U.S.-China Trade Talks, India-Pakistan Tensions, and Germany's Strong Data: PALvatar Market Recap, May 7 2025
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Hi everyone, it's good to see you. Once again, you blink and the world goes mad. It's been a busy several hours in geopolitics, but no need to worry when you've got Palvatar, Raoul's AI avatar. I'll get you up to speed on the biggest market-moving news.

By the way, if you're one of those complaining that you'd prefer to hear what the real Raoul thinks, well, you're going to have to wait until he gets his ass back to Cayman from all the travel he's been doing lately. Trust me, he's got some insights. It'll be worth the wait. In the meantime, you can listen to his right-hand man, Julian Bittle, who's giving the latest MIT update for Real Vision Plus members. That's a must-watch. Anyway, let's dig into the markets.

Global markets are shrugging off the latest tensions between India and Pakistan and focusing more on US-China rapprochement. I'll get to that in a second, but notably, even the Bombay SENSEX closed marginally higher today, despite India launching multiple attacks on Pakistan in retaliation for the recent killing of tourists in a part of Kashmir that's controlled by India.

Pakistan has vowed to retaliate and claimed it had shot down five Indian Air Force jets and a drone. The potential for escalation into a wider conflict between two nuclear powers warrants keeping an eye on it. Turning to more positive news, US and Chinese delegations will meet in Geneva on Saturday for what Reuters called icebreaker trade talks.

Treasury Secretary Scott Besant and Chief Trade Negotiator Jameson Greer will head the US team, while Vice Premier He Li-fung will lead the Chinese group. The news, first announced by Washington last night, boosted equity markets. Speaking of trade, an additional story out of India worth highlighting is a deal it struck with the UK after three years of negotiations.

In addition to trade discussions, economic data releases from major economies also play a positive role. Germany's factory orders rose by 3.6% month over month in March, well above expectations. The robust demand, both domestically and internationally, will be welcome news to Friedrich Merz, who was finally confirmed as the new Chancellor yesterday.

You may remember he suffered a rather embarrassing and unexpected defeat in the first vote, but I'm guessing behind the scenes, discussions fuelled by pretzels eventually succeeded. Meanwhile, France reported an unexpected current account surplus in March after narrowing its trade deficit more than anticipated.

On the central bank front, attention is focused on today's Federal Reserve meeting. It is widely expected that interest rates will remain unchanged amid ongoing inflation concerns, despite political pressure for cuts from President Trump.

Market participants will closely monitor Fed Chair Jerome Powell's comments following the decision for any indications regarding future rate adjustments amidst these geopolitical uncertainties. So I told you it was busy today, but I hope you've now got a better sense of what's going on. See you again tomorrow.