Market Jitters as Investors Eye Talks and Economic Data
Global stock markets ended Monday's session in negative territory, reflecting uncertainty amid turbulence in trade and geopolitical relations. At the same time, yields on long-term US Treasury bonds moved lower, with traders watching upcoming macroeconomic releases and high-level international meetings.
Extended Truce in US-China Trade Dispute
Just hours before elevated tariffs on Chinese goods were set to resume, US President Donald Trump signed an order extending the current tariff truce by another 90 days. The decision surprised some analysts, given the sharp rhetoric exchanged by both sides in recent weeks.
Leaders to Meet in the Arctic
Later this week, Donald Trump and Russian President Vladimir Putin are scheduled to meet in Alaska. Political observers suggest the talks may cover security matters as well as strategic economic issues.
Wall Street Under Pressure
US stock indexes closed the day lower, with the steepest losses seen in energy and technology shares, while companies producing consumer staples, discretionary goods, and healthcare products posted gains.
Trading Results
- Dow Jones Industrial Average: - 0.45%
- S&P 500: - 0.25%
- Nasdaq Composite: - 0.30%
- STOXX 600 (Europe): - 0.06%
- MSCI World: - 0.25% (938.16 points, near July's record high)
Inflation Data in the Spotlight
The main event for the week will be Tuesday's release of US consumer price data.
Economists expect tariff effects to push core inflation up by 0.3%, reaching an annual rate of 3%, which remains above the Federal Reserve's target of 2%.
Interest Rate Outlook Faces Uncertainty
A possible hike in the key interest rate could undermine market confidence in a September policy easing. Analysts stress that it would take a substantial move to alter current sentiment, given the drag from declining employment figures. At present, markets see a roughly ninety percent chance of a rate cut in September and anticipate at least one more reduction before year's end.
Political Pressure on the Fed
US President Donald Trump has renewed criticism of the Federal Reserve for keeping rates unchanged at recent meetings. Market participants are also watching closely to see who will replace current Chair Jerome Powell when his term expires in May.
Dollar Strengthens Against Majors
The US dollar advanced against key global currencies. It gained 0.26 percent to 148.11 against the Japanese yen and rose 0.47 percent to 0.812 against the Swiss franc. The euro weakened by 0.21 percent to 1.1615 dollars. The dollar index climbed 0.27 percent to 98.50.
Australian Dollar Slips Ahead of Policy Meeting
The Australian dollar fell 0.18 percent to 0.6512 US dollars ahead of the Reserve Bank of
Australia's policy meeting, where the central bank is expected to reaffirm its inclination toward rate cuts. In July, the RBA surprised markets by holding policy steady while awaiting fresh inflation data.
Gold Prices Decline
Gold dropped 1.50 percent to 3347.69 dollars an ounce after Trump announced he would not impose tariffs on imported bullion. US December gold futures closed 2.5 percent lower at 3404.70 dollars an ounce.
Oil Prices Edge Higher on Positive Sentiment
Oil benchmarks posted modest gains on Tuesday. Brent crude rose 0.06 percent to 66.63 dollars a barrel, while US WTI crude added 0.13 percent, closing at 63.96 dollars.
Asian Markets Finish in the Green
Equities across Asia advanced, with Japan's stock market hitting an all-time high. The rally was fueled by the extension of the US-China tariff truce and anticipation of a key US inflation report, which could shape the trajectory of future interest rate moves.
Reserve Bank of Australia Cuts Rates
Australia's S&P/ASX 200 (.AXJO) strengthened, while the Australian dollar fluctuated after the Reserve Bank of Australia, as widely expected, trimmed its benchmark interest rate by 0.25 percentage points to a two-year low of 3.60 percent.
Nikkei Hits Record on Tech Surge
Japan's Nikkei (.N225) index reached a historic peak, driven by a sharp rally in technology stocks and renewed optimism over trade relations with the United States.
China and Hong Kong Show Mixed Outcomes
China's blue-chip CSI300 index climbed 0.5 percent, while Hong Kong's Hang Seng (.HIS) remained nearly flat. The MSCI broad index for Asia-Pacific excluding Japan posted a slight gain.
A Year of Tariff Battles
For the past year, the United States and China have engaged in a tit-for-tat tariff conflict, culminating in a series of negotiations in Geneva, London, and Stockholm since May. Central to the discussions was the reduction of retaliatory tariffs from triple-digit levels.
Inflation Outlook and Fed Rate Cuts
An unexpected rise in inflation could reinforce expectations for interest rate cuts by the Federal Reserve this year. Markets are pricing in at least two reductions in 2025, while JPMorgan anticipates four consecutive cuts starting in September.
