Stocks, dollar up on US-China trade promise, detail needed

SYDNEY: Wall Street stock futures climbed and the dollar firmed against safe haven peers on Monday as signs of progress in US-China trade talks boosted hopes a global recession might be avoided, though specifics were still sorely lacking.

Geopolitical tensions also looked to be easing as a fragile ceasefire held between India and Pakistan, while Ukrainian President Volodymyr Zelenskiy said he was ready to meet Vladimir Putin in Turkey on Thursday for talks.

Over in Geneva, US Treasury Secretary Scott Bessent touted “substantial progress” in trade discussions, while Chinese officials said the sides had reached “important consensus” and agreed to launch a new economic dialogue forum.

A joint statement is expected later on Monday, though it was notable that neither side mentioned tariff rates specifically.“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,” said Michael Brown, a senior research strategist at Pepperstone.

“Not the worst case outcome that was possible from this weekend’s talks, far from it, but not a concrete deal either,” he added. “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 per cent tariff on Chinese goods, even if only back to the 60 per cent first flagged by President Donald Trump.

Trump still seems wedded to keeping broad tariffs in place no matter what, which will drag on economic growth and push up prices, but any trade progress could help dodge a sharp downturn.

Markets reacted by pushing S&P 500 futures ESc1 up 1.4 per cent, while Nasdaq futures NQc1 climbed 1.9 per cent. EUROSTOXX 50 futures STXEc1 firmed 0.9 per cent, while FTSE futures FFIc1 added 0.3 per cent and DAX futures FDXc1 0.8 per cent.

Japan’s Nikkei edged up 0.3 per cent, while South Korea’s .KS11 gained 0.6 per cent.Chinese blue chips firmed 0.8 per cent, while the yuan crept up 0.2 per cent to 7.2243 per dollar. Data over the weekend showed factory-gate prices there posted the steepest drop in six months in April, while consumer prices fell for a third month, underlining the pressure on the local economy.

The dollar added almost 0.5 per cent on the safe haven yen to reach, though it was off an early five-week peak of 146.31. The euro dipped 0.2 per cent to $1.1224 and the dollar index edged up 0.2 per cent to 100.60.

A FRUGAL FED

Trump’s erratic trade policies have put the dollar under pressure in recent weeks, though it gained some support last week when the Federal Reserve signalled it was in no rush to cut interest rates again.

Data on US consumer prices for April due this week could offer an early hint of the impact of import levies on inflation, while retail sales are seen flatlining in April after a pre-tariff surge the month before.

Earnings from retail giant Walmart on Thursday should provide colour on demand and how soon shelves might start to empty of Chinese goods.“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,” analysts at ANZ wrote in a note.

“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,” they added. “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, with Fed fund futures down between 3 and 7 ticks. The chance of a rate cut in June is now only 17 per cent, down from more than 60 per cent a month ago, while a July move is seen as a 59 per cent chance.

A host of Fed officials speak this week, led by Chair Jerome Powell on Thursday.The general increase in risk appetite hurt gold, which has been on a tear in recent weeks as investors sought safety in the physical metal. Gold was off 1.5 per cent at $3,273 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, though plans for increased supply by OPEC+ remain a headwind. Brent LCOc1 rose 39 cents to $64.3 a barrel, while US crude CLc1 added 41 cents to $61.43 per barrel.