Highlights

• India launched missile strikes on nine alleged terror sites in Pakistan under "Operation Sindoor," prompting immediate Pakistani retaliation and raising regional tensions1.
• U.S. and China will resume high-level trade talks in Switzerland (May 9–12), sparking optimism for tariff de-escalation; S&P 500 futures rose 0.8% on the news2.
• China’s PBOC cut the reserve requirement ratio by 0.5% and policy rates by 10 bps, injecting ¥1 trillion liquidity to support growth and the property market3.
• Brent crude oil prices jumped 3% on renewed US-China trade dialogue and lower US output, with expectations of increased demand from China and Europe13.
• EU is preparing €100 billion in retaliatory tariffs on Boeing jets, escalating transatlantic trade tensions; Boeing shares fell 0.8%4.
• Israel’s war cabinet approved a large-scale Gaza invasion plan, but implementation is paused pending President Trump’s regional visit; humanitarian crisis deepens5.
• Russia attacked Kyiv with missiles and drones ahead of a ceasefire, killing civilians; Moscow airports were also disrupted by drone attacks, causing widespread flight delays615.
• EU proposed a 17th Russia sanctions package targeting 50+ entities (including five in China), over 100 shadow fleet vessels, and dual-use tech7.
• EU may double military aid to Ukraine to €40 billion if Trump fails to broker peace with Putin, focusing on supporting Ukraine’s domestic defense industry8.
• Friedrich Merz elected German chancellor after a historic first-round defeat, stabilizing German political leadership9.
• India and UK sealed a landmark free trade deal, aiming to boost annual bilateral trade by £25.5 billion and reduce tariffs on key goods10.
• Saudi Arabia to sign a $2.5 trillion mining deal with the US, targeting minerals and rare earths as part of Vision 2030 diversification11.

Commentary

Geopolitical risk is firmly back on the radar. The India-Pakistan missile exchange—the most serious since 2019—injects fresh volatility into South Asian assets and regional FX, with potential spillover into global risk sentiment if escalation continues1. Meanwhile, the Middle East remains a flashpoint: Israel’s approved Gaza invasion plan and deepening humanitarian crisis5, coupled with Russia’s renewed attacks on Kyiv6 and drone disruptions in Moscow15, reinforce a risk-off undertone for EM and European markets. The EU’s 17th Russia sanctions package7 and possible doubling of military aid to Ukraine8 signal a long grind ahead for the region’s security and defense sectors, with implications for European fiscal policy and defense stocks.

On the trade front, there’s a glimmer of relief as the US and China prepare to restart talks in Switzerland2. Markets are cheering the prospect of tariff de-escalation, as evidenced by the rally in S&P 500 futures and a 3% jump in Brent crude13. China’s PBOC liquidity injection and rate cuts further support risk appetite, especially for Asian equities and EM currencies, while also providing a tailwind for commodities and property-linked assets3. However, the EU’s threat of €100 billion in tariffs on Boeing jets highlights that transatlantic trade friction is far from resolved, weighing on US industrials and potentially complicating global supply chains4.

Energy and commodities are in focus: Brent’s rally is underpinned by both macro (trade optimism, central bank easing) and micro (lower US output, OPEC+ compliance pressure—Kazakhstan mulling a 20% cut)1312. Saudi Arabia’s $2.5 trillion mining deal with the US underscores the global scramble for critical minerals and rare earths, with potential medium-term implications for metals markets and green tech supply chains11.

In Europe, political stability is tentatively restored with Friedrich Merz’s election as German chancellor, but the historic first-round defeat points to underlying coalition fragility9. The India-UK free trade deal is a rare positive for global trade, boosting prospects for exporters and select EM assets10. Meanwhile, sector-specific news—Orsted’s cancellation of a major UK wind project18 and Nvidia ’s warning on US chip export restrictions—highlight ongoing challenges in the energy transition and tech rivalry with China17.

Traders should monitor: further escalation in South Asia and the Middle East, signals from US-China trade talks, central bank actions (especially PBOC liquidity effects), and evolving sanctions or retaliatory measures between the EU, US, and Russia. Defensive positioning and selective exposure to commodities, defense, and trade-sensitive sectors remain prudent as volatility persists.