Trump Visits China as Middle East Stalemate Weighs on Global Markets
Market Reactions and Key Developments Amid Geopolitical Tensions
A look at the day ahead in European and global markets from Gregor Stuart Hunter
Geopolitical Context and Diplomatic Moves
With the conflict in the Middle East still mired in a stalemate, Donald Trump is on his way to Beijing to see if Chinese President Xi Jinping proves more amenable to a deal.
The U.S. president is due to arrive in China later today, saying he is seeking to "open up China", accompanied by a string of chief executives - including Nvidia CEO Jensen Huang, a last-minute addition to the roster.
China's Stance on Taiwan
Ahead of the talks, Beijing seems more keen to focus on Taiwan. China's government said its resolve to oppose Taiwan independence is "as firm as a rock" and its capability to "crush" separatism is "unbreakable".
Signs of Détente and Trade Issues
There are some signs of a détente though. China and the U.S. are considering extending a truce on Chinese rare earth export curbs, although customs data shows Beijing is still throttling shipments of the materials vital for defence and manufacturing.
Economic Impact on Global Markets
The growing economic toll of the Middle East conflict has started to weigh on markets, following Tuesday's hotter-than-expected U.S. inflation data.
Federal Reserve Rate Expectations
Traders have largely priced out any chance of a rate cut from the Fed this year and are starting to think a hike may be more likely. Expectations for an increase in the federal funds rate of at least 25 basis points at the December meeting have risen to more than 35% from below 22% earlier in the week, according to CME's FedWatch Tool.
Market Movements and Regional Performance
That prospect sent a chill through markets on Wednesday, but regional shares recovered in trading later on. S&P 500 e-mini futures were up 0.1% while MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1% after earlier declines.
Korean Market Volatility
Korean shares fell as much as 3.2% before rebounding to rise 2.4%, with Samsung Electronics shares plummeting as much as 6.1% before rallying to trade 1.8% higher, after the electronics behemoth failed to reach a pay deal with its South Korean labour union on Wednesday.
That sets the stage for more than 50,000 workers to go ahead with a full strike that threatens to disrupt production of AI and other chips.
European Market Open
In early European trade, pan-region futures rose 0.6%, German DAX futures were up 0.4% and FTSE futures were 0.5% higher.
Key Events to Watch
Key developments that could influence markets on Wednesday:
Earnings Releases
Cisco, Alibaba, Manulife, Takeda Pharmaceutical, Sumitomo Mitsui Financial Group, Allianz, Siemens and Alstom
Economic Events
U.S.: PPI for April, EIA crude oil stocks
France: ILO unemployment rate for Q1, CPI for April
Germany: Wholesale price index for April, current account balance for March
Debt Auctions
Germany: 28-year government debt
(Reporting by Gregor Stuart Hunter; editing by Jacqueline Wong)
