Markets Rally on U.S.-China Trade Progress, Dollar Strengthens, Treasury Yields Climb Amid Fed Caution

Markets ended the week with cautious optimism, driven by progress in U.S.-China trade talks. Both sides reported substantial advances during negotiations in Geneva, with expectations of a joint statement soon. This lifted global equities and strengthened the U.S. dollar, while U.S. Treasury yields rose as Fed Chair Powell dismissed hopes for imminent rate cuts, citing persistent inflation pressures.

United States

Equities:
U.S. stock futures rose as optimism from U.S.-China trade talks boosted investor sentiment. Hopes for easing tensions supported risk appetite across sectors.

Bonds:
The 10-year Treasury yield climbed to 4.408% as markets recalibrated expectations for Fed policy, with investors reducing bets on rate cuts in the short term.

Currency:
The dollar strengthened, particularly against the yen and Swiss franc, reflecting improved risk sentiment and stronger U.S. economic signals.

Eurozone

Equities:
European shares closed higher, with broad-based gains driven by global trade optimism and solid earnings in industrial and consumer sectors.

Bonds:
Yields across the bloc edged higher, following the move in U.S. Treasuries, as investors reduced holdings in safe-haven government debt.

Currency:
The euro eased slightly against the dollar, trading near $1.12, pressured by the stronger greenback and limited local macro drivers.

United Kingdom

Equities:
UK markets rose modestly, led by financials and industrials. The FTSE 100 gained as geopolitical relief and global sentiment improved.

Bonds:
Gilt yields rose, tracking the move in global yields. The 10-year yield settled near 4.52% as inflation outlooks and BoE rate path remained in focus.

Currency:
The pound declined slightly against the dollar, falling below $1.33 amid renewed dollar strength and limited domestic data catalysts.

China

Equities:
Chinese markets are expected to open higher, supported by favorable headlines from the Geneva trade talks and improved investor confidence.

Bonds:
Yields held steady as the PBoC signaled no major shifts in monetary policy, maintaining a neutral stance amid stable economic data.

Currency:
The yuan appreciated to a six-month high against the dollar as trade optimism drove outflows from defensive assets and reversed recent pressure on the currency.

Japan

Equities:
Japanese stocks are set to rise at the start of the week, fueled by easing global trade tensions and better sentiment toward Asian markets.

Bonds:
The 10-year JGB yield remained low around 1.34%, reflecting the BoJ’s continued caution and subdued inflation dynamics.

Currency:
The yen weakened to 145.52 per dollar, as carry trade demand returned and traders moved out of safe havens on trade progress.

EMEA (Europe, Middle East, Africa)

Equities:
Indian equities are poised to rebound at the open, helped by improving global cues and fading geopolitical tensions in the region.

Bonds:
Indian government bond yields may drift lower, supported by anticipated central bank bond purchases and stabilized inflation expectations.

Currency:
The rupee saw mild gains, driven by regional FX strength and positive spillover from yuan appreciation.

Commodities & Cryptocurrencies

Commodities:

• Gold:
  Fell to $3,286 per ounce as safe-haven demand waned in light of risk-on flows.
• Oil:
  Brent hovered around $83, torn between demand concerns and tight supply dynamics as OPEC maintains production discipline.

Cryptocurrencies:

• Bitcoin:
  Remained above $100,000, consolidating after a strong institutional-led rally over recent weeks.
• Ethereum:
  Traded flat near $5,200 as the market digested recent gains and awaited broader risk sentiment confirmation.

Top Performers:

• Equities: Japanese stocks expected to lead global gains.
• Currency: U.S. dollar outperformed major peers.
• Crypto: Bitcoin held above $100,000 with strong momentum.