The world's attention is now on Beijing. President Donald Trump has arrived in China to meet with President Xi Jinping, the first visit by a US leader in nine years.
Why is the meeting important for traders?
Economic Stability: Investors are hoping the two superpowers can stabilize relations as the world grapples with the Iran nuclear deal.
Commodity Prices: Any positive news on trade or peace in the Middle East could help ease global inflation concerns.
On the other hand, two US inflation reports this week have pointed to rising price pressures:
Factory Costs Rise: Wholesale inflation (PPI) jumped 6% in April, the fastest since 2022. This was driven by high energy and transportation costs due to the war.
Interest Rates: Investors are starting to believe that the US Federal Reserve may have to raise interest rates next year to control commodity prices.
Despite the risk of war and inflation, the major companies in the S&P 500 index reported a surprising first-quarter profit of 27%! This is the fastest growth in 20 years (excluding the recovery period of the great crisis).
Other Market Updates:
Crude Oil: Brent is currently around US$105.65 per barrel, still high but not as out of control as it was earlier in the week.
Government Bonds: US bond yields are at their highest since July as people sell bonds due to inflation fears.
New Fed Chair: The US Senate has just confirmed Kevin Warsh as the new Chairman of the US Central Bank, replacing Jerome Powell in what is considered the most controversial power transition.
This week is a very critical week. If the meeting between Trump and Xi Jinping produces a harmonious result, we may see the stock market continue to soar. However, if the news from the Middle East heats up again, we should be prepared for another “shake” in commodity prices.
Editor’s Note: Watch developments in Beijing this morning. Any statements from Trump or Xi Jinping regarding the Strait of Hormuz or trade tariffs will determine the direction of the Ringgit and our stocks next week.
