Global markets rebounded as Trump eased tensions over Fed policy and trade with China. Gold hit a record high before retreating, and equities surged amid hopes for renewed negotiations. However, risks remain as trade talks are still uncertain and volatility is expected to continue.

Markets Breathe as Trump Softens Rhetoric: Powell Tensions Ease, Trade Hopes Revived

Global markets, rattled last week by President Donald Trump's remarks suggesting he could remove Fed Chair Jerome Powell and by ongoing tariff tensions, found some relief on Tuesday. Trump stated he had no intention of dismissing Powell and struck a softer tone on China negotiations—offering markets a break from the recent wave of pessimism.

On Monday, Trump warned via social media that failure to cut interest rates could slow growth, referring to Powell as "Mr. Too Late" and a "major loser." He claimed that there is “virtually no inflation,” citing lower energy and food prices, and reiterated his call for immediate rate cuts.

These comments triggered another wave of selling in U.S. assets, with the “sell America” narrative strengthening. Safe-haven demand surged: the yen climbed above 140, and gold hit a record high above $3,500 per ounce.

However, on Tuesday Trump clarified that while he would prefer the Fed to be more proactive in easing policy, he had no intention of firing Powell. This followed comments by Chief Economic Advisor Kevin Hassett on Friday, suggesting the administration was reviewing whether such a dismissal was legally possible.

Markets also welcomed Trump’s more conciliatory stance on China. He said he would be "very nice" in any negotiations and that tariffs could be lowered if a deal were reached.

Investors interpreted this as a softening of his trade posture. The dollar gained 0.26% against major peers, the S&P 500 rose 2.5%, and the Nasdaq added 2.6%, erasing the week’s earlier losses. Asian equities in China and Japan rallied, gold fell over 1%, and the dollar strengthened by more than 1% against both the yen and the Swiss franc. Stronger outflows from safe havens signaled a sense of relief in the markets.

Still, U.S. Treasury Secretary Scott Bessent maintained a hard line, accusing China of suppressing consumer-driven growth and subsidizing production at America's expense. He emphasized that any deal must rebalance trade in a way that boosts U.S. manufacturing.

While no negotiations with China have yet begun, Bessent suggested that a comprehensive agreement could take two to three years. The U.S. is currently imposing a 145% tariff on Chinese imports, while China has retaliated with a 125% levy on U.S. goods. The U.S. has granted exemptions for certain technology and consumer electronics products, but it is expected to announce separate sectoral tariffs for these categories.

Ultimately, these tariff levels are making trade between the two countries nearly impossible, and whether they will be lowered before a full agreement is reached will be a key market catalyst.

Progress in Talks Offers a Glimmer of Optimism, Yet Risks and Uncertainties Persist

Trump’s temporary de-escalation has eased global sentiment. Moreover, reports of progress in talks related to the reciprocal tariff program that was announced in early April and paused for 90 days have further supported market confidence.

White House Press Secretary Karoline Leavitt stated the U.S. had received trade offers from 18 countries and was in discussions with 34. Reports indicate high-level agreements with Japan and India may be close, though finalizing terms could take months or even years.

While this momentum is welcomed, the key question is whether these preliminary framework talks can prevent tariffs from snapping back after the 90-day pause ends. Officials have declined to comment.

Later this week, attention will return to Japan’s ongoing meetings in Washington. As Japanese officials seek a new compromise with the U.S., planned talks with Thailand have reportedly been postponed.

Meanwhile, Japan’s Prime Minister sent a letter to Chinese President Xi Jinping, signaling Tokyo’s attempt to maintain a balanced stance between Washington and Beijing. Recent reports show the Trump administration has asked allied nations to limit trade with China in bilateral negotiations. In response, China has warned countries against making deals that might undermine its interests.

In this context, as the Duhani Capital Research team, we would like to point out that although market hopes for the negotiations have increased, reaching a successful outcome—particularly between the U.S. and China—may prove more challenging than current sentiment suggests.

Therefore, Trump’s shifting rhetoric is likely to continue fueling headline-driven volatility and shaping market sentiment. In this environment, inflows into risk assets may remain limited, as investors could be reluctant to significantly reduce their safe-haven positions while rebalancing their portfolios.

Gold Retreats After Historic High Amid Sentiment Shift

Gold surged past $3,500 per ounce for the first time on Tuesday, setting a new all-time high, before pulling back on profit-taking and improved risk sentiment following Trump’s comments on Powell and China. Despite the retreat, the precious metal remains up more than 25% year-to-date.

The recent pullback in gold appears to be a technical correction, following overbought signals from key indicators. Provided there are no major changes in the macro landscape, the medium-term outlook for gold is likely to remain positive.