By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets
Wall Street stocks look set to sustain this week’s gains, fueled by trade de-escalation hopes and soft April inflation readings. But investors will no doubt be conscious of the still-febrile state of the economy and policymaking.
I’ll dive into all the details below and be back with more columns and reading suggestions next week.
Today’s Market Minute
* Russian and Ukrainian negotiators met in Istanbul on Friday for their first peace talks in more than three years as both sides come under pressure from U.S. President Donald Trump to end Europe’s deadliest conflict since World War Two.
* Trump on Thursday announced deals totaling more than $200 billion between the United States and the United Arab Emirates, including a $14.5 billion commitment between Boeing, GE Aerospace and Etihad Airways.
* India is considering plans to dramatically increase the water it draws from a major river that feeds Pakistani farms downstream, as part of retaliatory action for a deadly April attack on tourists that New Delhi blames on Islamabad.
* The steady, gradual decline in U.S. inflation has recently come with an unwelcome side effect: rising ‘real’ borrowing costs. With the Federal Reserve’s official policy rate on hold and the benchmark 10-year Treasury yield edging higher, inflation-adjusted interest rates are rising, effectively tightening monetary policy and financial conditions. Read Reuters columnist Jamie McGeever’s latest analysis.
* China has focused on expanding its export markets across the ‘Global South’, particularly in Southeast Asia. But this is creating a new ‘China shock’ as the region’s manufacturers struggle to compete. Check out the column from Manishi Raychaudhuri, the founder of Emmer Capital Partners Ltd.
Trade and inflation relief
The S&P 500 is back in positive territory for the year for the first time since February, and futures point to modest further gains on Friday. The VIX “fear index” of equity volatility has fallen to its lowest point since March, as has the Treasury market equivalent.
U.S. tech and aircraft firms got a boost this week following the announcement of new orders from Middle East countries that Trump has visited this past week.
Meanwhile, a surprise drop in April U.S. producer prices helped Treasuries rally on Thursday. Ten-year Treasury yields tumbled back to as low as 4.40% on Friday, down 15 basis points from Thursday’s intraday peak. The dollar was on the back foot as a result.
The release of March data on foreign holdings of U.S. Treasuries later on Friday will be watched closely for any evidence of overseas wariness about U.S. debt, although the numbers will pre-date the April chaos.
Overall, the state of play for the markets and the economy remains pretty fluid, with U.S. bilateral trade negotiations still in the midst of a 90-day pause and many price and activity readings still unreliable given the seismic trade distortions afoot.
While the S&P 500 is back to where it was at the start of the year, it’s still underperforming Germany’s DAX by more than 25% in dollar terms. It’s also lagging behind euro zone benchmarks by some 20% and Hong Kong’s Hang Sen by 16%. Additionally, the Nasdaq and Russell 2000 remain in the red for 2025.
And the dollar index is still down almost 6% for the year.
The soft producer price report was a relief, particularly because this data feeds into the Federal Reserve’s favored inflation gauge.
But Walmart’s earnings suggest we may be in the eye of a storm. The world’s largest retailer declined to provide a profit forecast for the second quarter and said it will have to start raising prices later this month due to the high cost of tariffs.
U.S. April import and export prices are published later on Friday, alongside the University of Michigan’s update on consumer sentiment for May.
As to Fed thinking, the central bank is holding the second day of a conference on its five-year review of its strategic monetary policy stance. Fed Chair Jerome Powell indicated on Thursday that big supply-side changes to the economy since 2020 may force the Fed to become less tolerant of above-target inflation.
Overseas, European stocks climbed anew. The region-wide STOXX 600 index was set for its fifth consecutive weekly advance and the DAX hovered near a record high.
Helping European sentiment, Russia and Ukrainian negotiators are meeting in Istanbul in what has been billed as their first direct peace talks in three years.
However, Russian President Vladimir Putin will not meet Ukrainian President Volodymyr Zelenskiy there, dashing earlier hopes for face-to-face talks. Trump also said there would be no movement in negotiations without a meeting between himself and Putin.
In Asia, Chinese and Hong Kong stocks dropped on Friday as market sentiment came under pressure from renewed U.S.-China tech tensions and a disappointing earnings report from Alibaba.
The U.S. Commerce Department is considering placing more Chinese companies, including ChangXin Memory, on its restricted export list, a person familiar with the matter told Reuters.
Chart of the day
Powell opened a two-day conference on the Fed’s strategic approach to monetary policy by saying the economic environment has changed significantly since 2020. He flagged the increasing likelihood of a “period of more frequent, and potentially more persistent, supply shocks” ahead.
The comments suggest a change to the Fed’s position adopted five years ago that favored focusing on average inflation targeting to avoid overreacting to temporary overshoots that could penalize job creation unnecessarily. Powell noted that structural drivers of inflation may have changed, meaning the Fed may now have to be less tolerant of above-target inflation and quicker to rein it in.
Today’s events to watch
* U.S. April housing starts/permits, import/export prices (8:30 AM EDT), University of Michigan May consumer survey (10:00 AM EDT), March TIC data on foreign holdings of Treasuries (4:00 PM EDT)
* Federal Reserve Board holds second and final day of Thomas Laubach Research Conference on its five-year monetary policy framework review
* Richmond Fed President Thomas Barkin and San Francisco Fed President Mary Daly speak; European Central Bank chief economist Philip Lane speaks
* Russia and Ukrainian negotiators meet in Istanbul in what is billed as their first direct peace talks in three years
* US President Donald Trump completes his Middle East tour in the United Arab Emirates
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan; Editing by Anna Szymanski and Joe Bavier)
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