US-China Trade Talks and Their Impact on the US Stock Market and Economic Outlook

This morning during my commute, I saw the news that the US and China are continuing their trade negotiations in London.

As a result, US stock index futures are showing cautious movements with slight declines.

Dow Jones futures fell by 0.2%, and S&P 500 and Nasdaq 100 futures each dropped by 0.1%.

In the previous trading session, the S&P 500 index had a slight rise, likely due to modest gains in major IT companies like Amazon and Alphabet.

The trade talks have been ongoing for two days, with the main issues being China's rare earth export restrictions and the US semiconductor export limits.

Rare earth elements are essential minerals for advanced products like smartphones and electric vehicle batteries, and continued export restrictions could seriously affect the global supply chain.

On the other hand, the US is reportedly considering easing semiconductor and technology export restrictions to China, signaling progress in the negotiations.

However, despite President Trump's optimistic remarks about smooth negotiations, China appears unsatisfied, and tensions remain high.

The most important economic event this week is tomorrow's US Consumer Price Index (CPI) release, an indicator showing how much inflation has increased.

Inflation has been elevated partly due to tariffs imposed by President Trump, which have raised import prices.

Depending on the CPI results, the Federal Reserve’s interest rate policy adjustments are eagerly anticipated.

Citibank strategists predict rates will be held steady through June and July, with rate cuts starting in September.

The benchmark interest rate they refer to is currently between 4.25% and 4.5%, which essentially is the interest rate banks charge each other for loans.

When interest rates rise, borrowing becomes harder, leading to reduced consumption and investment; the opposite happens when rates fall.

Apple announced AI-related updates at today's developer conference, but the market did not react strongly.

Among the AI features presented was real-time translation during phone calls, but investors seemed to expect more groundbreaking innovations.

Also, companies like JM Smucker and GameStop are scheduled to release their quarterly earnings today.

Crude oil prices rose slightly on hopes that progress in trade talks will increase fuel demand.

Brent crude is priced at $67.19 per barrel, and West Texas Intermediate crude is at $65.43 per barrel.

In conclusion, US-China trade talks remain highly uncertain, but the market is closely watching for potential progress.

Inflation and interest rate trends are expected to significantly influence the stock market direction, and particularly, the movements of tech stocks need close attention.