US-China Trade Talks Lead Gains in Equities

STOCK INDEX FUTURES

Nasdaq futures led gains among all the indexes ahead of a long-anticipated meeting between President Trump and Chinese President Xi, and as the Federal Reserve is set to cut interest rates at the conclusion of its two-day policy meeting on Wednesday. Treasury Secretary Scott Bessent said there was a “very successful framework” for President Trump and Xi to discuss Thursday, while a Chinese official touted a consensus on several issues. Bessent also said that the trade talks have eliminated the possibility of the US imposing 100% tariffs on China starting November 1, while he also expects China to delay the implementation of its rare earth and magnets licensing. Also on the trade front, the White House announced it had reached trade agreements or frameworks with Malaysia, Cambodia, Thailand, and Vietnam. The US will exempt some products from tariffs in exchange for lower levies on American goods. Notably for big tech, the countries agreed to not impose regulations or fines that target US tech companies.

Also on the calendar for the week are several big tech earnings, with results from Microsoft, Alphabet, and Meta on Wednesday, and Apple and Amazon on Thursday.

CURRENCY FUTURES

US DOLLAR: The USD index fell to start a week packed with global trade negotiations and central bank meetings. President Trump and Xi will meet in South Korea on Thursday to decide on the framework of a trade deal that was created over the weekend. The Federal Reserve will also meet this week; markets have fully priced in a rate cut from the central bank. Investors will listen for any signals on how far interest rates are expected to drop at future meetings, with a cut in December expected to follow as well following Friday’s tame inflation print. Any cautious commentary coming out of the Fed could provide support for the dollar given that a December cut is almost fully priced in.

EURO: The euro rose against the dollar ahead of central bank meetings from the European Central Bank. The ECB is expected to keep its benchmark rate unchanged on Thursday, given recent data releases and commentary from officials that the current rate is well-positioned. It is a busy week for the European calendar, starting with Germany’s Ifo business climate index for October, which showed that business confidence rose slightly from 87.7 to 88.4. Sentiment rose due to improved expectations, though the current business situation was assessed as slightly worse, the Ifo Institute said. by Germany’s GfK consumer climate survey and Italy’s consumer and business confidence surveys will be released Tuesday, followed by eurozone business and consumer surveys for October on Thursday, alongside unemployment figures from Germany for October and Italy and the eurozone for September. Third-quarter GDP figures are also due for release from Germany, France, Italy, and the Eurozone on Thursday. CPI figures from a host of countries will also be watched following a slight uptick in inflation last month, although markets widely expect inflation to fall below the ECB’s 2% target in early 2026.

BRITISH POUND: The pound gained against the dollar ahead of Wednesday’s Fed decision in what is a quiet week of economic data for the UK. Last week, CPI inflation data for September came in below expectations, with inflation holding at 3.8%, showing no changes in September after rising 0.3% in August. The inflation figures came in below the expectations of economists and the Bank of England, who had expected a rise to 4%. Inflation is expected to continue to moderate, offering the BoE a potential reprieve if those expectations are reflected in upcoming data. The data led markets to increase bets on BoE rate cuts; markets are pricing in a 67% chance of a rate cut by year-end, up from 50% before last week’s inflation data was released. The BoE is likely to be highly divided when it votes on interest rate moves in November. Mortgage lending, mortgage approvals, and consumer credit data will be in focus this week as investors continue to look ahead to the government’s budget on November 26.

JAPANESE YEN: The yen was little changed against the dollar as President Trump visited Japan for his first summit with Japan’s new prime minister, Sanae Takaichi. The Bank of Japan also announces its policy decision on Thursday; markets widely expect the bank to hold rates steady at 0.5% as it monitors the full impact from US tariffs and have time to communicate with the new administration in the country. Japan’s new finance minister, Satsuki Katayama, said that BoJ policy should align with government policy. Fiscal spending concerns continue to remain a worry for markets as reports suggest that a new fiscal spending package will be unveiled soon. On the data front, Tokyo consumer price data for October on Friday offers a leading indicator of country-wide trends, which comes out alongside national industrial production and retail sales figures for September.

AUSTRALIAN DOLLAR: The Aussie gained strongly against the dollar as optimism surrounding US-China trade talks sparked a risk-on sentiment that supported the currency. Third-quarter inflation data due Wednesday will be decisive for the Reserve Bank of Australia in whether or not it decides to cut rates at its meeting in November. Markets forecast headline CPI to rise to 3.0% annually, at the upper end of the RBA’s 2–3% target. PMI data out last week showed that among surveyed businesses, composite input cost inflation eased to near a one-year low even as manufacturing input prices rose at the quickest rate since April, while selling price inflation fell to its softest pace in around five years. Still, if the CPI data shows inflation is at the upper end of the RBA’s target, the bank is still expected to lower interest rate cuts next year given the current macroeconomic backdrop.

INTEREST RATE MARKET FUTURES

Yields rose across the curve ahead of the Fed’s meeting this week as trade tensions with China cooled ahead of a meeting between President Trump and Xi, helping to spark a global risk-on sentiment. Markets are hopeful a trade breakthrough will happen after productive weekend discussions between US and Chinese negotiators. Several issues, such as export controls, fentanyl, and shipping levies, were reportedly resolved.

Friday’s CPI inflation report showed a smaller-than-expected rise in inflation. Headline CPI inflation rose to 3.0% from 2.9% in August on an annualized basis, below expectations of a rise to 3.1%. Core CPI rose 0.2% on the month, a slower pace than the previous two months, at 0.3%, landing the annualized core figure at 3.0%, below expectations of a rise to 3.1%. The data all but confirms that the Fed will move to cut rates by 25 bps at its meeting. Markets will parse commentary from the central bank for any signals on the extent of easing, which the economy could see before year-end, as markets have largely priced in another rate cut in December. Any signals that easing in December may not be entirely on the table could prove to be a headwind for Treasurys.

Also in focus at the Fed’s meeting will be any signals about when the bank might end its quantitative tightening cycle, after Powell recently signaled that the end of QT is approaching. An end to QT would be bullish for Treasurys, as it reduces bond supply and lowers the Treasury’s financing requirements.

The spread between the two- and 10-year yields fell to 51.90 bps from 52.60 bps on Friday, while the 2-year yield, which reflects interest rate expectations, rose to 3.497%.

Interested in more futures markets?  Explore our Market Dashboards here.