Stocks offer restrained response to US-China trade framework

Share markets and the dollar on Wednesday offered a guarded welcome to the latest signs of progress in US-China trade talks, while awaiting more detail of what was decided and whether it would stick for long.

Bond investors were also hunkered down for a reading in US inflation that could show the early impact of tariffs on prices, and a Treasury auction that will test demand for the debt.

Over in London, negotiators from Washington and Beijing said they had "agreed a framework on trade" that would be taken back to their leaders.

US Commerce Secretary Howard Lutnick added the implementation plan should result in restrictions on rare earths and magnets being resolved, but again offered no specifics.

"Even though details are scant, as long as the two sides are talking, I think markets will be happy," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

"It will still be very hard and it will take a long time for both sides to reach a comprehensive trade agreement," she added. "That sort of comprehensive deal usually takes years to be reached, so I'm sceptical that a framework reached at the meeting in London will be comprehensive."

The law was another hurdle as a federal appeals court allowed President Donald Trump's most sweeping tariffs to remain in effect on Tuesday while it reviews a lower court decision blocking them.

Investors, who have been badly burned by trade turmoil before, offered a cautious response and MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%.

Japan's Nikkei added 0.4% and Australian stocks firmed 0.4%.

AUCTION ANGST

EUROSTOXX 50 futures, FTSE futures and DAX futures all down 0.2%, while S&P 500 futures and Nasdaq futures both lost 0.1%.

The reaction in currency markets was equally restrained, with the dollar dipping 0.1% on the Japanese yen to 144.73. The euro edged up to $1.1433 and the dollar index held steady at 98.971 =USD.

Bond investors had other things to worry about and yields on 10-year Treasuries US10YT=TWEB were little changed at 4.467%. An auction of $39 billion in 10-year notes is due later in the day and the market is anxious to see if foreign buyers turn up.

Concerns about huge US budget deficits and debt have combined with unease over the White House's erratic trade policies to see investors demand a higher term premium for holding Treasuries.

Data on US consumer prices for May might also show some initial upward pressure from tariffs, though analysts assume it will take a few months to fully show in the series.

Median forecasts are for the headline CPI to rise 0.2% and the core 0.3%, which would nudge the annual rates up to 2.5% and 2.9% respectively.

Anything higher would be a setback to hopes for another rate cuts from the Federal Reserve and could see bonds sell off. Markets imply little chance the Fed will ease at its meeting next week or in July, but have priced around a 60% chance of a move in September.

In commodity markets, gold edged up 0.3% to $3,333 an ounce.

Oil prices eased back from near seven-week highs ahead of US inventory data.

Brent dropped 31 cents to $66.56 a barrel, while US crude eased 28 cents to $64.71 per barrel.