Asian Markets Trade Lower as Investors Track Trump-Xi Summit

GLOBAL MOOD: Cautiously Risk-Off
Drivers: US-China Trade Diplomacy, Inflation Concerns

Asia-Pacific markets traded lower as investors adopted a cautious stance during the second day of high-level talks between US President Donald Trump and Chinese President Xi Jinping. Sentiment turned risk-off after Xi warned that mishandling the Taiwan issue could lead to “clashes and even conflicts,” reviving geopolitical concerns despite ongoing efforts to stabilise trade ties.

South Korea’s Kospi retreated after recently touching record highs, while the Kosdaq fell sharply amid profit-booking in technology and AI-linked stocks. Japan’s Nikkei also declined as investors reassessed elevated valuations and concentration risks in semiconductor shares. Samsung Electronics and SK Hynix, which have driven much of the recent rally, remained under pressure amid labour negotiations and concerns over stretched market positioning.

Markets are balancing hopes that the Trump-Xi summit could ease trade and export restrictions against rising geopolitical and inflationary risks linked to the Iran conflict and the Strait of Hormuz disruptions. Investors are also monitoring the Federal Reserve’s increasingly hawkish tone as policymakers continue to warn about persistent inflation pressures, adding to broader market caution.

The earlier gains in South Korea’s market reflected investor optimism that the Trump-Xi talks could ease tensions around trade and technology exports, particularly for chipmakers and AI-related stocks.

Shares of Samsung Electronics fell 1% after its labor union said the company has proposed resuming wage talks without preconditions. The union said it was willing to return to negotiations after June 7, while its leader added that workers would continue to exercise rights guaranteed under South Korea’s constitution.

Trump arrived in Beijing on Wednesday for the closely watched summit, joined by a delegation of American business leaders, including Tesla CEO Elon Musk and Nvidia chief Jensen Huang. 

TODAY’S WATCHLIST
 - Trump-Xi meeting
 - Fuel price hike

THE BIG STORY
US President Donald Trump and Chinese President Xi Jinping prepared to conclude a closely watched Beijing summit aimed at stabilising trade relations and addressing growing geopolitical tensions. While both sides announced business agreements and reaffirmed efforts to maintain the fragile trade truce established last year, tensions resurfaced after Xi warned that mishandling the Taiwan issue could push bilateral relations into “a very dangerous place.”

Trump sought tangible economic and diplomatic outcomes from the visit as rising inflation linked to the Iran conflict continued to pressure the US economy and weaken domestic political sentiment ahead of midterm elections. Washington was also expected to push Beijing to encourage Iran toward a broader agreement that could help stabilise energy markets and ease disruptions in the Strait of Hormuz.

Meanwhile, US monetary policy developments added another layer of uncertainty. Jeffrey Schmid warned that inflation remained the biggest threat to the US economy despite resilient growth and labour market conditions, reinforcing the Federal Reserve’s increasingly hawkish stance.

Separately, Federal Reserve Governor Stephen Miran announced plans to resign ahead of Kevin Warsh assuming leadership at the Fed, highlighting the broader transition underway within US monetary policymaking. The leadership changes continued to draw attention as markets assessed the future direction of interest rates and central bank independence under the Trump administration.

Data Spotlight
US retail sales rose 0.5% month-on-month in April, matching expectations and indicated that consumer spending remained relatively resilient despite higher energy costs and elevated inflation. Much of the increase was driven by higher gasoline prices linked to the Iran conflict, though underlying demand also remained firm in categories such as electronics, online retail and food services. Core retail sales, which feed directly into GDP calculations, also rose a stronger-than-expected 0.5%, supporting expectations that overall economic activity remained stable.

At the same time, import prices surged 1.9% month-on-month, the largest increase since March 2022, highlighting broadening inflationary pressure from higher global energy costs. Fuel and lubricant prices rose sharply, led by a surge in petroleum imports as oil prices remained elevated due to disruptions in the Strait of Hormuz. Non-fuel import prices also increased, signalling wider cost pressures across capital goods and consumer products.

Meanwhile, weekly jobless claims increased modestly to 211,000 but remained historically low and consistent with a still-resilient labour market.

Takeaway:
Strong consumer spending and rising import costs reinforced the view that the US economy remained resilient, but persistent energy-driven inflation pressures continued to strengthen expectations of a prolonged restrictive Federal Reserve stance.

WHAT HAPPENED OVERNIGHT

US stocks climbed as tech optimism and China talks lifted sentiment

• S&P 500 and Nasdaq closed at fresh record highs, while Dow Jones rose 0.75%.
• Investors focused on developments from the Trump–Xi summit in Beijing.
• Nvidia surged 4.4% after the US approved sales of H200 AI chips to Chinese firms.
• Broader technology sentiment remained strong as AI-linked themes continued to support markets.
• Semiconductor shares were mixed, with Qualcomm, Intel, Sandisk and Micron declining despite broader tech gains.
• Cisco jumped 13.4% after announcing restructuring measures and raising revenue guidance.
• Nebius Group extended gains following a target price upgrade.
• Boeing declined despite reports that China agreed to purchase 200 aircraft.
• AI chipmaker Cerebras surged sharply in its US market debut.

US Treasury yields eased slightly as markets assessed inflation and policy outlook

• The US 10-year Treasury yield edged lower to 4.45% after hitting its highest level since July 2025 in the previous session.
• Investors evaluated the broader political and economic implications of the ongoing Iran conflict.
• Stabilisation in oil prices helped limit further upward pressure on yields.
• Markets closely monitored the Trump–Xi summit for signals on trade and geopolitical cooperation.
• US retail sales data showed resilient consumer spending despite slowing growth momentum.
• Earlier CPI and PPI reports reinforced concerns over persistent energy-driven inflation pressures.
• Investors continued to expect the Federal Reserve to keep rates unchanged through year-end.

US Dollar extended gains as strong data reduced rate cut hopes

• The US dollar index rose 0.37% to 98.83, marking a fourth consecutive daily gain.
• Stronger economic data continued to support expectations of higher-for-longer US interest rates.
• Investors further scaled back expectations for near-term Federal Reserve rate cuts.
• Markets also awaited developments from ongoing US–China discussions in Beijing.
• Euro weakened further against the greenback amid widening policy and growth divergence expectations.

Oil steadied as Hormuz traffic resumed but supply risks persisted

• Brent crude edged up 0.1% to settle at $105.72 per barrel, while WTI gained 0.2% to $101.17.
• Iranian state media reported that around 30 vessels had crossed the Strait of Hormuz.
• Partial resumption of shipping helped limit further gains in oil prices.
• Markets remained cautious after reports of attacks on one vessel and the seizure of another ship.
• Continued security risks in the Gulf kept concerns over energy supply disruptions elevated.
• Oil traded in a volatile range as investors balanced improving shipping activity against persistent geopolitical tensions in West Asia.

Day’s Ledger* 

Economic Data

• India Weekly FX Reserves Data
  
• US NY Empire State may Manufacturing Index
  
• US April Industrial Production Index

Corporate Actions

• Balmer Lawrie & Company to consider bonus share issue
• Earnings: Aarti Drugs, Alembic Pharmaceuticals, Arvind, Bajaj Electricals, Balmer Lawrie & Company,  Balrampur Chini Mills, Cochin Shipyard, Cupid, Deepak Nitrite, GIC Housing Finance, Godawari Power And Ispat, Godfrey Phillips India, Godrej Industries, Hindustan Copper, IRB InvIT Fund, ITC Hotels, Jain Irrigation Systems, Kokuyo Camlin, NHPC, Noida Toll Bridge Company, POWERGRID Infrastructure Investment Trust, SJVN, Tata Steel, Tree House Education & Accessories, Triveni Engineering & Industries, VIP Industries,  Welspun Living, Wheels India, and Zuari Agro Chemicals,     

Tickers to Watch

• HCL TECHNOLOGIES announces strategic collaboration with Red Hat to deliver enterprise-grade AI infrastructure solutions for enterprises accelerating AI adoption.
• SEPC-FURLONG JV receives ₹5.2 billion LoA from Shalimar Corp for EPC work on four-laning and upgradation of the Shahjahanpur–Bisalpur highway section in Uttar Pradesh.
• M&M FINANCIAL board approves fundraising of up to ₹30 billion through issuance of non-convertible debentures.
• KIRLOSKAR OIL ENGINES plans ₹14 billion capex to expand manufacturing capacity at its Maharashtra facility.
• PITTI ENGINEERING board approves ₹2.9 billion capex for setting up a new greenfield casting unit.
• TAMILNAD MERCANTILE BANK gets tax relief after Tamil Nadu authority cuts tax demand to ₹30 million from ₹2.0 billion.
• PRICOL says Vanitha Mohan has resigned as Chairman, with MD Vikram Mohan appointed as successor; board also approves corporate guarantee of up to ₹1.5 billion for subsidiary.

Must Read

• What a Cricket Stadium Taught Me About India’s Gold Obsession
• The War on Billionaires Is Dangerous Nonsense
• SEBI Proposes Allowing Municipal Bodies to Raise Funds Jointly
• Why Resilience Is Becoming the New Currency of Energy 
• The Business Holding Blinkit's Margins Together Is Amazon's Home Turf
  
• India Just Made Gold More Valuable at a Pawnshop Than a Jewellery Store
• America’s Superpower Suicide
  
• Interest Rates Can’t Control Today’s Inflation 

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Gold, the Rupee and India’s External Sector Déjà Vu

India’s macro anxieties are beginning to look uncomfortably familiar. A weakening rupee, rising oil prices, widening external pressures and renewed concern over gold imports are reviving memories of the 2012–14 balance-of-payments stress.

In this piece, Dr Arvind Mayaram, who was the Finance Secretary in 2012-14, revisits the logic behind the controversial 80:20 gold import scheme and explains why gold repeatedly becomes the policy pressure valve during periods of external-sector stress.
 

(*Compiled from various media sources)