Global markets are experiencing a state of divergence and caution amid rising inflation fears in the United States, coinciding with investors' anticipation of the results of the upcoming summit between US President Donald Trump and Chinese President Xi Jinping in Beijing, amid hopes of reaching trade and technology agreements that could ease global economic tensions.
Conversely, the ongoing war with Iran and rising energy prices are putting pressure on global inflation expectations, which presents central banks, especially the Federal Reserve, with increasing challenges regarding interest rate cuts in the coming period.
US markets
US futures showed mixed performance, with the Dow Jones futures falling more than 150 points after US producer inflation data came in higher than expected, while the Nasdaq continued to make gains, supported by rising shares of chip and artificial intelligence companies.
The US Producer Price Index (PPI) data came in very strong during April:
- Monthly producer price inflation: +1.4%
- Forecast: +0.4%
- Previous reading revised: +0.7%
- Annual producer price inflation: +6%
- Forecast: +5%
This is the largest monthly jump since March 2022, reinforcing concerns that price pressures will be passed on to consumers in the coming months, especially as energy and transportation costs continue to rise.
This scenario prompted markets to reduce bets on interest rate cuts, while pressure increased on inflation-sensitive sectors such as banks and retail, while technology stocks continued to attract liquidity.
Technology and Artificial Intelligence Sector
Chip company stocks led the rally once again:
- Nvidia's stock rose by more than 1%
- AMD's stock rose by approximately 1%
- Micron Technology's stock jumped by more than 5%
- SMH chip box rose by approximately 1%
The sector's main boost came after Nvidia CEO Jensen Huang accompanied the US president on his visit to China, which revived hopes for a possible easing of trade restrictions or agreements related to artificial intelligence chips and technology trade.
Tesla CEO Elon Musk also accompanied the visit, indicating the significant economic importance of the current summit.
The US-China summit under scrutiny
Markets are closely watching the upcoming talks between Washington and Beijing, especially given the discussion of sensitive issues including:
- Customs duties
- rare metals
- artificial intelligence
- War with Iran
- Taiwan file
There are also growing expectations of potential announcements regarding Chinese deals to purchase American aircraft and soybeans, which could support American industrial and agricultural markets if actual agreements are reached.
Asian markets
Asian markets closed with mixed performance amid continued caution:
- Japan's Nikkei index +0.84%
- Japan's Topix index +1.20%
- South Korean KOSPI +2.63%
- Chinese CSI 300 +1.02%
- Hang Seng in Hong Kong +0.15%
- Nifty Indian +0.56%
- Australian ASX -0.46%
Despite some rising indicators, the overall mood remains cautious due to high US inflation and ongoing geopolitical tensions in the Middle East.
oil markets
Oil prices declined slightly despite ongoing geopolitical risks:
- West Texas Intermediate (WTI) crude oil is at $101 a barrel, down 1%.
- Brent crude is at $106.90 a barrel, down 0.90%
It appears that the oil markets are trying to balance the risks of war with Iran with the prospects of political de-escalation and international understandings.
Chinese stocks
Alibaba's stock came under heavy pressure after the company announced that its core operating profit had collapsed by 84% year-on-year as a result of massive investments in technology and e-commerce.
- EBITA's adjusted profits amounted to 5.1 billion yuan.
- Annual decline: 84%
- The stock fell by more than 2.8% in trading.
This reflects continued pressure on Chinese technology companies despite improved sentiment following the US-China summit.
Summary
Global markets are entering a highly sensitive phase, as several factors clash simultaneously:
- High US inflation threatens to delay interest rate cuts
- Continued war and tensions in the Middle East
- Bets on a trade breakthrough between Washington and Beijing
- Continued strong momentum in the artificial intelligence and chip sectors
Therefore, markets currently appear divided between inflation and energy concerns on one hand, and hopes for trade and technology agreements on the other, which will keep volatility high in the coming days.
