Stocks, dollar climb as investors hope for US-China trade talk progress

New Straits Times

18 hours ago

SINGAPORE: Global stocks rose and the dollar edged higher on Tuesday as trade talks between the United States and China were set to extend to a second day, with tentative signs that tensions between the world's two largest economies could be easing.
Following Asia's lead, EUROSTOXX 50 futures and FTSE futures both edged up roughly 0.1 per cent each, while Nasdaq and S&P 500 futures in the US were also gearing up for a higher open.
US President Donald Trump put a positive spin on the talks, which wrapped up for the night on Monday and were set to resume on Tuesday.
Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer were set to meet for the second day with their Chinese counterparts.
Any progress in the negotiations is likely to provide relief to markets given that Trump's often shifting tariff announcements and swings in Sino-US ties have undermined the world's two biggest economies, disrupted supply chains and threaten to hobble global growth.
Stocks advanced in Asia, with MSCI's broadest index of Asia-Pacific shares outside Japan advancing 0.7 per cent to hit their highest since January 2022.
"While market participants are clearly taking a glass half-full view of the outlook, both on trade policy and more broadly, we don't think that should be interpreted as a view that tariffs will be fully unwound," said Jonas Goltermann, deputy chief markets economist at Capital Economics.
Goltermann anticipates US duties on Chinese goods to settle at around 40 per cent, while most analysts have said that the universal 10 per cent levy on imports into the United States is here to stay.
In Tokyo, attention was on the measures the Japanese government was considering to calm recent bond (JGB) market volatility.
Finance Minister Katsunobu Kato said policymakers were looking at measures to promote domestic ownership of Japanese government bonds, a day after Reuters reported 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, while the 30-year yield slid three bps to 2.88 per cent early in the session.
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.
In currencies, the dollar attempted to regain its footing after falling on Monday.
Against the yen, the dollar was up 0.19 per cent to 144.83. The euro fell 0.17 per cent to US$1.14 while sterling slipped 0.07 per cent to US$1.3537.
Trump's erratic trade policies and worries over Washington's growing debt pile have dented investor confidence in US assets, in turn undermining the dollar, which has already fallen more than eight per cent for the year.
INFLATION TEST
The next test for the greenback will be on Wednesday, when US 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 US 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 commodity markets, oil prices were marginally higher, with US West Texas Intermediate crude close to a more than two-month high hit earlier in the session.
Spot gold fell 0.5 per cent to US$3,310.17 an ounce.