Stocks rise, U.S. dollar tentative ahead of U.S.-China talks outcome

Globe and Mail

16 hours ago

Stocks were buoyant and the U.S. dollar remained on guard on Tuesday as trade talks between the United States and China were set to extend to a second day, with tentative signs tensions between the world's two largest economies could be easing.
U.S. President Donald Trump put a positive spin on the talks at Lancaster House in London, which wrapped up for the night on Monday and were set to resume at 0900 GMT on Tuesday.
'The fact that we're still up here near record highs, does suggest that we are seeing the market accept what has been said by Trump and when you look at some of the other comments from Lutnick and Bessent, to me it seems to suggest that they are relatively happy with the progress,' said Tony Sycamore, a market analyst at IG.
'But the market always likes to see some concrete announcements.'
As Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer were set to meet for the second day with their Chinese counterparts, much of investors' focus has been on the progress of the talks.
Any progress in the negotiations is likely to provide relief to markets given Trump's chaotic tariffs and swings in Sino-U.S. trade ties have undermined the world's two biggest economies and hobbled global growth.
Analysis: In Trump-Xi dealings, China seems to have the upper hand
Stocks advanced in Asia, extending their rise from the start of the week.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.5 per cent, while Nasdaq futures gained 0.62 per cent. S&P 500 futures edged 0.43 per cent higher.
EUROSTOXX 50 futures and FTSE futures both added roughly 0.1 per cent each.
In Tokyo, attention was also on the Japanese government bond (JGB) market, following news that Japan is considering buying back some super-long government bonds issued in the past at low interest rates.
The yield on the 10-year JGB fell one basis point to 1.46 per cent in early trade, while the 30-year yield slid 5 bps to 2.86 per cent.
Yields on super-long JGBs rose to record levels last month due to dwindling demand from traditional buyers such as life insurers, and jitters over steadily rising debt levels globally.
'The volatility at the super-long segment of the curve stems from a supply-demand imbalance that has been brewing since the BOJ embarked on balance sheet normalisation,' said Justin Heng, APAC rates strategist at HSBC Global Investment Research.
Japanese Finance Minister Katsunobu Kato said on Tuesday the government will conduct appropriate debt management policies while communicating closely with market participants.
In currencies, the dollar attempted to regain its footing after falling on Monday.
Against the yen, the dollar was up 0.45 per cent to 145.25. The euro fell 0.28% to $1.1387 while sterling slipped 0.2 per cent to US$1.3523.
Trump's erratic trade policies and worries over Washington's growing debt pile have dented investor confidence in U.S. assets, in turn undermining the dollar, which has already fallen more than 8 per cent for the year.
The next test for the greenback will be on Wednesday, when U.S. inflation data comes due. Expectations are for core consumer prices to have picked up slightly in May, which could push back against bets of imminent Federal Reserve rate cuts.
The producer price index (PPI) report will be released a day later.
'May's U.S. CPI and PPI data will be scrutinised for signs of lingering inflationary pressures,' said Convera's FX and macro strategist Kevin Ford.
'If core CPI remains elevated, expectations for rate cuts could be pushed beyond the June 18 FOMC meeting.'
Traders see the Fed keeping rates on hold at its policy meeting next week, but have priced in roughly 44 bps worth of easing by December.
In the oil market, prices edged up, with Brent crude futures gaining 0.24 per cent to US$67.20 a barrel.
U.S. West Texas Intermediate crude was last up 0.25 per cent at US$65.45 per barrel after hitting a more than two-month high earlier in the session.
Spot gold fell 0.5 per cent to US$3,310.40 an ounce.