A woman cycles past the Beijing Stock Exchange building on the Financial Street in Beijing, China, February 8, 2024. REUTERS
SINGAPORE, May 7 (Reuters) – U.S. stock futures bounced and the dollar rose on Wednesday on news of an upcoming meeting between top U.S. and Chinese trade officials, though Asian markets were cautious about prospects for any tariff deal, ahead of a Federal Reserve rates decision.
“My sense is this will be about de-escalation,” U.S. Treasury Secretary Scott Bessent said of the meeting, set for the weekend in Switzerland, while China sounded more guarded and cited a proverb about actions speaking louder than words.
S&P 500 futures rose about 0.6% as did Hong Kong’s Hang Seng, both giving up larger early rises through the Asia session.
China blue chips rose 0.4% and Japan’s Nikkei was broadly flat. A sizzling rally in Asian currencies cooled with Korea’s won down sharply and a rate cut in China weighing on the yuan.
“The easing of trade strains supports the dollar,” said analysts at the Commonwealth Bank of Australia in a note.
“Another possible source of support for the dollar is today’s (Fed) meeting … if Chair Powell strikes a hawkish tone to assert his independence from political influence.”
The U.S. Federal Reserve meets to set interest rates later in the day, with expectations for cuts being dialled down after relatively solid U.S. labour data last week.
Markets imply nearly no chance of a move on Wednesday and only a 33% chance of a cut in June, down from 64% a month ago.
The dollar took a knock last month when U.S. President Donald Trump threatened to fire Fed Chair Jerome Powell, though he has since backed down.
India’s rupee fell a little and stocks in Pakistan slumped after the heaviest fighting in decades erupted between the two nuclear-armed neighbours.
China also announced a rate cut, more cash for the banking system and expanded a channel for insurance money to flow into stocks, though reaction was muted as investors are waiting for fiscal stimulus and all eyes are on the U.S-China talks.
For weeks, stocks have tiptoed higher, recouping losses since the “Liberation Day” tariff announcements in anticipation of some kind of rapprochement or breakthrough to cut the levies.
German carmaker BMW on Wednesday confirmed its 2025 outlook, saying it expected some of the tariffs that have been imposed on vehicle imports globally to be temporary and decline from July.
Gold sits more than $100 an ounce below last month’s record high. Brent crude futures , down about 16% since the tariff announcements, steadied at $62.74 a barrel.
The euro had support above $1.13 with German conservative leader Friedrich Merz elected chancellor in a second round of voting after his alliance with the Social Democrats was dealt a surprise defeat in the first attempt.
Reporting by Tom Westbrook; Editing by Shri Navaratnam and Jacqueline Wong
