10 June 2025
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US-China trade talks underway in London

Daily Outlook - 10 June 2025

By Daniel Richards

China and the US resumed trade talks yesterday, with negotiations taking place in London and focusing on rate-earth minerals from China’s side and access to tech exports from the US. The talks followed a cooling in the antagonistic rhetoric between the two sides over the weekend, when Donald Trump spoke to Xi Jinping. China has indicated that it has approved some applications for rare-earth exports while the US would remove some restrictions on tech exports in return. Meanwhile, Chinese CPI inflation was at -0.1% y/y in May, unchanged from the previous month. This marked the fourth month running of a deflationary price print for consumer prices, while producer prices saw the 32nd consecutive month of negative growth at -3.3% y/y, from -2.7% in April.

Saudi Arabia has released the second print of its Q1 GDP growth figures, with a substantial upwards revision to 3.4% y/y, compared with 2.7% on the initial print published at the start of May. On a quarterly basis, growth was 1.1% rather than the 1.4% contraction initially estimated. Government activities was left unchanged with growth of 3.2% y/y, thereby contributing 0.5 percentage points (ppts) to the headline figure, but there were sizeable revisions elsewhere. Oil GDP saw a much smaller contraction of 0.5%, compared with the initial estimate of a 1.4% contraction, while non-oil growth was revised up to 4.9%, compared with 4.2% previously, and contributing the bulk of the headline expansion (2.8ppts).

Today’s Economic Data and Events

10:00 UK jobless claims change, May

Fixed Income

  • It was a far more positive day for USTs yesterday than on Friday when both the 2-yr and the 10-yr yield closed up 12bps on the worst day of the year for treasuries. Yesterday yields on the 2yr closed down 3bps at 4.0034% while the 10yr was also down 3bps at 4.4738%. All eyes will be on the 30-yr auction this week, with the current yield at 4.9398%, also 3bps lower on the day.
  • The Central Bank of the UAE held its regular auction of mbills at the start of the week, raising a total of AED 9.86bn. In the 28-day tranche, the CBUAE raised AED 5bn with orders of more than AED 7bn. The yield for the short-dated bills was 4.55%. For 42-day mbills, the bank issued AED 2bn with a bid-to-cover ratio of 1.13x and a yield of 4.58%; for 70-day mbills the bank raised AED 1.86bn with a bid-to-cover ratio of 1x and a yield of 4.63% while the longest dated 283-day mbills raised AED 1bn with a bid-to-cover ratio of 4.8x and a yield of 4.63%.

Currencies

  • The dollar index pared Friday’s gains on Monday, dropping 0.3% on the day. The AUD and the NZD were notable gainers, benefitting from positivity around US-China trade talks in London, and closing up 0.4% and 0.6% respectively. This put them at 0.6516 for the AUD and 0.6047 for the NZD at the close.
  • Gains elsewhere were more muted, with GBP, EUR, and JPY all closing up 0.2% against the dollar. This saw them close at 1.3551, 1.1422, and 144.57 respectively.

Equities

  • There were some modest gains in US equities on Monday as markets watched to see the outcome of the discussions in London. The Dow Jones closed flat but the S&P 500 edged up 0.1% and the NASDAQ added 0.3% despite a disappointing day for Apple.
  • Locally, the DFM performed strongly upon the re-open from the long weekend, closing up 1.0% on the day. The ADX gained 0.1% while Saudi Arabia’s Tadawul closed 1.6% higher.

Commodities

  • Positive noises around the US-China trade talks in London saw oil prices close up for a third straight session yesterday. Brent futures added 0.6% to close at USD 67.0/b, while WTI was up 1.1% at USD 65.3/b.

Written By

Daniel Richards Senior Economist


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