Global markets dip ahead of Trump-Xi summit amid inflation and geopolitical risks

Global equity markets experienced a pullback on Thursday as investors weighed the outcomes of President Donald Trump’s three-day summit with Chinese President Xi Jinping amid persistent inflation pressures and geopolitical uncertainties. U.S. stock futures declined modestly in the overnight session, with the Dow Jones Industrial Average dropping 0.13% and the S&P 500 falling 0.10%, while the Nasdaq-100 edged down 0.08%. By market open, all three major benchmarks had closed lower: the Nasdaq Composite shed over 300 points, or 1.13%, to 26,936.04; the Dow Jones Industrial Average fell 0.68% to 51,511.59; and the S&P 500 declined 0.75% to 7,706.03. The broader market sentiment was further influenced by a surge in long-dated Treasury yields, which reached their highest levels in nearly two decades, reflecting heightened inflation concerns. The 10-year Treasury yield hit 5.127%, while the 30-year yield traded at 5.418%, prompting analysts to warn of potential further upward pressure on rates and equity valuations. A BMO rates strategist noted that the data reinforced expectations of sustained policy tightening and higher borrowing costs, even if supply-side inflation eased. The U.S. PMI Output Index, which tracks manufacturing and services, rose to 58.4 in September—a record high since July 2021—with input costs rising at their fastest pace in four years, driven by higher fuel and transportation expenses linked to elevated oil prices. Analysts warned that these cost pressures could sustain demand-driven inflation, complicating the Federal Reserve’s monetary policy stance. Meanwhile, oil markets also reacted to the geopolitical backdrop. Brent crude futures settled at $102.22 per barrel, while WTI crude futures closed at $91.52, reflecting ongoing concerns over supply disruptions in the Middle East. The war between Israel and Iran has tightened global oil flows, with the Strait of Hormuz—through which about one-fifth of global oil and LNG transit—remaining under pressure. The International Energy Agency (IEA) highlighted a significant supply shortfall this year, with Russia’s crude production declining by 460,000 barrels per day in April, while OPEC cut its 2026 oil demand growth forecast. U.S. crude stocks fell sharply by 4.3 million barrels last week, exceeding analysts’ expectations, while gasoline and distillate inventories also declined, underscoring tighter market conditions. The summit between Trump and Xi, which included discussions on artificial intelligence, trade, and security, also drew attention. While Treasury Secretary Scott Bessent confirmed a two-month extension of the U.S.-China trade truce, the broader agenda—including AI cooperation, Taiwan’s status, and Iran nuclear negotiations—remained contentious. Human rights activists protested outside Washington during the visit, highlighting China’s political repression. The mixed opening in Asian markets reflected the broader uncertainty: South Korea’s KOSPI and Japan’s Nikkei 225 opened green, while China’s SSE Composite and Australian equities traded lower, signaling divergent regional risk appetites. Tech stocks, including Meta Platforms (META), Alphabet (GOOG), and Nvidia (NVDA), saw volatility tied to announcements from major tech firms, with Meta’s Connect event generating retail interest in its VR and AI products. McDonald’s (MCD) also drew attention for its updated growth strategy, targeting a 1.5 percentage-point market share gain in chicken and beverage categories by 2030. The session underscored the interplay between economic fundamentals, geopolitical risk, and corporate developments in shaping market sentiment.