China Considers Trade Talks with the U.S.

Rates soar on positive jobs data and trade developments. U.S. Treasury yields rose ~7-13 bps across the long end of the curve today, with the 2-year ending at ~3.82% and the 10-year closing at ~4.31%, after the labor market proved better than expected in April and following early signs that China may be open to trade talks with the U.S. Rates are now ~20-30 bps above YTD lows set in April, and futures markets now expect the first Fed cut in 2025 to occur in July instead of June. Equities rose on the news, with major indices ending the day ~1.40% – 1.50% higher and the S&P 500 fully erasing tariff-related losses after a second-consecutive weekly gain.

U.S. and China take small steps toward trade talks. In a statement today, China’s Commerce Ministry said it is weighing the possibility of trade talks with the U.S. after noting multiple outreach attempts by the U.S. The Ministry said, “The U.S. has recently sent messages to China through relevant parties, hoping to start talks with China.” Still, China maintained it’s stance that the U.S. should roll back recently imposed tariffs, with the Ministry statement saying, “…if the U.S. side wants to talk, it should show its sincerity, and be ready to take action on issues such as correcting wrong practices and canceling the unilateral imposition of tariffs.” Separately, China may have reached out to the U.S. to understand demands related to the production of fentanyl precursor chemicals in China, a key justification for tariffs by the Trump administration during the early days of the tariff rollout.

Job growth exceeded expectations in April. Today’s much awaited labor data showed still-robust job growth in April, despite tariff uncertainty. Nonfarm payrolls grew by 177,000 vs. expectations of a 138,000 advance. While slightly lower than March’s 185,000 print, the result was 133,000 higher than last October’s 12-month low and illustrated that despite heightened tariff-related uncertainty, businesses haven’t stopped hiring. The unemployment rate sent a similarly positive signal, landing at 4.2%, in-line with expectations and unchanged from March.