Stock markets rise as traders eye possible Trump-Xi talks

New Straits Times

4 days ago

NEW YORK: Major stock markets rose and the dollar climbed as investors kept tabs on the China-US trade war, with speculation swirling that the countries' leaders will soon hold talks.
After a period of relative calm on tariffs, US President Donald Trump accused Beijing last week of violating an earlier deal to temporarily lower staggeringly high tit-for-tat levies and unveiled plans to double tolls on steel and aluminium.
"Trade tensions threatened a sharp sell-off on Monday, before news that President Trump and President Xi (Jinping) would speak on the phone helped to ease fears," said Kathleen Brooks, research director at XTB.
Hong Kong and Shanghai stock markets closed higher Tuesday, and Wall Street made solid gains.
Trade Nation analyst David Morrison noted that investors had been largely brushing off negative news about the economy linked to Trump's tariffs.
"Many remain convinced that Mr Trump's trade wars will soon come to an end, perhaps basing this view on 'TACO', or Trump Always Chickens Out," he said.
Europe's main indices also pushed higher despite the collapse of the Dutch government.
Far-right Dutch leader Geert Wilders withdrew his party from the government in a row over immigration, bringing down a shaky coalition and likely ushering in snap elections.
It opens up a period of political uncertainty in the Netherlands -- the European Union's fifth-largest economy and a major exporter -- as far-right parties make gains across the continent.
The Netherlands is part of the eurozone, where official data on Tuesday showed the area's inflation eased in May to its lowest level in eight months, back below the European Central Bank's two-per cent target.
The ECB had already been widely expected to cut eurozone interest rates this week, putting pressure on the euro.
Among companies, Nvidia shares gained 2.8 per cent as it overtook Microsoft as the biggest US company by market value.
Overall, investors were focused on the United States and China.
Officials from both sides are set for talks on the sidelines of an Organisation for Economic Cooperation and Development ministerial meeting Wednesday in Paris.
The OECD on Tuesday slashed its 2025 growth outlook for the global economy to 2.9 per cent from 3.1 per cent previously expected.
It also said the US economy would expand by 1.6 per cent, down from an earlier estimate of 2.2 per cent.
The group noted that "substantial increases" in trade barriers, tighter financial conditions, weaker business and consumer confidence, as well as heightened policy uncertainty would all have "marked adverse effects on growth" if they persist.
"For everyone, including the United States, the best option is that countries sit down and get an agreement," OECD chief economist Alvaro Pereira told AFP.
Data on Tuesday indicated Chinese factory activity shrinking at its fastest pace since September 2022.
Also in focus was Trump's signature "big, beautiful bill," headlined by tax cuts slated to add up to US$3.0 trillion to the nation's debt at a time of heightened worries over the country's finances.
US senators have started what is certain to be fierce debate over the policy package, which partially covers an extension of Trump's 2017 tax relief through budget cuts projected to strip health care from millions of low-income Americans.
Crude prices rose on concerns that Canadian wildfires could impact oil supplies.