Two Geopolitical Breakthroughs Send Stocks and Dollar Sharply Higher – Currency Thoughts
Two Geopolitical Breakthroughs Send Stocks and Dollar Sharply Higher
May 12, 2025
(192) The Pakistani and Indian governments accepted a brokered ceasefire of their rapidly escalating military conflict in Kashmir.
Then came news of greater-than-anticipated 115 percentage point scale-back in U.S. and Chinese tariffs against one another. It’s a temporary 90-day agreement that reduces U.S. tariffs on imported Chinese goods to 30% from 145%, and reciprocal Chinese duties against U.S. goods to 10% from 125%.
In response, the DXY weighted dollar index leaped 1.4% to a 5-week high, with individual 1.9% gains against the Japanese yen and Swiss franc and advances of 1.7% vis-a-vis the Korean won, 1.4% relative to the euro and 1.1% against sterling.
U.S. stock futures have shot up 5% in the case of the Russell 2000, 3.9% in the Nasdaq and 3% in the S&P 500. In pre-open trading the DOW is more than 1000 points higher.
Stock market in Asia closed up 3.7% in India, 3.0% in Hong Kong, 1.2% in South Korea, and 1.0% in Taiwan. In European trading, stock market gains so are exceed 1.0% in France and Italy but are less than 0.5% in the U.K., Germany, and Spain.
Ten-year sovereign debt yields so far this Monday show broad gains of eight basis points in Japan, seven basis points in the U.K. and Germany, six basis points in the United States and five basis points in France, Spain and Italy.
Bitcoin’s recent revival extended another 0.3% to a 2025 high and not far below its al-ltime high, while the gold safe-haven rally deflated by 3.9%. The price of West Texas Intermediate oil jumped nearly 4%.
In a week that will feature GDP reports for the euro area, Great Britain and Japan and U.S. April CPI, PPI, and import price readings, Monday’s menu is on the light side and mostly limited to Chinese and Japanese releases.
China experienced sub-zero percent consumer price inflation for a third straight month as April matched the March reading of -0.1%. Core CPI stayed at a mere 0.5%, and Chinese producer prices fell 0.4% on month and by 2.7% on year, extending a multi-year experience of sub-zero readings that started in October 2022. Separately, a 9.8% year-on-year rise in Chinese car sales occurred in April, up from March’s 8.2% advance.
In Japan,
- The current account surplus widened slightly in March to JPY 3.678 trillion in March from JPY 3.448 trillion a year earlier but narrowed on a seasonally adjusted basis to JPY 2.723 billion from JPY 2.906 billion in February. TheJPY 30.38 trellion current account in fiscal 2024, which ended in March, was 16% larger than in the prior fiscal year.
- The economy watchers index, a measure of service sector worker confidence fell to a 38-month low in April from 49.0 last December and a prior high of 55.0 in May 2023.
- On-year growth in Japanese bank lending of only 2.4% in April was the smallest 12-month increase in 31 months.
Danish consumer price inflation of 1.5% in April matched the prior month’s pace. Danish CPI inflation previously decelerated from 10.1% in October 2022 to 0.1% a year leater.
Moldovan CPI inflation, which had soared as high as 34.6% in October 2022, dropped a percentage point in April to a 4-month low of 7.8%.
Serbian CPI inflation of 4.0% was at a 10-month low and also well below its early 2023 high of 16.2%. In contrast, Latvian consumer price inflation rose in April to a 20-month high of 3.9% from 3.3% in March and as low as 0.1% in March 2024.
Sub-zero Lithuanian producer price inflation of -3.5% in April was its most deflationary so far in 2025, and Dutch PPI inflation of 0.5% in March represented a 4-month low.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese CPI and PPI, India and Pakistan agree to ceasefire, Japanese current account, Mutual 90-day de-escation of U.S.-Chinese trade war
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