Markets Eye Trump-Xi Summit Amid Record Inflation Data

The U.S. dollar strengthened on Wednesday as another round of hotter-than-expected inflation data reinforced expectations that the Federal Reserve could maintain a restrictive policy stance and potentially raise interest rates later this year. Investors were also closely monitoring President Donald Trump’s visit to China for any diplomatic progress regarding the ongoing Iran conflict.

Market attention centered on the latest Producer Price Index (PPI) report, released one day after strong consumer inflation figures. Data from the U.S. Bureau of Labor Statistics showed headline producer prices rose 1.4% month-over-month in April, marking the largest monthly increase since March 2022. On an annual basis, PPI accelerated to 6.0%, the highest reading since December 2022, significantly above market expectations of 0.5% monthly growth and 4.9% yearly growth.

With inflationary pressures remaining elevated, markets expect the Federal Reserve to keep interest rates unchanged in the near term, while maintaining the possibility of additional tightening later this year.

Attention has now shifted to Trump’s summit with Chinese President Xi Jinping in Beijing, where discussions are expected to cover trade relations, the Iran conflict, Taiwan, and global supply chains.

In Europe, the euro weakened modestly against the dollar after fresh economic data pointed to slowing growth in the Eurozone. Official figures showed Eurozone GDP expanded by 0.1% quarter-over-quarter and 0.8% year-over-year in the first quarter of 2026, both slower than the previous quarter’s pace. Employment growth also cooled during the period.

Gold prices moved higher during early Asian trading on Thursday as investors closely monitored developments surrounding the summit between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing.

The precious metal gained support from heightened geopolitical uncertainty and cautious market sentiment ahead of key discussions between the leaders of the world’s two largest economies. Investors are also awaiting the release of the U.S. April Retail Sales report later in the day for additional direction on the economic outlook.

Markets are also watching reports suggesting the United States and China are exploring a framework that could allow both countries to reduce tariffs on approximately $30 billion worth of goods without compromising national security interests. Any signs of easing trade tensions could influence broader market sentiment in the coming sessions.

Meanwhile, stronger-than-expected U.S. inflation data continued to shape expectations for Federal Reserve policy. Data released by the U.S. Bureau of Labor Statistics showed that the Producer Price Index (PPI) rose 6.0% year-over-year in April, accelerating from 4.3% in March and surpassing market forecasts of 4.9%.

The elevated inflation figures reinforced market expectations that the Federal Reserve will likely maintain higher interest rates for longer in an effort to contain persistent price pressures. Higher interest rates generally weigh on non-yielding assets such as gold, as they increase the opportunity cost of holding the precious metal.

Despite the pressure from rising rate expectations, gold continued to find support from ongoing geopolitical risks and uncertainty surrounding global economic and diplomatic developments.

Oil prices edged higher on Thursday as investors closely monitored the high-stakes meeting between U.S. President Donald Trump and Chinese President Xi Jinping, amid hopes the talks could help ease tensions surrounding the ongoing Iran conflict that has severely disrupted global energy supplies.

Market attention remains firmly focused on discussions between Washington and Beijing, with traders looking for signs of diplomatic progress that could contribute to resolving the conflict involving Iran and reopening critical energy routes in the Middle East.

Oil markets have become increasingly sensitive to developments surrounding the Strait of Hormuz, one of the world’s most important oil transit chokepoints, which has been largely disrupted since the conflict escalated earlier this year.

Despite Thursday’s gains, both major oil benchmarks posted sharp losses in the previous session as investors weighed the potential impact of higher inflation and possible U.S. interest rate hikes.

In a rare development, a Chinese supertanker carrying approximately two million barrels of Iraqi crude successfully passed through the Strait of Hormuz on Wednesday after being stranded in the Gulf for more than two months due to the conflict. It marked only the third oil tanker to transit the strait since hostilities began.

Further supporting oil prices, the International Energy Agency (IEA) warned on Wednesday that global oil supply is now expected to fall short of demand this year, reversing earlier projections for a surplus. The agency cited severe disruptions to Middle Eastern production and rapidly declining inventories as key drivers behind the revised outlook.

U.S. stocks ended mixed on Wednesday, with the US 500 and Nasdaq Composite climbing to fresh record closing highs as strong gains in artificial intelligence-related technology shares helped investors look beyond hotter-than-expected inflation data and rising expectations for prolonged restrictive monetary policy from the Federal Reserve.

Markets recovered from earlier losses as semiconductor and AI-linked stocks rebounded sharply following weakness in the previous session. Six of the so-called “Magnificent Seven” mega-cap technology companies posted gains ranging between 1.4% and 3.9%, providing significant support for broader equity indexes.

Fresh inflation data released Wednesday showed U.S. producer prices rose 1.4% in April, marking the largest monthly increase in four years. The report indicated that rising oil prices — driven largely by disruptions linked to the Strait of Hormuz closure — are beginning to spread inflationary pressures beyond the energy sector into the wider economy.

Markets are also adjusting to a transition in Federal Reserve leadership after the U.S. Senate confirmed Kevin Warsh, President Donald Trump’s nominee to replace Fed Chair Jerome Powell.

Trump arrived in China accompanied by several prominent business leaders, including Nvidia CEO Jensen Huang and Tesla CEO Elon Musk. Discussions are expected to cover trade relations, U.S.-China business access, artificial intelligence, Taiwan, and the ongoing Iran conflict. Investors are watching the summit closely for potential trade agreements or measures aimed at stabilizing relations between the world’s two largest economies

Among individual stocks, Ford Motor surged 13.4% after Morgan Stanley highlighted the company’s energy business and partnership with Chinese battery giant CATL as an undervalued competitive advantage. Meanwhile, cryptocurrency-related stocks came under pressure as weaker digital asset prices weighed on sentiment.