+ remain a headwind. Brent rose 29 cents to $64.20 a barrel. U.S. crude added 30 cents to $61.32 per barrel.
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