SINGAPORE, June 10 (Reuters) - In a notable development, stocks showed significant buoyancy while the dollar maintained a cautious stance on Tuesday, as trade talks between the United States and China entered a crucial second day. This ongoing dialogue has sparked tentative optimism regarding a potential easing of tensions between the world’s two largest economies. U.S. President Donald Trump expressed a positive outlook on the discussions taking place at Lancaster House in London, which concluded for the night on Monday and are scheduled to resume at 0900 GMT on Tuesday.
Market analyst Tony Sycamore from IG noted, "The fact that we're still trading near record highs suggests the market is absorbing the positive sentiments expressed by Trump. Comments from other prominent figures like Howard Lutnick and Scott Bessent indicate a general satisfaction with the progress made thus far." However, he emphasized that the market is eager for more concrete announcements regarding the negotiations.
As Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and U.S. Trade Representative Jamieson Greer met with their Chinese counterparts for the second consecutive day, investor attention remained firmly on the outcomes of these talks. Any tangible progress is expected to deliver relief to the markets, particularly after Trump's unpredictable tariff policies and fluctuations in Sino-U.S. trade relations have adversely impacted both economies and global growth.
Asian stocks continued their upward trajectory, building on gains observed at the start of the week. Both EUROSTOXX 50 futures and FTSE futures recorded slight increases of approximately 0.1% each. In Tokyo, market participants turned their attention to the Japanese government bond (JGB) market, especially with reports indicating Japan's consideration to repurchase some super-long government bonds issued during periods of low interest rates.
In early trading, the yield on the 10-year JGB dipped by one basis point to 1.46%, while the 30-year yield decreased by 5 basis points to 2.86%. Notably, yields on super-long JGBs had surged to record levels in the previous month, driven by declining interest from traditional buyers like life insurers and growing concerns over the rising debt levels globally. Justin Heng, an APAC rates strategist at HSBC Global Investment Research, highlighted that the volatility in the super-long segment stems from a supply-demand imbalance that has been exacerbated since the Bank of Japan initiated balance sheet normalization.
On Tuesday, Katsunobu Kato, Japan's Finance Minister, assured that the government would implement appropriate debt management policies while maintaining close communication with market participants.
In the currency markets, the dollar attempted a recovery after a decline on Monday. Against the yen, the dollar rose by 0.45% to 145.25. The euro, however, fell by 0.28% to $1.1387, while the British pound slipped 0.2% to $1.3523. Investor confidence in U.S. assets has been shaken by Trump's erratic trade policies and concerns regarding Washington's escalating debt, contributing to a more than 8% decline in the dollar this year.
The upcoming U.S. inflation data release on Wednesday is poised to be a significant test for the greenback. Analysts expect a slight uptick in core consumer prices for May, which could counteract predictions of imminent rate cuts by the Federal Reserve. The producer price index (PPI) report is scheduled for release the following day, and May's U.S. CPI and PPI figures will be closely examined for indications of persistent inflationary pressures, according to Kevin Ford, a macro strategist at Convera.
If core CPI remains elevated, expectations for rate cuts could be pushed beyond the upcoming June 18 FOMC meeting. Traders currently foresee the Fed maintaining steady rates at its policy meeting next week, although they have priced in approximately 44 basis points of easing by December.
In the oil markets, prices experienced a slight increase, with Brent crude futures rising 0.24% to $67.20 per barrel. Meanwhile, U.S. West Texas Intermediate crude gained 0.25% to $65.45 per barrel, having reached a two-month high earlier in the session. In contrast, spot gold prices fell by 0.5% to $3,310.40 per ounce.
This comprehensive overview of the current market situation underscores the ongoing influence of U.S.-China trade relations on global financial stability and investor sentiment.
