U.S. and Chinese officials resumed trade talks for a second day in London on Tuesday, hoping to secure a breakthrough over export controls on rare earths and other issues threatening to widen the rupture between the world's two biggest economies.
The two delegations, led on the U.S. side by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer opposite a Chinese contingent helmed by Vice Premier He Lifeng, are meeting at the ornate Lancaster House in the British capital.
The talks ran for almost seven hours on Monday and are set to resumed on Tuesday, with both sides expected to issue updates. Lutnick said the talks would continue all day.
U.S. President Donald Trump said the talks were difficult but going well: "We're doing well with China. China's not easy."
White House economic adviser Kevin Hassett on Monday said the U.S. was likely to agree to lift export controls on some semiconductors in return for China speeding up the delivery of rare earths.
Wall Street stocks were little changed on Monday, with a marginal outperformance for the tech sector.
Treasuries were in better form, with yields on long-term maturities ebbing in a week of heavy new debt sales. Those start with a $58 billion auction of 3-year notes later on Tuesday, followed by sales of 10- and 30-year tenors on Wednesday and Thursday.
The U.S. May consumer price report tomorrow will barrel into the middle of everything.
On that score, the New York Federal Reserve's monthly household survey for May showed Americans' anxiety about the future path of inflation easing last month.
That tallies with a broader investor take on the tariff crunch. Many seem to feel that the worst fears are being scaled back as bilateral deals get thrashed out and business sentiment appears to calm.
However, the resilience likely hinges on further détente in the trade war. And that's why this week's London talks are so important, especially given that Trump's 90-day pause on wider 'reciprocal' tariffs ends early next month.
On the currency front, sterling weakened as Bank of England easing bets rose following the release of the latest UK labor data. Pay growth in Britain slowed sharply, and unemployment rose to its highest in nearly four years in the three months to April.
Elsewhere, European and Chinese stocks were more downbeat and lower on the day. Japan's Nikkei bucked that trend and pushed higher due to reduced fears about the domestic bond market.
European indexes was weighed down partly by a reversal of recent gains for Swiss banking giant UBS. The stock retreated as much as 7% as Swiss markets reopened after a long weekend and investors reacted to government proposals that would require the bank to hold an additional $26 billion in capital.
Vaccine makers such as AstraZeneca and Sanofi pushed higher, brushing off news that U.S. Health Secretary Robert Kennedy fired all 17 members of a Centers for Disease Control and Prevention panel of vaccine experts.
Now for today's column, which looks at why a turbulent year so far for markets is being perceived more positively as half-time in 2025 approaches.
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