Optimism Builds Ahead of Fed Decision and Trump-Xi Summit

Index Update:  U.S. markets extended gains after the Dow, S&P 500, and Nasdaq rose between 1.9% and 2.3% last week to record highs, supported by expectations of a quarter-point Fed rate cut following softer inflation data. Investors also awaited earnings from major tech firms including Apple, Amazon, Alphabet, Meta, and Microsoft. On the trade front, optimism grew ahead of the Trump-Xi meeting in South Korea, seen as a potential breakthrough after productive weekend negotiations resolved several key disputes, raising hopes of easing U.S.-China trade tensions.

Market Movers:  On Friday, the top gainers were Inhibrx Biosciences, Inc. (+102.01%), followed by MaxsMaking Inc. (+76.92%). On the contrary Picard Medical, Inc. (-59.77%), and American Rebel Holdings, Inc (-41.64%) declined the most the same day.

Commodities Update:  Crude oil and gold prices declined on Monday as optimism over progress in U.S.-China trade talks reduced demand for safe-haven assets and outweighed supply concerns. WTI crude fell toward USD 61 per barrel and Brent dropped to USD 65.4 per barrel, despite support from new U.S. sanctions on Russian oil giants Rosneft and Lukoil. The IEA warned of a continued supply surplus, with production from the “American quintet” — the U.S., Canada, Brazil, Guyana, and Argentina — exceeding demand growth. Meanwhile, gold prices slid over 1% to around USD 4,040 per ounce, extending Friday’s losses as trade progress dampened safe-haven appeal. Investors now await key central bank meetings, with the Federal Reserve expected to cut rates by 25 basis points, while the ECB and BOJ are likely to maintain current policies.

Macro Updates:

U.S. and China Reach Breakthrough Ahead of Trump-Xi Summit

Top U.S. and Chinese negotiators reached a consensus on key trade and geopolitical issues after two days of talks in Malaysia, setting the stage for Presidents Donald Trump and Xi Jinping to finalize a trade deal later this week. Agreements were made on export controls, fentanyl, and shipping levies, while the U.S. confirmed that Trump’s 100% tariff threat is off the table. China committed to major soybean purchases and a one-year delay on rare-earth export controls. The upcoming summit is expected to extend the tariff truce, address TikTok-related disputes, and ensure rare-earth supply stability, with discussions also touching on a global peace initiative and potential cooperation to end the Russia-Ukraine conflict.

U.S. and Vietnam Set to Finalize Balanced Trade Agreement

The U.S. and Vietnam are preparing to finalize a trade deal in the coming weeks that maintains 20% tariffs on most Vietnamese goods while lifting duties on selected products. In exchange, Vietnam will grant preferential access to U.S. goods and commit to a framework for reciprocal and fair trade. The agreement includes provisions for recognizing U.S. vehicle safety and emissions standards, easing import rules for medical devices, and streamlining approvals for pharmaceuticals. Vietnam also pledged to fully comply with international intellectual property treaties and work with the U.S. to address non-tariff barriers.

Bonds Commentary:  The U.S. 10-year Treasury yield rose to 4.03%, its highest in over a week, as investors awaited the Trump-Xi meeting and the upcoming Federal Reserve policy decision. Optimism grew for a potential trade breakthrough after negotiators resolved key issues such as export controls and shipping levies. Meanwhile, markets have largely priced in a 25-basis-point Fed rate cut following softer inflation data, though the ongoing government shutdown continued to temper investor sentiment.

Futures Update:  U.S. stock futures advanced on Monday, building on last week’s rally amid optimism over an expected Federal Reserve rate cut and improving U.S.-China trade relations. Dow Jones Futures rose 0.6%, S&P 500 Futures gained 0.9%, and Nasdaq 100 Futures surged 1.4%. All three major indices closed at record highs on Friday following softer-than-expected inflation data, strengthening expectations of an imminent Fed rate reduction.

Stocks experienced a significant rally on Friday, building on the gains seen in the previous session. The S&P 500 increased by 53.25 points, or 0.58%, closing at 6,791.68. From a technical standpoint, the index found support at important levels and steadily moved higher, indicating the possibility of sustained upward momentum in the near future. Moreover, the 14-day Relative Strength Index (RSI) is climbing above the midpoint, reinforcing a positive outlook. Key support levels are approximately at 6,690, with resistance expected around 6,855.