Substantial progress. But who holds the cards?
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What did the US Treasury Secretary say about progress in US‑China trade talks?
Well, US Treasury Secretary Scott Besant has said there's been substantial progress in negotiations with China over the weekend. But obviously there has to be. US stores are warning of supply shortages. Whilst China's exports didn't fall in April, they just moved to other countries, taking their deflationary impacts with them. So who holds all the cards in that negotiation? And is it a sign that the US will make more deals faster this week to bring down the threatened tariffs? It's Monday. It's the 12th of May, 2025. It's the morning call from NAB. Good morning. Well, a bit of a fall in the US dollar at the end of the week, finishing just above 100.3 on the DXY. That's up about 0.3% over the last week. The Aussie was up a quarter percent on Friday, up over 64.1 US cents, but that's down about 0.3% over the week.
Weaker US equities at the end of the week as well. The Nasdaq was flat on Friday. The S&P just in the red. The Dow, though, down about 0.3%. The S&P down about 0.5% over the whole week last week. But European stocks had a good week at the end. The Eurostoxx 50 up 0.4%. The DAX up 0.6% on Friday. That's up 1.8% over the week last week. And the ASX 200 was up 0.5% on Friday, which has helped it to finish the week pretty much where it finished the week before. So basically flat. Relatively small moves in bonds. Ten-year treasuries were flat on Friday.
How are global equity and bond markets reacting to the latest US‑China developments?
But over the week, they've gone from just under 4.35% down to 4.27%. then back up to finish the week almost at 4.39%. So that's up eight basis points on the week, whereas Aussie 10 years went from 4.18% to almost 4.25%, but peaked around 4.29%. In other words, the opposite pattern to what we're seeing in the United States. They fell, we peaked in terms of yields middle of the week. And oil up a lot on Friday, 1.8% for WTI, 1.7% for Brent. Brent went from $61.30 to $63.90 last week, but troughed almost down to $60 early on in the week. So everything is still very up and down. Can we expect more of that? Well, so long as Donald Trump is sitting in the White House, perhaps we can. Sitting with us today, Rodrigo Cotrillo joins us from NAB in Sydney.
So it does look like markets had the wind knocked from their sails a bit at the end of the week. So is some of this post-Fed syndrome, the upshot of all of this is this more hawkish stance taken by Jerome Powell and the chance we're going to get fewer cuts this year? If we look underneath everything else, is that how markets are reacting? Is that what they're really reacting to?
Morning, Phil. I think it's more kind of a holding pattern. I mean, the equity markets didn't really decline. They just... kind of went sideways. And to your point, I think there's a few factors. One, we need to see more details about the potential trade deal between the US and China, which would be significant. This idea that, you know, Trump tweeted, or I don't know, how do you social, you socially tweeted?
He posted, I think is the generic term, isn't
it? Yeah. He said, oh, 80% tariff looks about right.
Are China’s rising exports creating deflationary pressure for the rest of the world?
And the thing is, is that it's great news is coming down from 145 to 80, but 80 is terrible. And 145 is really basically no trade. So it is kind of good news coming from a really bad, bad angle. And I think the market is still trying to assess what that potentially means. And to your point as well, the... The Powell story is a reminder that the Fed is or has a dual mandate. And at the moment, the Fed remains concerned about the two sides of that mandate. And until it has more clarity on which one is the one that is deviating the most, then it will act accordingly. So it's not a given, if you like, that the Fed will be willing to cut even if the economy slows down.
Yeah, well, let's look at that a bit more because a lot of it does rest on this relationship with China, doesn't it? And we saw, you know, the question is, how far is the U.S. going to have to negotiate? Because we know that there are, you know, ships that are arriving almost half empty in the United States or, you know, a big cut anyway in trade from the United States.
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Chapters
8 chapters
1
What did the US Treasury Secretary say about progress in US‑China trade talks?
0:01–1:27
2
How are global equity and bond markets reacting to the latest US‑China developments?
1:27–3:17
3
Are China’s rising exports creating deflationary pressure for the rest of the world?
3:17–5:19
4
Will the Fed’s hawkish stance limit interest‑rate cuts this year?
5:19–8:11
5
Who holds the negotiating advantage in the US‑China tariff talks?
8:11–10:45
6
What could a potential Putin‑Zelensky meeting mean for global markets?
10:45–12:48
7
Which economic data releases this week will shape the Australian and US outlooks?
12:48–15:00
8
How might Walmart and Target earnings reflect the impact of new tariffs?
15:00–16:11