Global stocks and the dollar experienced a decline on Thursday as investors analyzed a benign U.S. inflation report alongside fragile trade truce developments involving Washington and Beijing. Simultaneously, rising tensions in the Middle East and ongoing tariff concerns dampened overall risk sentiment.
European markets were predicted to open lower, with futures indicating declines of 0.8% for Germany’s DAX and 0.4% for London’s FTSE 100. Additionally, contracts for Wall Street’s S&P 500 hinted at a slow start.
This week, focus has centered on U.S.-China trade discussions that have produced a framework agreement aimed at lifting Chinese export restrictions on rare earth minerals and facilitating access for Chinese students to U.S. universities. President Trump stated, “We made a great deal with China.
We’re very happy with it.” However, market reaction remained cautious, with investors waiting for concrete details and hoping to avoid a resurgence of tensions. After a recent rally that brought stocks closer to record highs, U.S. and European equities appeared to be consolidating.
Furthermore, Trump’s announcement of impending letters to multiple countries outlining trade deal terms injected additional uncertainty. Charu Chanana, chief investment strategist at Saxobank, noted that markets may need to react to Trump’s tariff threats, even if they are merely intended to foster negotiation.
In the Asia-Pacific region, the MSCI index, excluding Japan, dipped 0.2% after reaching a three-year high, while Japan’s Nikkei fell by 0.5%. Chinese and Hong Kong markets also slowed after previously achieving multi-week highs.
Trump’s unpredictable tariff policies have unsettled global markets this year, prompting many investors to shy away from U.S. assets, particularly the dollar. The euro, benefitting from the dollar’s decline, reached a seven-week high at $1.1525, while the Japanese yen gained 0.4%, contributing to a dip in the dollar index, which is down 9% this year.
On Wednesday, data indicated a slower-than-expected increase in U.S. consumer prices for May; however, inflation is anticipated to rise in the upcoming months due to tariffs. Shane Oliver, AMP Capital’s head of investment strategy, suggested that the impending price uptick could lead to a combination of inflationary pressures and reduced profit margins.
Later in the day, investors would be tracking a producer inflation report that influences the Federal Reserve’s preferred inflation measure. Although a rate cut is not expected next week, traders are pricing in a 70% likelihood of a quarter-point reduction by September.
In the UK, economic output was reported to have contracted by 0.3% in April, heightening investor concerns. Amid these developments, oil prices remained near two-month highs, and gold benefitted from safe-haven demand.