Progress in US-China Trade: Markets React Cautiously Optimistic

In light of new signs of progress in the trade talks between the US and China, stock markets and the dollar reacted with subdued confidence on Wednesday. Investors are eagerly awaiting concrete details on what was agreed and whether these decisions will be lasting. Meanwhile, bond investors are focusing on the upcoming release of US inflation data, which could show initial effects of tariffs on prices, as well as an upcoming Treasury auction that will test demand for US government bonds. In London, negotiators from Washington and Beijing announced that they had agreed on a "framework for trade," which will subsequently be presented to their senior politicians. US Commerce Secretary Howard Lutnick added that the implementation plan should clarify restrictions on rare earths and magnets but did not disclose further details. Carol Kong, a currency strategist at the Commonwealth Bank of Australia, commented: "Even if the details are still unclear, as long as both sides are communicating, markets are satisfied for now." Nevertheless, uncertainty persists, as it is likely to take years before a comprehensive trade agreement can be reached. Kong describes such an outcome as unlikely for the current round in London. The situation was further complicated by a ruling from a federal appeals court that temporarily upheld President Donald Trump's most extensive tariffs. The reaction of investors remains cautiously optimistic, as reflected in the MSCI Asia Pacific Index outside Japan, which rose by 0.2%. In macro-capital markets, bets continued to decline. EUROSTOXX 50, FTSE, and DAX futures each fell by 0.2%, while S&P 500 and Nasdaq futures dipped by 0.1%. In the currency markets, the dollar reacted minimally, losing 0.1% against the Japanese yen. The euro edged up to $1.1433. Regarding the upcoming US Treasury auction, there is tension among investors due to uncertainty about the high US budget deficits and the unpredictable trade policy of the White House. Forecasts for US consumer prices suggest a slight increase, which could dampen expectations for lower Fed interest rates. In commodity markets, gold climbed 0.3% to $3,333 per ounce, while oil prices retreated from their seven-week highs. Brent and US crude recorded slight declines.