Tensions surrounding Taiwan are at the forefront as talks between Donald Trump and Xi Jinping commence in Beijing, with Xi warning that mishandling the issue could severely damage U.S.-China relations. Meanwhile, European markets are showing strength, with the German DAX leading gains at 1.2%, buoyed by Siemens’ robust performance despite slightly weaker quarterly results. In contrast, the Brazilian real and Ibovespa are under pressure due to political instability linked to the Bolsonaro family, which has contributed to a 10% decline in the Ibovespa over the past month.

U.S. inflation data has surprised to the upside, with producer prices rising significantly above expectations. Despite this, market reactions have been muted, with only a modest increase in the implied probability of a rate hike this year, currently estimated at 35%. The dollar remains strong, supported by these inflation figures, while Asian markets show mixed results, with the Korean KOSPI continuing its impressive upward trajectory.

For market professionals, the key takeaway is the potential impact of U.S.-China relations on global markets, particularly as inflation data may influence monetary policy. Investors should remain vigilant to geopolitical developments and their implications for market stability.

Source: xtb.com