U.S. and China to Hold First Official Trade Talks in Switzerland on May 10
Besant: "This Negotiation Is About Easing Tensions"
Fed to Decide on Interest Rates Today... 99% Probability of a Hold
Powell's Economic Outlook in Focus Amid Tariff Uncertainty
The three major indices on the New York Stock Exchange opened higher on May 7 (local time). Investor sentiment is improving amid expectations of eased trade tensions, as the United States and China, which have been engaged in a high-stakes tariff war, have agreed to hold their first official talks. Investors are now focused on the U.S. Federal Reserve's decision on the benchmark interest rate, which is scheduled for later in the day.
As of 10:04 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was up 228.36 points (0.56%) at 41,057.36. The large-cap S&P 500 Index had risen 23.71 points (0.42%) to 5,630.62, while the tech-heavy Nasdaq Index was trading at 17,748.9, up 59.24 points (0.33%) from the previous session.
By stock, The Walt Disney Company surged 9.59% after reporting an increase in streaming service subscribers and earnings that exceeded expectations. Ride-sharing company Uber fell 2.47% after reporting results that missed market forecasts.
The United States and China are set to begin their first trade negotiations in Switzerland on May 10. On the previous day, the U.S. Treasury Department and the Office of the United States Trade Representative (USTR) announced that Treasury Secretary Scott Besant and USTR Representative Jamison Greer would visit Switzerland starting May 8 to meet with their Chinese counterparts. The Chinese Ministry of Commerce also confirmed that Vice Premier He Lifeng, who is in charge of the Chinese economy, would visit Switzerland from May 9 to 12 to discuss economic issues with Secretary Besant. In an interview with Fox News, Secretary Besant stated, "In my view, this negotiation is not about a large-scale trade agreement, but rather about easing tensions," adding, "But we need to ease tensions before we can move forward."
This meeting marks the first high-level encounter between the two countries since the U.S. raised tariffs on Chinese goods to 145% and China responded by increasing tariffs on U.S. goods to 125%. It appears that the two sides, which have long been at an impasse, are now entering a phase of exploratory talks to seek common ground.
The news of the first official U.S.-China dialogue came just one day before the Fed's interest rate decision. Investors are awaiting the results of the Federal Open Market Committee (FOMC) meeting at 2:00 p.m., followed by a press conference by Fed Chair Jerome Powell 30 minutes later. Amid concerns over tariff-induced inflation and a potential economic downturn, the interest rate futures market is currently pricing in a 99% probability that the Fed will keep rates unchanged at 4.25-4.5% per year. The probability of a rate hold next month is also close to 70%. The key point to watch is Chair Powell's economic outlook. As concerns over tariffs grow, investors are expected to listen closely to Powell's projections for inflation and growth, seeking clues about the future path of interest rates.
On Wall Street, there are expectations that Chair Powell may not provide the dovish signals on monetary easing that the market is hoping for, due to the uncertainty surrounding tariff policies.
Chris Brigati, Chief Investment Officer (CIO) at SWBC, analyzed, "The tariff situation is extremely fluid and unpredictable," adding, "Any attempt by the Fed to respond to tariffs would be irresponsible." He continued, "The situation can change rapidly, and the Fed's actions may fail to achieve their intended effect or could even exacerbate negative impacts."
Thierry Wizman, global FX and interest rate strategist at Macquarie, said, "Traders want to believe the Fed will save the world and ease policy and political uncertainty with an overtly dovish signal," adding, "If that's the case, they need to think again."
U.S. Treasury yields are mixed within a narrow range. The benchmark 10-year U.S. Treasury yield, a global bond market indicator, fell 3 basis points (1bp = 0.01 percentage point) from the previous day to 4.28%, while the 2-year yield, which is sensitive to monetary policy, rose 1 basis point to 3.79%.
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