European Markets Rally as Trump Calms US-China Trade Tensions

UPDATE: European markets are experiencing a swift turnaround following a turbulent selloff, fueled by renewed optimism after US President Donald Trump confirmed a crucial meeting with China’s President Xi Jinping in just two weeks. This development, announced during a Fox Business interview, has significantly boosted risk assets as investors digest the implications of a more composed approach to US-China trade relations.

For much of the European morning, the sentiment was bleak, reflecting a 1.3% drop in S&P 500 futures earlier in the session. However, following Trump’s reassuring comments that “we’ll be fine with China,” futures have rebounded, with losses now trimmed to 0.3%. The shift in tone from the US administration has sparked a rally across various markets, signaling a potential stabilization in investor sentiment.

In the bond market, 10-year US Treasury yields have bounced back from earlier lows of 3.94%, now hovering around 3.98%. The currency markets have also reacted positively, with the USD/JPY pair recovering from 149.40 to exceed 150.00, although it remains down 0.2% for the day. The EUR/USD is trading flat at 1.1690, and GBP/USD holds steady at 1.3437.

Despite the positive momentum in US markets, European stocks are still grappling with significant losses. The DAX is down over 1.6%, reflecting investor caution as they play catch-up to Wall Street’s previous declines. Conversely, France’s CAC 40 index has managed to pare some losses, currently down just 0.2%.

Meanwhile, commodities have seen a shift in fortunes. After a volatile session, gold, which spiked to $4,370 during European trading, has seen its gains dissipate as profit-taking sets in, now down 0.8% to $4,292. The risk-on sentiment is clearly outweighing the previous bullish momentum for the precious metal.

In the cryptocurrency market, Bitcoin is under pressure, plummeting to fresh four-month lows below $104,000. The cryptocurrency’s struggle continues as it threatens to break below its 200-day moving average, marking a significant technical challenge for investors as the weekend approaches.

As the trading day unfolds, all eyes will be on the upcoming meeting between Trump and Xi, which could reshape market dynamics significantly. Investors are eagerly awaiting further developments, and with the potential for a thaw in US-China relations, the urgency to engage with risk assets continues to rise.

Stay tuned for more updates as this story develops.