Global Markets Steady Amid US-China Trade Truce and Soft Inflation Data

Published: May 14, 2025 | Marketsall News
Global financial markets exhibited a cautious optimism on Wednesday, buoyed by a temporary truce in the ongoing US-China trade tensions and softer-than-expected US inflation data. While Asian equities saw gains, European markets paused after a recent rally, and the US dollar continued its downward trend.

Asian Markets Rally on US-China Trade Truce Optimism

Investor sentiment in Asia improved following the announcement of a 90-day pause in tariff escalations between the United States and China. The MSCI Asia-Pacific index rose by 1.1%, with Hong Kong’s Hang Seng index climbing 1.4%, driven by strong earnings reports from tech companies like JD.com. However, analysts caution that the lack of concrete details in the trade truce leaves room for uncertainty.

European Stocks Take a Breather

After a significant rally fueled by trade optimism, European markets showed signs of stabilization. The STOXX 600 index dipped slightly by 0.2%, reflecting a cautious approach among investors awaiting further developments in trade negotiations and economic indicators.

US Dollar Weakens Amid Inflation Data

The US dollar experienced its most substantial decline in over three weeks, following the release of April’s Consumer Price Index (CPI), which rose by only 0.2%, below the anticipated 0.3%. This softer inflation data has increased expectations for potential interest rate cuts by the Federal Reserve later in the year. The dollar index fell by 0.8% on Tuesday and continued to decline on Wednesday, particularly against the Japanese yen and Swiss franc.

Federal Reserve Holds Back Amid US-China Trade Developments

Despite market expectations for rate cuts, the Federal Reserve signaled a cautious approach, emphasizing the need to assess the full impact of trade policies on the economy before making further monetary policy decisions. Analysts now anticipate a 50 basis point reduction in interest rates by the end of the year, with the first cut potentially occurring in September.

Commodities Respond to Market Sentiment

Gold prices fell by 0.7% to $3,226.11 per ounce, as easing trade tensions reduced the demand for safe-haven assets. Similarly, US crude oil prices decreased slightly to $63.35 per barrel, reflecting a balanced outlook on global economic growth and energy demand.

Outlook Remains Cautiously Optimistic

While the temporary US-China trade truce has provided short-term relief to global markets, investors remain vigilant. The absence of detailed agreements and the potential for renewed tensions necessitate a cautious approach. Upcoming economic data releases, including US retail sales figures and further developments in trade negotiations, will be critical in shaping market trajectories in the coming weeks.