Stocks rise on easing US-China trade tensions, cool US inflation
Chinese and US flags wave outside a technology company in Beijing, China, on Apr 17, 2025. (File photo: AFP/Pedro Pardo)
LONDON: Stock markets edged higher on Wednesday (Jun 11) as investors welcomed cooler United States inflation data and a China-United States agreement aimed at lowering trade tensions.
After two days of talks between US and Chinese negotiators in London, US President Donald Trump said: "Our deal with China is done".
The US and China slashed tit-for-tat tariffs after negotiations in Geneva last month, but tensions flared up again after Trump later accused Beijing of violating the pact reached in Switzerland.
The positive London talks provided some relief to markets.
"Constructive talks between the US and China have put markets on a firmer footing, as investors hope that the worst of the tariff turbulence may have passed," said Richard Hunter, head of markets at Interactive Investor.
Wall Street's three main indices rose as trading got underway in New York and Europe's main indices were higher in afternoon deals.
Asian stock markets also got a lift on the China-US progress, with Hong Kong among the best performers.
As well as tariffs, a key issue in the discussions was China's export of rare earths used in smartphones and electric vehicles, while Beijing was keen to see an easing of restrictions on its access to tech goods.
Trump said on his Truth Social platform that China would supply rare earth minerals and magnets - vital elements for US industries.
The US, he added, would allow Chinese students to remain in US universities.
Washington has infuriated Beijing by vowing to revoke the visas of Chinese students, a major source of revenue for US universities.
China said the trade talks made new progress, and Vice Premier He Lifeng stressed the need for Beijing and Washington to strengthen cooperation.
The talks came as the World Bank downgraded its 2025 forecast for global economic growth to 2.3 per cent, from the 2.7 per cent predicted in January, citing trade tensions and policy uncertainty.
It also said the US economy would expand 1.4 per cent this year, half of its 2024 growth.
Meanwhile, data showed little impact of Trump's tariffs on US consumer prices in May.
Between April and May, the consumer price index (CPI) rose 0.1 per cent. Analysts had expected it to continue at the 0.2 rate it rose in April.
It also rose less than expected in the so-called core reading that excludes volatile food and energy prices.
"The key takeaway from the report is that both headline and core CPI were lower than expected on a month-over-month basis," said Briefing.com analyst Patrick O'Hare.
"While these readings may not give a big boost to near-term rate cut expectations, they should also not cause the market to think that the next cut will be delayed," he added.
Investors have worried that a tariff-driven surge in inflation could hinder the Federal Reserve from lowering interest rates to counter the slowdown in growth.
Investors now see a 57 per cent chance the Fed, which has not reduced rates since December, will cut rates in September.
