Trump-Xi Meeting's Impact on Markets and the Fed's Interest Rate Decision

Effects of Trump and Xi's Meeting on Global Markets

Global markets experienced volatility due to the U.S. Federal Reserve (Fed) decision to cut interest rates by 25 basis points and Fed Chairman Jerome Powell's warnings that a December rate cut should not be taken for granted. The S&P 500 Index remained flat in New York, while the Nasdaq 100 Index gained 0.4%.

Treasury Bonds and Dollar Index

The yield on two-year U.S. Treasury bonds closed the day up 11 basis points at 3.5980%. The yield on 10-year bonds also rose by 10 basis points. The Bloomberg Dollar Index traded at 1.214, up 0.33%. Investors focused more on the Trump-Xi meeting than on the Fed meeting, leading to a slight decline in U.S. futures indices, while European futures remained flat. Asian markets presented a mixed outlook.

Japan and Gold Market

The Bank of Japan's decision to keep the policy interest rate unchanged wiped out the gains of the yen, and the Nikkei index fell by 0.33%. Gold remained flat after a four-day decline, with the dollar index giving back some of its previous gains. U.S. Treasury bonds partially recovered from yesterday's losses.

New Opportunities for Investors

Charu Chanana, chief investment strategist at Saxo Markets in Singapore, stated, “Investors are overlooking the cautious Fed and pricing in the likelihood of a thaw in relations between Trump and Xi. With the momentum of artificial intelligence, this situation could initiate a phase of rising stock prices.”

Fed's December Warnings

After the two-day Federal Open Market Committee (FOMC) meeting, the Fed updated the policy interest rate by cutting it 25 basis points to a range of 3.75% to 4%. This decision was made by a vote of 10 to 2. Following the meeting, Powell warned investors that a rate cut in December should not be seen as a sure thing.

Powell stated, “The further reduction of the policy interest rate at the December meeting is not a certainty, rather it is very much up in the air.” For investors, a new opportunity has arisen to assess whether there are downside risks in the labor market.