“The report basically indicates that the Fed needs to be very cautious and that the stand that they have taken is probably the right course, for now,” said Peter Cardillo, chief market economist at Spartan Capital in New York.
European shares ended slightly higher, ending up 0.1 per cent, around their highest level since late March.
Emerging market stocks fell 5.03 points, or 0.43 per cent, to 1,156.82.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.51 per cent lower at 603.95, while Japan’s Nikkei rose 1.43 per cent to 38,183.26.
Following the Geneva talks over the weekend, the US said it will cut tariffs on Chinese imports to 30 per cent from 145 per cent, while China said it will slash duties on US imports to 10 per cent from 125 per cent.
The shift in US-China trade relations has led traders to reduce their expectations for Federal Reserve rate cuts, as they believe policymakers may have more leeway to lower rates if the risks to inflation abate.
Traders are now pricing in 56 basis points of cuts this year, down from forecasts for over 100 basis points in April, when fears about the impact of Trump’s tariffs were at their worst.
“The Fed has embarked on what seems to be the right course and unless there’s any real movements in terms of trade war ending by June, it looks like a June rate cut remains in question,” Cardillo said.
Economists, fund managers and analysts have said that while the 90-day pause is welcome, it has not changed the bigger picture.
“When all is said and done, tariffs will still be dramatically higher and will weigh on US growth,” said Christopher Hodge, chief US economist at Natixis.
Ratings agency Fitch estimates the US effective tariff rate is now 13.1 per cent, a notable decline from 22.8 per cent prior to the agreement but still at levels unseen since 1941 and above the 2.3 per cent that prevailed at the end of 2024.
The benchmark US 10-year note yield rose 1.6 basis points to 4.473 per cent, and the 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 0.2 basis points to 4.004 per cent.
In commodities, spot gold rose 0.61 per cent to US$3,253.51 an ounce. US gold futures settled 0.6 per cent higher at US$3,247.80.
Brent crude futures settled at US$66.63 a barrel, up US$1.67, or 2.57 per cent. US West Texas Intermediate crude finished at US$63.67, up US$1.72 or 2.78 per cent.
