Trump Says "I Respect President Xi... We Will Reach an Agreement"
U.S. Treasury Hints at Suspension of China's Rare Earth Controls and U.S. 100% Tariff Withdrawal
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On October 27 (local time), all three major U.S. stock indexes are showing gains. Buying momentum is being driven by growing expectations that a trade agreement will be reached between the United States and China at the upcoming summit scheduled for October 30 in Busan, South Korea.
On the 27th (local time), traders are working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by AFP News Agency
As of 9:45 a.m. on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average is up 205.63 points (0.44%) from the previous trading day, standing at 47,412.75. The S&P 500 Index, which focuses on large-cap stocks, has risen 58.05 points (0.85%) to 6,849.74, while the tech-heavy Nasdaq Index is trading at 23,543.43, up 338.563 points (1.46%).
U.S. Treasury Secretary Scott Besant stated after trade talks with China in Kuala Lumpur, Malaysia, the previous day, "We have prepared a very successful framework (a broad agreement) for the leaders to discuss on Thursday (the 30th)." He added that China has agreed to suspend its export controls on rare earth elements for one year, and the United States will not impose an additional 100% tariff on Chinese goods. He also explained that China has agreed to resume imports of U.S. soybeans and support efforts to curb fentanyl distribution, and that detailed negotiations regarding the sale of TikTok’s U.S. operations have been completed.
As both sides move toward resolving their trade conflict, the likelihood has increased that the summit will result in an agreement sufficient to prevent escalation and manage the conflict through a truce. U.S. President Donald Trump also told reporters aboard Air Force One en route from Malaysia to Japan, "I have great respect for President Xi Jinping," and added, "We will reach an agreement."
Additionally, during this Asian tour-the first since President Trump returned to office-the United States has concluded and formalized trade agreements with Malaysia, Cambodia, Thailand, and Vietnam in quick succession.
However, trade tensions with some countries continue to weigh on investor sentiment. On October 25, after Ontario, Canada, ran an anti-tariff advertisement quoting former President Ronald Reagan, President Trump announced an additional 10% tariff hike on Canadian imports. Negotiations with South Korea have also not yet concluded due to differences over a $350 billion investment package in the United States.
Tobin Marcus, Chief Political and Policy Strategist at Wolfe Research, commented, "The details are limited and nothing will be finalized before the U.S.-China summit, but a resumption of the truce appears almost certain." He added, "Overall, the outcome is better than expected, and if the summit proceeds smoothly, the market is likely to be strong this week."
The market is also watching whether the Federal Reserve will cut interest rates this week, alongside the U.S.-China trade summit. The Federal Open Market Committee (FOMC) will hold its regular meeting on October 28-29 to decide on the benchmark interest rate. Last month, the Fed cut the rate by 0.25 percentage points to a range of 4.0-4.25% per year. The Consumer Price Index (CPI) for September rose 3.0% year-on-year, higher than August’s 2.9% but below the market expectation of 3.1%, increasing the likelihood of a rate cut.
In addition, this week, major Big Tech companies such as Alphabet (Google’s parent company), Amazon, Apple, Meta Platforms (Facebook’s parent company), and Microsoft are all scheduled to announce their third-quarter earnings results.
U.S. Treasury yields are on the rise. The 10-year U.S. Treasury yield, a global benchmark, is up 3 basis points (1bp = 0.01 percentage points) from the previous day, reaching 4.03%. The 2-year Treasury yield, which is sensitive to monetary policy, is also up 3 basis points from the previous day, trading around 3.51%.
By sector, semiconductor stocks are climbing on optimism about a U.S.-China trade agreement. Nvidia is up 2.26%. Broadcom and AMD are up 0.53% and 0.39%, respectively. Tesla and Apple, which have significant business exposure to China, are up 2.53% and 1.27%, respectively.
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