Trump–Xi summit brings cautious optimism, but Taiwan warning reignites geopolitical risk

US equity indices finished mixed yesterday: S&P 500 +0.58%, Nasdaq 100 +1.20%, Dow Jones -0.14%. The Trump–Xi summit in Beijing was the focal point. Positive rhetoric and the presence of a business delegation, including Nvidia's Jensen Huang and Tesla's Elon Musk, failed to deliver fresh market-moving catalysts after recent record highs. The most tangible outcome was US authorization to sell H200 chips to ten Chinese firms, including Alibaba and Tencent.

However, Xi's warning on Taiwan — that mismanagement of the situation could lead to conflict — forced investors to reprice geopolitical risk. China's market reacted to it with losses in a classic "buy the rumor, sell the fact" move. The CSI 300 fell by 1.7%, led by tech weakness, while the offshore yuan strengthened for an 11th consecutive day. Follow the link for more details.

S&P 500 at crossroads: inflation shock, summit bets

The US market remains resilient. In the first half of the European session on Thursday, the S&P 500 pushed above a record level near $7,470 despite a shocking PPI print. Investors have been betting on the US–China summit and a rotation into tech, largely discounting worrying fundamental signals, including rising odds of a "hawkish pause" and the appointment of Kevin Warsh.

Producer prices were the strongest since December 2022. The rise was driven by a jump in energy prices after the Strait of Hormuz disruptions, and the gap between PPI and CPI widened to levels not seen since 2010, signaling persistent inflationary pressure. The market did not panic but repriced policy risk: expectations of rate cuts in 2026 are now largely off the table, while the probability of a rate hike by year-end has increased. Follow the link for more details.

S&P 500: tech locomotive lifts index despite inflation and Fed hawkishness

Shocking inflation and rising expectations of a hawkish Fed create an overall bearish backdrop, yet the technology sector — fuelled by hopes of eased China restrictions and strong corporate profits — continues to pull the S&P 500 higher. Technically, the index remains in a broad bull trend. The price is above the key 50/144/200-period moving averages, and primary indicators remain in bullish territory.

A confident break and consolidation above $7,475 would open the path to $7,500 and then $7,600, assuming no negative surprises from the US–China summit, continued earnings resilience, and stabilizing geopolitics. However, on the daily chart, RSI and Stochastic indicators are in overbought territory, and OsMA, while still above zero, has flattened. This raises the odds of short-term consolidation or a correction after the extended advance. Follow the link for more details.