The latest round of the ever-unfolding US-China trade deal is starting to crack, raising investors’ fears about where it’s headed. Not long ago, China declared that henceforth all soybeans purchased would be at the “market price.” This ruling threatens to make negotiations between the two countries even more difficult. This shift adds to the already tense atmosphere surrounding trade relations, as both sides navigate a complex web of tariffs and trade policies.
On the ground, the markets have been responding to all of these unknowns with fervor. The Hang Seng Index was down 1.4% and the Shanghai Composite Index was down 0.8%. By comparison, Japan’s Nikkei 225 index had a good day, up 2%, clearing the 52,000 level. Over the past month, the Nikkei has jumped more than 16%. This spike capitalizes on an impressive rebound in Japanese equities, while the rest of the global market is more tumultuous.
The economic context isn’t getting any easier, especially if you happen to work in or near the energy sector. Here’s why President Trump’s “drill, baby, drill” policy is on the ropes. With crude oil prices staying around $60 per barrel, people have started to worry about what this might mean for corporate earnings. Major oil companies—including ExxonMobil and Chevron—are set to report their third-quarter earnings any day now. Analysts, too, are on the lookout for what negative effects swinging oil prices might wash over their results.
Apart from these things, China’s new manufacturing PMI fell to 49.0, its joint lowest point since the middle of 2023. This drop is a sure sign of a manufacturing sector contraction. Such a move would be a tremendous blow to global supply chains and impede future growth. Thus, as European markets opened up to early trading, they had a hard time finding their footing. The FTSE 100 was the biggest loser of all the major indices.
At the same time, inflationary pressures are building in Japan, as the Tokyo inflation rate climbed from 2.5% to 2.8%. This unprecedented increase makes policymaking much more complicated. They will need to closely judge what’s going on with the economy and what to do about increasing prices.
Yet with these countervailing signals, Amazon just announced a 12% increase in profit. This provides a rare glimpse of optimism in a generally stormy market environment. The ubiquitous tech giant is doing great. This success will be a welcome relief, going a long way to balance out some other alarming indications from across the federal landscape.