MACRO – What’s Driving Overnight Risk?

Overnight Price Action

• Asia: Higher; semiconductors and AI infrastructure names led gains across Korea and Taiwan
• Europe: Mixed-to-higher; industrials, exporters, and defense stronger while rate-sensitive sectors lagged
• U.S.: Futures firmer; Nasdaq leading after constructive Trump-Xi headlines and strong Cisco results
• Rates: Treasury yields modestly lower as stability in oil is filtering through to relaxed inflation expectations
• FX: Dollar softer; Sterling firmer after stronger U.K. GDP data
• Commodities: Brent holding near $107; copper and aluminum remain elevated as supply-chain concerns persist

Ticker	IVR	IVx 5d Chg
/ESM6	43.4	1.2%
/NQM6	60.5	1.7%
/CLM6	47.9	-0.4%
/ZNM6	21	-0.1%
/GCM6	36.6	-1.4%
/6EM6	48.5	-0.2%
/BTCK6	11.1	0.4%
VIX3M-VIX Spread	3.35 pts	3.28 pts

 

Catalysts

• Trump and Xi continued summit discussions in Beijing focused on trade, semiconductors, AI infrastructure, agricultural purchases, and Iran/Hormuz transit (swap Iran and Taiwan from China's perspective)
• President Trump posted on Truth Social that discussions with China are “VERY PRODUCTIVE” and described progress on trade as “substantial”
• Xi Jinping reportedly opposed efforts to impose Iranian navigation tolls in Hormuz and expressed interest in purchasing more U.S. energy supplies
• China renewed import licenses for hundreds of U.S. beef plants as agricultural trade discussions accelerated
• U.S. PPI rose to 6% y/y in April, which given its two-to-three-month lead on CPI, suggests another big wave of inflation is building up that will hit over the summer
• U.K. Q1 GDP expanded 0.6%, the strongest quarterly growth since Q1 2025 and above annual expectations
• China’s April loan growth weakened sharply, with new lending turning negative and total social financing falling to the lowest since July 2023
• Cisco surged in after-hours trading after raising guidance and announcing further AI-focused restructuring initiatives

Market ImplicationMarkets are stabilizing after two sessions dominated by inflation and energy concerns. Constructive rhetoric from Beijing, improving trade sentiment, softer wholesale pricing details, and continued AI leadership are supporting risk appetite even with oil remaining above $100 and Hormuz disruptions continuing.

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THEMATIC – Forces Behind the Tape

1. The Trump-Xi Summit Is Expanding Beyond Trade

The Beijing summit continues broadening into a larger conversation around industrial strategy, energy security, semiconductors, agriculture, and geopolitical stability. Markets are increasingly treating these discussions as foundational for the next phase of global economic alignment.Technology remains central. Nvidia, Apple, Tesla, and other major U.S. firms continue pushing for greater access to Chinese markets while both governments negotiate around AI infrastructure, semiconductor supply chains, and export controls. Markets responded positively overnight to reports that discussions around AI-related restrictions may be constructive.Energy security also moved further into focus. Xi Jinping reportedly opposed imposing navigation tolls in Hormuz and expressed interest in increasing purchases of U.S. energy supplies over time. That matters because global supply chains are increasingly attempting to reduce exposure to Middle East shipping disruptions while preserving stable access to energy inputs critical for industrial and AI expansion.Agricultural trade is also re-emerging as an important stabilizer inside the broader relationship. China renewing licenses for U.S. beef imports reinforces how both governments are attempting to create areas of economic cooperation even while strategic competition remains intense.

2. The AI Buildout Continues Driving Capital Spending and Corporate Restructuring

Cisco’s earnings reinforced the same theme driving the market for months: enterprise and hyperscaler AI spending continues accelerating. Guidance was strong, networking demand remains firm, and management is actively reallocating capital toward AI infrastructure. That keeps pressure behind semiconductors, networking equipment, memory suppliers, and data-center exposure broadly. Applied Materials becomes important after the close because it sits directly inside the semiconductor manufacturing chain. Markets want confirmation that foundry and memory spending remains elevated despite rising energy costs and geopolitical volatility. Strong commentary around wafer-fab equipment demand would likely support the entire AI infrastructure complex again tomorrow. The leadership structure inside equities remains clear: semiconductors, networking, power-management, and infrastructure-linked software continue attracting capital, while weaker consumer and cyclical groups lag underneath the surface.

3. Global Growth is Becoming Increasingly Uneven

Markets are treating the Beijing summit as constructive for global trade and industrial activity. Agricultural trade discussions, semiconductor access, energy cooperation, and easing rhetoric around AI export restrictions all supported risk appetite overnight. That tone helped lift industrial exporters, semiconductor suppliers, machinery firms, and China-sensitive equities globally. Reports that China may expand purchases of U.S. energy and agricultural products also supported commodity-linked names and broader cyclicals. At the same time, China’s weak lending data reinforced how uneven global growth remains underneath the surface. Credit creation continues slowing even while AI-related exports remain extremely strong. Markets continue rewarding firms tied directly to infrastructure spending and industrial policy while remaining more cautious around consumer-driven growth exposure.

MICRO – Today’s U.S. Catalysts

Economic Calendar (CT)

• 7:30 – April U.S. retail sales, watching spending ex-gas
• 7:30 – Weekly U.S. initial jobless claims, need to stay low to keep stocks calm

TRENDING – Retail Radar

• Trump-Xi summit and AI export restrictions
• Cisco AI restructuring
• Applied Materials earnings
• Oil above $100 as Hormuz disruptions continue
• Memory-chip shortage

KEY LEVELS TO WATCH

• S&P 500 (/ESM6) – Support/Resistance: 6925/? (ATH)
• Nasdaq 100 (/NQM6) – Support/Resistance: 25580/? (ATH)
• Crude Oil (/CLM6) – Support/Resistance: 78.97/110.93
• U.S. 10Y Yield – 4.226-4.481% pivot range
• VIX – oscillating around 18, much ado about nothing

Trade Setup Bias

Constructive bias with selective positioning. AI infrastructure, semiconductors, networking, and industrial suppliers tied to compute demand continue showing the strongest relative strength globally. Elevated oil prices and persistent inflation pressure still argue for disciplined risk management around consumer-sensitive and highly cyclical sectors.Bottom LineMarkets are increasingly trading around technology access, industrial capacity, and AI infrastructure. The Trump-Xi summit continues reinforcing the strategic importance of semiconductors, energy security, and compute infrastructure, while elevated energy prices and uneven global growth continue shaping inflation expectations underneath the surface. 

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime,Monday-Thursday. @cvecchiofx