Morning Note: A Round-up of Global Financial Market News.

Market News

Donald Trump said he made “fantastic trade deals” with Xi Jinping as the leaders held a second day of talks in Beijing, though few concrete agreements emerged. USTR Jamieson Greer said he expects China to commit to billions in US agricultural purchases. Boeing fell after the US president said China would buy 200 planes, below expectations for a purchase of as many as 500.

Trump and Xi also discussed efforts to keep the Strait of Hormuz open to preserve energy trade. However, Brent crude futures strengthened above $107 a barrel as diplomatic attempts to end the conflict continued to stall, leaving the strategically crucial channel effectively closed. In the meantime, nearly half of the crude released from US strategic reserves is heading overseas highlighting the war’s strain on global supplies. So far, roughly 13m barrels have been exported to Europe and other markets, Kpler data showed.

Gold has fallen below $4,600 an ounce and was on track to fall about 3% for the week, pressured by accelerating US inflation that fueled concerns the Federal Reserve may need to keep interest rates elevated or even hike them. The yield on the US 10-year Treasury note climbed above 4.5%, reaching its highest level in a year. India tightened gold import regulations further as authorities intensified measures to support the rupee.

The US market finished higher – S&P 500 (+0.8%); Nasdaq (+0.9%) – but ended off the best levels seen late morning. Overnight the mood turned more negative as investors began to question whether the AI-fueled rally in equities has run too far. South Korea’s Kospi, a bellwether for AI investments, fell more than 5%, while the Nasdaq is currently expected to open 1% lower. Markets were also weak elsewhere in Asia: Nikkei 225 (-2.0%); Hang Seng (-1.6%); Shanghai Composite (-1.0%). Japan’s producer prices surged by the most in 12 years in April, boosting the case for a BOJ rate hike. Finance minister Satsuki Katayama denied the need for an extra budget.

The FTSE 100 is currently trading 0.8% lower at 10,293. Yesterday afternoon, US food and beverage ingredient company Ingredion announced a non-binding indicative all-cash offer for Tate & Lyle at 595p a share, sending the shares up almost 50%. Ingredion is now engaged in discussions and a period of due diligence with Tate & Lyle to further explore a potential transaction. There can be no certainty that a binding offer will be made.

Sterling fell to $1.3350 and €1.1475 as the UK political backdrop became more uncertain, while 10-year Gilts moved above 5.10%. There’s conflict at the Bank of England, with chief economist Huw Pill advocating raising rates to combat inflation spillovers from the energy shock, while Sarah Breeden stated that the Middle East conflict is “much less likely” to spark an inflation surge like in 2022, adding that any necessary rate hikes could wait until later this year.

Source: Bloomberg