Market Report:
📰 Investors welcomed the conciliatory tone of the talks between China and US, though they do not expect a major breakthrough just yet. Both sides declined to provide details, but U.S. officials said a deal had been reached to cut the U.S. trade deficit with China. The meeting could mark one of the biggest developments since the U.S. launched tariffs in April 2018, which threw global trade into chaos. Trade tensions escalated last month when the U.S. boosted tariffs on Chinese imports to 145% and China retaliated. Any signs of progress would allow China to focus more on its domestic economic problems, such as lower domestic consumption or a real estate sector that is still at risk. An official joint announcement is anticipated on today’s afternoon.
🤝 U.S. Treasury Secretary Bessent touted “substantial progress” in the trade discussions, while Chinese officials said the sides had reached “important consensus” and agreed to launch a new economic dialogue forum. However, this was probably more of a broad framework for further talks rather than a concrete deal. Investors are hoping the White House will soon scale back the 145% tariff on Chinese goods, even if only back to the 60% first proposed by President Trump.
🇪🇺 Weeks ago, we suggested an idea in our reports. The worst-case scenario for the EU would be for Trump to offer separate deals to different EU countries, potentially creating even more division among European powers. Well, it seems we anticipated the German chancellor’s concerns: Germany’s new Chancellor, Friedrich Merz, told US President Donald Trump that Germany can only negotiate trade matters with the European Union as a whole, and there cannot be any side deals with individual EU member states.
🎉 Merz congratulated Trump on the recent trade agreement with the UK, but explained this will not be possible with other EU member states, as the EU can and wants to act only united on trade matters. Merz said he conveyed to Trump that escalating the trade dispute would not be a good idea, and that his strong conviction is that zero tariffs would be best.
📊 The EU is planning to hit $108 billion of US products with additional levies if ongoing trade talks with the US do not yield a satisfactory result. Merz pushed back against speculation that Germany might support more joint European borrowing to finance increased defense spending, stating this must remain an exception and cannot be a permanent justification for additional European debt.
💬 Merz noted that discussions among EU member states on joint borrowing are ongoing, with France and Germany not on the same page on the debt issue.
Geopolitics:
🌐 The American President urged for a meeting between Ukraine and Russia to discuss peace, regardless of ceasefire conditions requested by Europe. During a Saturday gathering in Kyiv, European leaders from France, Germany, Britain, and Poland called for Russian President Putin to implement an “unconditional” cessation of hostilities before any meeting with Ukrainian President Zelenskiy could take place in Istanbul. Following pressure from the United States, Zelenskiy announced on Sunday that he would anticipate Putin’s presence in Turkey on May 15, making this statement shortly after Trump’s urging. Subsequently, Putin expressed willingness to engage in direct discussions with Ukraine in Istanbul on the specified date, indicating openness to reaching a ceasefire agreement. “We are prepared to engage in meaningful negotiations with Ukraine,” Putin stated during his evening remarks to journalists at the Kremlin.
🎖️ Russia’s 80th anniversary Victory Day parade in Moscow went ahead as planned, despite Ukrainian and European efforts to disrupt or overshadow it. Such as the closure of European airspace to prevent the Serbian president from flying to Moscow for this event.
🤔 Rumors suggest a deterioration in the relationship between Trump and Netanyahu, potentially signaling a shift in U.S. policy towards Israel. This could portend a divergence in U.S.-Israeli policy in the Middle East, though the specifics are unclear. Trump has suddenly declared an end to U.S. military bombing of Yemen.
🛑 The brief border conflict between India and Pakistan appears to have ended for now. However, the underlying causes and instigators of this dangerous escalation remain murky. Geopolitical analysts like Joe Quinn suggest the U.S./UK/Israel may have been behind the provocation to disrupt pan-Asian integration efforts.
🇬🇧 The UK government, under Prime Minister Keir Starmer, has introduced significant reforms to address immigration amidst the growing influence of Nigel Farage’s Reform UK party. Key measures include doubling the wait time for immigrant welfare eligibility to 10 years (excluding highly skilled workers), restricting skilled visas to graduate-level applicants, barring care sector firms from overseas recruitment, and raising English language requirements for migrant dependents. These policies aim to tighten migration control while prioritizing domestic workforce development and addressing public concerns over immigration.
Market View:
📈 The U.S. futures market opens on a positive note, fueled by the optimistic vibes between the United States and China. The Mini S&P 500 futures are climbing by 5,760 points at this moment, approaching the 5,800 zone that we identified last week as a target. Similarly, Nasdaq 100 futures display a comparable pattern, positioning themselves above 20,550 points.
💵 The U.S. Dollar Index strengthens, exceeding the 100-point mark and currently standing at 100.55 points. This causes currency pairs like the Euro-Dollar to retreat, with the pair currently trading at 1.1230.
🌍 In Europe, DAX 40 futures are already trading at a new all-time high, surpassing 23,800 points. The Eurostoxx 50 is also advancing, now standing at 5,335 points.
🛢️ The crude oil market is on the rise, with Brent crude nearing $65 per barrel. This movement might be influenced by the trade agreement between the U.S. and China.
🥇 Gold futures, on the other hand, are retreating, opening the week with a downward gap. Gold is currently trading at $3,280 per ounce.
₿ Meanwhile, Bitcoin has managed to surpass the $100,000 mark, consolidating above $104,300 at present.
📅 Key Highlights for the Week:
🇺🇸 US: The main focus will be on inflation data (CPI, PPI), retail sales, industrial production, and ongoing Fed commentary. The FOMC is expected to keep rates steady, with markets watching for any signals on future policy direction. Trade talks with China could generate significant headlines.
🇪🇺 EU: GDP data for Germany, the UK, and the Eurozone will be closely watched, along with sentiment indicators and the ongoing response to US tariffs.
🇨🇳 China: Inflation data (CPI, PPI) released over the weekend is expected to confirm persistent deflationary pressures. The outcome of US-China trade talks in Geneva will be critical for global markets.
🇯🇵 Japan: The Bank of Japan’s Summary of Opinions and Q1 GDP will be key, alongside ongoing analysis of inflation trends and the central bank’s cautious policy stance.
