The Morning Edge: US-China Reach Trade Truce Framework To Ease Export Restrictions

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Global Sentiment: Risk-on
Factors: US-China Trade Truce

TODAY’S WATCHLIST

• US May CPI data
• ECB President Lagarde speaks

THE BIG STORY
Two major economic developments unfolded on Tuesday that underscore both the fragility and urgency of the global recovery. In London, US and Chinese officials reached a tentative framework to revive their trade truce and resolve Beijing’s restrictions on rare earth mineral exports—an issue that had threatened to escalate into a broader supply chain crisis. US Commerce Secretary Howard Lutnick described the agreement as putting "meat on the bones" of the Geneva consensus, with both sides expected to seek final sign-off from Presidents Trump and Xi in the coming days.

But even as negotiators moved closer to easing trade tensions, the World Bank delivered a sobering assessment: global growth is set to slow more sharply than previously feared. Citing persistent tariff hikes and rising policy uncertainty, much of it rooted in Trump-era trade disruptions. The Bank downgraded its 2025 global GDP forecast to 2.3%, the lowest non-recession rate since the 2008 financial crisis. With nearly 70% of the world’s economies facing downward revisions, the message is clear: trade diplomacy may be progressing, but the damage is already seeping deep into the global economic fabric. 

DATA
The US NFIB Small Business Optimism Index rose 3 points to 98.8 in May, marking its first increase since December. The gain in sentiment likely reflects easing trade tensions between the US and China, though concerns remain over the future of President Donald Trump’s tax-cut agenda. The report also pointed to a cooling labour market, with fewer businesses citing labour quality as their top challenge. The share of firms raising compensation fell to its lowest level since early 2021, suggesting reduced wage pressures. Overall, while confidence improved, uncertainty about the broader policy environment continues to weigh on small business outlooks. 

WHAT HAPPENED OVERNIGHT
US stocks closed higher on Tuesday, supported by a strong rally in Tesla and optimism surrounding US-China trade negotiations. Tesla surged 5.6%, buoying sentiment as hopes mounted for a breakthrough in trade talks aimed at easing tariff tensions. Alphabet advanced 1.4% after reports that OpenAI is set to expand its computing capacity using Google Cloud. Meanwhile, Microsoft edged 0.4% lower, and broader tech stocks were mixed, reflecting ongoing sensitivity to geopolitical and supply chain dynamics.

US Treasury 10-year yield held steady at 4.47% on Tuesday, extending Monday’s retreat as investors assessed the first of this week’s key Treasury auctions. The $58 billion sale of 3-year notes cleared at a high yield of 3.972%, just above the when-issued level, implying a modest tail and signalling steady, if subdued, demand. The bid-to-cover ratio of 2.52 was below recent averages, while indirect bids, at around 67%, remained firm. Although solid demand has capped yields, ongoing concerns over inflation, trade tensions, and elevated issuance continue to reinforce a higher-for-longer rate outlook.

The US dollar gained on Tuesday, supported by upbeat remarks from US officials on the ongoing trade negotiations between Washington and Beijing, though a deal remained elusive as talks entered a second day. The dollar index, which measures the greenback against six major currencies, edged up to 99.087. Despite Tuesday’s gains, it remains down more than 8% this year as concerns over tariffs and trade tensions have prompted investors to reduce exposure to US assets and seek alternatives.

Brent crude oil prices hovered near a seven-week high on Tuesday as investors looked for signals from ongoing US-China trade talks that could influence global demand. A breakthrough deal between the world's two largest economies is expected to support global growth and, in turn, lift oil consumption. Brent crude futures eased by 17 cents, or 0.3%, to settle at $66.87 per barrel, while US West Texas Intermediate crude slipped 31 cents, or 0.5%, to close at $64.98. 

Day’s Ledger

Economic Data

• US May CPI data
• US weekly crude oil inventories data

Corporate Actions

• Hindustan Zinc  to consider dividend
• Muthoot Capital to consider issuance of NCDs
• City Union Bank to consider fund raising
• Atal Realtech to consider fund raising

Policy Events

• German Buba Vice President Buch speaks 
• ECB President Lagarde speaks
• ECB's Lane speaks

TICKERS

• APOLLO HOSPITALS acquired 90,000 shares in APOLLO HEALTHTECH for ₹900,000, making it a wholly owned unit. HEALTHTECH, launched May 15, is yet to start operations.
• BANK OF BARODA cut marginal cost of lending rates by 5 basis points across most tenures. Revised rates effective Thursday. The move follows RBI’s repo rate cut to 5.50%.
• CASTROL INDIA named Vishal Thakkar interim CFO effective Thursday. VP and marketing head Rohit Talwar to exit on Aug. 8.
• CREDITACCESS GRAMEEN raised $100 million syndicated social loan from Asia Pacific banks. Proceeds to support inclusive projects. Standard Chartered led the deal.
• DEVYANI INTERNATIONAL issued shares worth ₹4.2 billion to acquire 80.7% of SKY GATE HOSPITALITY. Additional ₹3 million in cash for tax. Subsidiaries now fully owned by DEVYANI.
• HAVELLS INDIA received CCI approval to acquire up to 9.2% stake in GOLDI SOLAR. Also cleared other Goldi group deals. Planned ₹6 billion investment based on fundraise of ₹10.5–13 billion.
• HCL TECHNOLOGIES will deliver GenAI-powered app and infrastructure services to US-based insurer The Standard. Services include AI Force platform and cloud solutions. Deal value not disclosed.
• JBM AUTO clarified it has no official plan to launch electric buses overseas. Media comments from its vice-chairman reflect a broad vision, not a confirmed timeline for global product launches.
• JINDAL SAW’s stake in JINDAL ITF dropped to 56.4% from 76.1% after subsidiary allotted shares to new investors. Details of new shareholders not disclosed.
• KAYNES TECHNOLOGY’s  unit KAYNES SEMICON to acquire power module production assets from FUJITSU for ₹940 million. Deal aligns with expansion in electronics manufacturing.
• Moodys's affirmed PUNJAB NATIONAL BANK’s issuer rating at Baa3 with stable outlook. Asset quality remains steady; no upgrade expected unless sovereign rating improves or risks from MSME and agri exposure ease.
• POWER GRID CORP approved ₹1.32 billion unified network management project. System to integrate all regional platforms, expected to complete within 24 months.
• RELIANCE EMINENT TRADING informed that Delhi High Court dismissed ₹4.6 billion summary suit against DDA over Jasola plot. Case requires full trial due to lack of uncontested evidence.
• UNITED SPIRITS denied media reports about plans to sell stake in Royal Challengers Bengaluru. Clarified no discussions underway and RCB remains a wholly owned unit.
• VALOR ESTATE’s subsidiary Horizontal Ventures to acquire remaining 23.4% in Sahyadri Agro for ₹111.4 million via share purchase. Sahyadri becomes a wholly owned unit.
• VODAFONE IDEA launched 5G services in Bengaluru with unlimited data on plans from ₹299. Expanded network with Samsung-backed infrastructure and AI-based optimisation.
• WIPRO extended digital services deal with Germany’s METRO AG by two years. Will provide cloud, AI-enabled support, and analytics. Original partnership began in December 2020.

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