Energies
Two days of high-stakes US-China trade talks concluded Sunday in Geneva with officials citing “substantial progress” but offering no immediate details. Treasury Secretary Scott Bessent described the negotiations as “productive” and promised a full briefing Monday morning, leaving markets waiting for concrete signals on whether the sweeping tariff war will begin to unwind. The talks, led by Bessent and Ambassador Greer for the US and Chinese Vice Premier He Lifeng for Beijing, mark the most significant diplomatic engagement in months, following weeks of escalating tariffs. Key unresolved issues include intellectual property, currency practices, agricultural access, and semiconductor trade. While Trump has maintained a hard line, insisting last week that the US is “losing nothing” by halting trade with China, his tone has softened. He has suggested an 80% tariff level to seem “right,” indicating room for negotiation. Investors will watch Monday’s briefing closely. Any indication of de-escalation could lift equities while bolstering sentiment in emerging markets.
The Federal Reserve has been stuck in a cautious stance, acknowledging rising risks to both inflation and employment amid ongoing trade-related uncertainty. Chair Jerome Powell highlighted the Fed’s limited visibility into how Trump’s aggressive tariff strategy will ultimately impact the economy, noting that the central bank remains in a wait-and-see mode. Policymakers are particularly concerned about the possibility of stagflation-where inflation and unemployment rise simultaneously-leaving them with difficult trade-offs. With decisions effectively on hold until there is greater clarity on trade policy, market participants will be watching upcoming data closely. April’s Consumer Price Index (CPI), due this Tuesday, could provide early clues about inflationary pressures and shape expectations for the next policy move. The Fed’s heightened sensitivity to trade outcomes may increase volatility, particularly for rate-sensitive sectors like tech and risk assets. A hotter-than-expected CPI could reignite rate hike expectations, adding further uncertainty.
Tensions remain elevated across two key geopolitical flashpoints-South Asia and the Middle East-as efforts to de-escalate conflict unfold in parallel. A fragile ceasefire was holding between India and Pakistan following four days of the most intense cross-border fighting in nearly three decades. The ceasefire, brokered with US diplomatic pressure, came under immediate strain with reports of fresh artillery fire in Indian-administered Kashmir, casting doubt on its longevity. President Donald Trump has pledged to pursue a resolution to the longstanding Kashmir dispute, potentially increasing US involvement in the region. Meanwhile, in the Middle East, US and Iranian negotiators are set to resume nuclear talks, seeking to resolve long-standing disagreements over Tehran’s nuclear program. The discussions come as Washington adopts a more assertive stance ahead of Trump’s upcoming visit to the region. Despite mutual preference for diplomacy, deep divisions remain on several critical issues, raising the risk of stalemate or further escalation. Market participants will closely monitor developments on both fronts. Sustained de-escalation could support risk sentiment globally, while renewed conflict may trigger safe-haven flows into assets such as gold and US Treasuries, and pressure energy markets.
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