Global Markets Await US-China Trade Talks Outcome

Asian markets rose on June 9, 2025, as investors awaited trade talks between the US and China. China's consumer price inflation fell 0.1% year-on-year in May, beating expectations, while producer prices declined 3.3%. China's CSI 300 index rose 0.18%, Hong Kong's Hang Seng Index added 1.01%, and the Hang Seng Tech index surged 2.3%. Japan's Nikkei 225 advanced 0.99%, and South Korea's Kospi index climbed 1.51%. India's Nifty 50 was up 0.46%. US equity futures fell during Asian hours after US non-farm payrolls data exceeded expectations on Friday. China's exports growth missed expectations in May, with shipments to the US declining sharply by 34.5% year-on-year.

China's consumer prices fell for a fourth consecutive month in May, declining 0.1% from a year earlier, as domestic consumption remained weak despite stimulus measures. Deflation in factory-gate prices deepened, with a 3.3% drop from a year earlier, the steepest decline since July 2023. A price war in the auto sector and falling property prices contributed to the downward pressure. Chinese policymakers have called for more forceful and targeted stimulus measures to boost consumption, with potential further monetary easing expected. Trade talks with the US are ongoing, with Chinese Vice Premier He Lifeng set to meet with the US trade negotiation team in London.

China's exports rose 4.8% in May from a year earlier, missing expectations, while imports plunged 3.4%, exceeding economists' estimates of a 0.9% drop. Exports to the U.S. plummeted 34.5% year-over-year, the largest decline since February 2020, while imports from the U.S. dropped over 18%. However, shipments to Southeast Asia, the European Union, and Africa rose 15%, 12%, and 33%, respectively. China's total trade surplus increased 25% to $103.2 billion. Analysts expect U.S.-bound exports to recover in June after the two countries struck a preliminary trade deal, easing tariffs.

European markets are expected to open higher on Monday, June 9, with the FTSE 100 projected to rise 7 points to 8,836, DAX up 3 points to 24,296, CAC 40 up 5 points to 7,801, and FTSE MIB 13 points higher to 40,595. The gains come as investors await U.S.-China trade talks in London, with signs that trade tensions may be easing, including China's temporary approval for rare earth exports and Boeing's commercial jet deliveries to China. Asian markets climbed overnight, while U.S. equity futures were mostly flat, ahead of key U.S. inflation data releases later in the week.

U.S. equity futures were mostly flat on Sunday evening as the S&P 500 neared a record high ahead of a busy week. The S&P 500 closed above 6,000 for the first time since February 21 and is less than 3% away from its record closing high. The coming week will bring trade talks between the U.S. and China, Apple's Worldwide Developers Conference, and key inflation data, including the consumer price index and producer price index. The market's rally suggests easing concerns about tariffs and the U.S. economy, with cyclicals performing well. The communication services sector led the S&P 500's rally last week, while consumer staples was the worst performing sector.

China's consumer prices fell for the fourth consecutive month in May, dropping 0.1% year on year, amid weak demand and trade tensions with the US. The decline was driven by a drop in energy prices, and was better than market expectations of a 0.17% fall. The country's consumer price index also contracted 0.2% from April, highlighting persistent deflationary pressures.

China's export growth slowed to 4.8% in May, down from 8.1% in April, as US tariffs took a toll, with exports to the US plunging 34.52%. However, June is expected to be a better month after China and the US agreed to a 90-day tariff truce in May, temporarily halting tariff escalations.

Top officials from the US and China will meet in London to discuss a trade truce amidst a precarious moment in their trade war. The US delegation, led by Treasury Secretary Scott Bessent, will aim to cement an agreement that gives American businesses greater access to China's market and encourages Beijing to buy more American products. The talks come as the global economy faces uncertainty and supply chain disruptions, partly due to the trade war and China's curbs on exports of rare earth magnets. The US has imposed tariffs on Chinese goods, which China has reciprocated, and a US trade court has deemed some of these tariffs illegal, although they remain in place pending an appeal. Recent tensions have eased slightly after a conversation between Trump and Xi Jinping, with Trump suggesting that issues surrounding China's restrictions on rare earths had been addressed. The talks will focus on resolving issues around rare earth exports, export controls, and currency practices, with the US seeking to ensure shipments of rare earths from China resume normally.

Kenneth Rogoff and Yu Yongding discuss the US dollar's diminishing role and the potential rise of China's yuan. Rogoff, a Harvard professor and former IMF chief economist, has warned of a legitimacy crisis for the US dollar. Yu, a senior fellow at the Chinese Academy of Social Sciences, believes foreign demand for US assets will decline, making it harder for the US to maintain a strong dollar. They suggest China's yuan could benefit from the US dollar's decline, with Yu advocating for a free-floating yuan and reduced Chinese holdings of US Treasuries.