US markets were relatively subdued on Monday as investors awaited the outcome of fresh trade talks between the world’s two largest economies.  

The S&P 500 and Nasdaq edged up 0.09% and 0.31% respectively, whilst the Dow Jones closed flat. The US dollar index, which measures the greenback against a basket of foreign currencies, inched up 0.19% and continued to rise on Tuesday morning.
 

US-China Trade Talks

On Monday, the US and China began a new round of trade talks in London, as the world’s two largest economies attempt to ease ongoing trade tensions.

After ending for the day on Monday evening, trade talks are expected to continue on Tuesday, with President Trump stating he was “only getting good reports” from his representatives in London.

Following a tit-for-tat escalation of tariffs between the two nations, Washington and Beijing agreed a truce last month in Geneva, agreeing to roll back the majority of their tariffs for 90 days.

However, since then, both sides have accused the other of not holding up their end of the deal.

The US said that China had not eased restrictions on exports of rare earth metals and magnets, as had been agreed. Soon after, China stated that since the Geneva talks, the US had introduced a number of measures against China, including issuing export control guidelines on AI chips.
 

Chinese Economic Data

The latest US-China trade talks started following the release of various economic data from China on Monday morning. 

China’s export growth slowed to 4.8% in May, missing analyst expectations. The data showed that Chinese exports to the US plummeted 34.5% year on year, highlighting the impact of trade tensions between the two countries. 

Exports have been an important driver of China’s economic growth in recent times, amidst an ongoing downturn in the property market and sluggish domestic demand. 

Evidence of this weak domestic demand was on show in China’s latest inflation data, also released on Monday.  

The Consumer Price Index (CPI) was reported in negative territory for the fourth consecutive month, as China continues to battle deflationary pressure. CPI fell by 0.1% year on year in May, although this was less than had been anticipated by analysts.  

Meanwhile, the Producer Price Index (PPI) slumped by more than expected, falling 3.3% year on year, its sharpest drop in almost two years. 
 

ECB Cuts Rates, Again

Last week, on Thursday, the European Central Bank (ECB) cut its key interest rate for the eighth time since last June.

As had been widely expected, the ECB cut its deposit rate by 25 basis points to 2% and signalled that its rate-cutting cycle may be coming to an end.

At the same time, the central bank lowered its headline inflation outlook for the year to its medium-term target of 2%, down from its projection of 2.3% in March. Its expectations for GDP growth remained unchanged at 0.9% in 2025.
 

What to Look Out for This Week

The remainder of this week will see a number of other important economic events, including the following:

• US inflation data on Wednesday
• UK monthly GDP figures on Thursday
• US 30-Year Treasury auction on Thursday

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