Key Points
- Global stocks and the dollar slipped as investors remained wary of the vague details of the U.S.-China trade deal and tensions in the Middle East.
- Asian markets dropped, with Japan’s Nikkei down 0.6% and Hong Kong’s Hang Seng losing 0.5%.
- U.S. inflation came in softer than expected, prompting renewed calls by President Trump for a Fed rate cut.
- The euro and yen strengthened, pushing the dollar index to its lowest level since April. Oil and gold prices rose due to concerns over potential conflict.
Global stock markets and the U.S. dollar declined on Thursday as investors digested a mild U.S. inflation report, lingering trade tensions, and growing geopolitical risks. While a recent U.S.-China trade framework offered some optimism, its lack of concrete details left markets cautious.
The agreement between Washington and Beijing includes the easing of Chinese export restrictions on rare earth minerals and continued access for Chinese students to U.S. universities. U.S. President Donald Trump called it “a great deal,” but investors remain skeptical until more specifics are revealed. Trump also announced upcoming letters to other nations outlining trade terms, adding further uncertainty to global trade policy.
Shane Oliver, Chief Economist at AMP Capital, noted that despite reduced tariffs after the Geneva meeting, the trade deal hasn’t fundamentally altered the strained U.S.-China relationship. “Trade tensions are not yet resolved,” Oliver stated.
Equity markets in Asia responded with modest losses. MSCI’s Asia-Pacific index (excluding Japan) dipped 0.3%, Japan’s Nikkei 225 fell 0.6%, and Hong Kong’s Hang Seng slid 0.5%. China’s blue-chip CSI 300 index gained 0.04%. U.S. and European stock futures also edged lower.
The dollar weakened broadly as investors retreated from U.S. assets amid trade uncertainties. The euro reached a seven-week high at $1.1512, and the yen gained 0.4% to 144.03 per dollar. As a result, the U.S. dollar index fell to its lowest since April, down 9% year-to-date.
Wednesday’s U.S. inflation data showed consumer prices rose less than expected in May, mainly due to falling gasoline costs offsetting rising rents. Still, inflation could rise in the coming months due to Trump’s tariffs. This prompted the President to renew calls for aggressive Federal Reserve rate cuts, although the Fed remains cautious. Markets currently price in a 70% probability of a rate cut by September.
Meanwhile, oil prices hovered near two-month highs, approaching $70 per barrel, amid concerns about potential supply disruptions following Iranian threats to U.S. bases. Gold also rose 0.5% to $3,370.29, driven by safe-haven demand.
