Markets Wary Despite US-China Trade Framework as Investors Await Concrete Details

Global markets responded cautiously on Wednesday to the announcement that the United States and China had agreed on a trade framework during negotiations in London. While officials described the development as progress, they offered few details, leading investors to question the durability and substance of the deal. U.S. Commerce Secretary Howard Lutnick said the framework included steps to ease restrictions on rare earths and magnets, but specifics remained vague. Analysts were skeptical, with some suggesting it could take years before a truly comprehensive trade agreement is reached.

Investors’ cautious optimism was evident in the stock markets. Asia-Pacific shares made modest gains, with Japan’s Nikkei and Chinese blue chips both up 0.5% to 0.8%. However, futures for U.S. and European equities dipped, indicating a restrained global outlook. The muted market response reflected the deep wariness following past trade tensions that had disrupted global supply chains and triggered financial volatility. The situation was further complicated by a U.S. federal appeals court decision allowing sweeping Trump-era tariffs to remain in effect during an ongoing legal review.

In currency and bond markets, the reaction was similarly subdued. The dollar remained stable against the yen, and Treasury yields showed little movement as investors braced for the results of a $39 billion 10-year bond auction. Concerns lingered over rising U.S. debt and unpredictable trade policies, which have raised the premium investors demand for long-term U.S. government debt. The outcome of the auction could serve as a broader indicator of market confidence in fiscal policy and international stability.

Traders are also eyeing upcoming U.S. inflation data, which may reveal whether tariffs are beginning to influence consumer prices. The Consumer Price Index (CPI) for May is expected to show moderate increases, but any upside surprise could challenge the narrative supporting interest rate cuts later in the year. Current forecasts suggest a 0.2% rise in headline CPI and 0.3% in the core rate. If inflation exceeds expectations, it could delay the Federal Reserve’s next move, with market odds now pointing to a potential rate cut in September.

Commodity markets reflected the same sense of cautious uncertainty. Gold prices edged up 0.6% as investors sought safe-haven assets. Oil prices, on the other hand, slipped slightly ahead of U.S. inventory reports, after nearing seven-week highs. Brent crude fell to $66.77 per barrel, while U.S. crude dipped to $64.94. Overall, the market mood suggests that while progress in trade talks is welcome, investors are withholding judgment until they see concrete results and long-term commitments.

Source: Reuters