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What’s happening: Asia stocks recorded gains this morning amid prospects of successful trade talks between the US and China.
What happened: Officials from both countries held talks in London on Monday, with discussions set to resume today.
Equity markets in Japan recorded gains for the third day in a row this morning.
Why it matters: US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer held a meeting with China’s Vice Premier He Lifeng and his team, aimed at easing restrictions on shipments of tech and rare earths.
Although no major breakthroughs were announced following the first day of talks, US trade representatives struck a positive tone following the negotiations. US Commerce Secretary said talks between both nations were “fruitful,” while Scott Bessent said the meeting was “good.”
US President Donald Trump said he was getting good reports from his officials regarding the talks with China. “We are doing well with China. China’s not easy,” he added.
Tariffs are impacting trade between the world’s two biggest economies. Data released on Monday showed that China’s shipments to the US staged the worst decline in over five years in May.
Overall, China’s imports dipped 3.4% year-over-year to $212.9 billion in May, bigger than the 0.2% decline recorded in the previous month and worse than market expectations of 0.9%. However, exports from China grew by 4.8% year-over-year to $316.1 billion last month.
Other data released on Monday showed China’s producer prices declining 3.3% year-over-year in May, higher than market expectations of a 3.2% decline and following a 2.7% easing in the previous month. The latest reading signalled producer deflation for the 32nd straight month. China’s consumer prices fell by 0.1% year-over-year in May, compared to market estimates of a 0.2% decline.
Market sentiment received some boost on Monday amid reports that China had issued temporary approvals for rare earth exports.
Japan’s Nikkei 225 Index added 0.97% to trade at 38,457.55 this morning, extending gains for a third straight session.
China’s Shanghai Composite Index gained 0.1% to 3,403.23, while Hong Kong’s Hang Seng Index rose 0.2% to 24,232.95.
What to watch: Investors will continue monitoring ongoing talks between the US and China, with hopes of the two nations reaching a deal.
Data on producer price inflation from Japan, due to be released on Wednesday, will also remain in focus. Producer prices in Japan, which rose by 4.0% year-over-year in April, are expected to increase by 3.5% in May.
Context: The EUR/USD forex pair fell this morning, as investors monitored the European Central Bank’s monetary policy outlook.
Details: Last week, the ECB had cut its benchmark interest rates by 25 basis points, which brought borrowing costs to their lowest level since November 2022. The region’s central bank also lowered its inflation expectations for 2025 and 2026, indicating it may be nearing the end of its ongoing monetary policy easing cycle.
Some strength in the US dollar exerted pressure on the EUR/USD pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.3% to 99.25.
The EUR/USD forex pair fell around 0.2% to 1.1398 this morning, while the EUR/GBP pair slipped about 0.1% to 0.8424.
What to watch: With no major economic reports due today, investors await the release of data on industrial production from the Eurozone on Friday. Industrial production in the Eurozone, which rose 2.6% in March, is expected to decline by 1.3% in April.
Inflation data from Germany and France, scheduled for release on Friday as well, will remain in focus. Germany’s consumer price inflation is expected to remain at 2.1% in May, while analysts expect France’s annual inflation rate to slow to 0.7% in May from 0.8% in both March and April.
Other Markets: US trading indices closed mixed on Monday, with the S&P 500 and Nasdaq 100 up by 0.09% and 0.17%, respectively, and Dow Jones index down by 0.003%.
Russia launched a record 479 drones against Ukraine ahead of the POW swap. The news sent the safe-haven US dollar index higher in forex trading this morning.
Australia’s Westpac-Melbourne Institute Consumer Sentiment Index rose 0.5% to 92.6 in June. This being a slowdown from the 2.2% rise recorded in May exerted pressure on the AUD/USD forex pair.
South Korea recorded a current account surplus of $5.7 billion for April, posting a surplus for the 12th month in a row. However, the latest reading being the smallest in three months sent the KRW/USD pair lower in forex trading this morning.
UK’s retail sales grew by 0.6% year-over-year in May, sharply lower than the 6.8% surge recorded in the previous month. The latest reading coming in short of market estimates of a 2.7% rise exerted pressure on the GBP/USD forex pair.
Argentina’s industrial production surged by 8.5% year-over-year in April, following a 5% gain in the previous month. Industrial production growing for the fifth straight month sent the ARS/USD pair higher in forex trading this morning.
Italy’s industrial production (1200 UAE Time), Spain’s 3-month Letras auction (1240 UAE Time), 9-month Letras auction (1240 UAE Time), Germany’s 5-year Bobl auction (1330 UAE Time), US NFIB business optimism index (1400 UAE Time), Redbook index (1655 UAE Time), 52-week Bill auction (1930 UAE Time) and 3-year Note auction (2100 UAE Time), South Africa’s manufacturing production (1500 UAE Time), Brazil’s inflation rate (1600 UAE Time), France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), as well as Turkey’s treasury cash balance (1830 UAE Time).
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