Global markets turned cautious on Thursday as investors dissected President Donald Trump’s remarks following his long awaited meeting with Chinese leader Xi Jinping. Trump described the discussion as “amazing” and announced an immediate reduction of fentanyl related tariffs from 20% to 10%, signaling a modest step toward easing trade friction. Despite the initial optimism, the lack of tangible progress left traders unimpressed. The market interpreted the outcome as a tactical ceasefire rather than a breakthrough, suggesting volatility could persist as deeper issues remain unresolved.
Equities Lose Momentum as Optimism Fades
While equities had rallied in anticipation of the Trump–Xi summit, enthusiasm faded quickly as investors realized the agreement lacked clear commitments or a timeline for broader trade reforms. Market participants largely view the outcome as a short term risk relief, not a shift in the underlying dynamics of U.S.–China relations. With tensions over technology, export controls, and tariffs still unresolved, traders remain wary of another flare-up heading into year-end.
Federal Reserve Delivers Rate Cut, Signals a Pause Ahead
Meanwhile, attention shifted to the Federal Reserve, which announced its second consecutive interest rate cut on Wednesday to cushion a cooling U.S. labor market. Policymakers also confirmed plans to halt the reduction of the central bank’s balance sheet starting December 1 — a move seen as an effort to restore liquidity to the financial system. However, the Fed tempered expectations for further easing, warning that a December rate cut “is not a given.”
Policy Divide Emerges Within the Fed
The decision highlighted widening divisions among Fed officials. Governor Stephen Miran once again dissented in favor of a deeper cut, arguing for a more aggressive approach to support growth, while Kansas City Fed President Jeff Schmid opposed any reduction, citing inflation risks and financial stability concerns. The mixed signals underscore the Fed’s delicate balancing act as it navigates between easing financial conditions and maintaining credibility on inflation control.
Market Outlook: Volatility Set to Persist
The combination of an underwhelming U.S.–China truce and a cautious Fed leaves global markets in a holding pattern. Traders are now recalibrating their expectations for both monetary policy and trade developments, with risk appetite likely to remain fragile. For investors, this is a pivotal moment understanding the nuance between policy signaling and actual implementation will be key before making any new market commitments.
Disclaimer: This report is for informational purposes only. It does not constitute investment advice or represent the official views of any central bank or regulatory body.