FED Holds Rates, China Injects Liquidity, Vietnam Benefits – A 2025 Global Economic & Market Overview

The May 2025 FOMC meeting concluded with the Federal Reserve maintaining interest rates at 5.25%, as widely expected. However, the underlying message was far more complex: both inflation and unemployment risks are rising.

Data-Dependent FED with a Subtle Warning:

• No explicit rate cuts ahead, but possibility not ruled out.
• FED is considering ending Quantitative Tightening (QT) by June, signaling potential policy softening.

This sends a reassuring tone to markets, amid concerns of:

• Emerging stagflation (high inflation + slow growth).
• Hard data showing resilience, while soft data (consumer sentiment) is slipping.

The People’s Bank of China (PBoC) and Ministry of Finance jointly announced:

• A 5% reduction in reserve requirements, freeing ~1 trillion yuan in lending capacity.
• Short-term 7-day interest rate cut from 1.5% → 1.4%.
• Additional 300–500 billion yuan for consumer spending and healthcare support.

Dual Objectives:

• Revive domestic consumption amid deflationary pressures.
• Strengthen China’s leverage in upcoming trade talks with the U.S.

Yet, Chinese bond yields remain at record lows (~1.64%), showing a lack of investor confidence in long-term recovery.

As trade talks are scheduled between May 9–12, tensions remain high:

• China claims the U.S. initiated the meeting, insisting on “mutual respect.”
• The U.S. denies it’s a high-level negotiation—just an exploratory dialogue.

President Trump & Treasury Secretary Scott Bons:

• Firmly reject reducing the 145% tariff on Chinese goods.
• Accuse China of exploiting its developing-nation status at WTO.

For six consecutive days, the U.S. launched verbal offensives, while China maintained a more diplomatic posture—a classic “soft-power” negotiation strategy.

Amid U.S.–China tensions, Vietnam emerges as a key beneficiary:

• Vietnam acts as a trade bridge: Chinese goods are rerouted through Vietnam, rebranded, and exported to the U.S.
• Bloomberg and Reuters confirm:
  • Vietnam pledged to increase imports from the U.S.
  • Trade between Vietnam–U.S. and Vietnam–China has hit historical highs.

Vietnam profits with 15–20% margin as a re-export intermediary.
But U.S. may soon pressure Vietnam to prevent Chinese transshipments.

Google drops ~9%:

• Disclosure: Pays Apple $20B/yearto be default search engine on Safari.
• First recorded drop in Google Search traffic– attributed to AI (ChatGPT, Claude…) disruption.
• Apple hints at new AI partners beyond Google (e.g. OpenAI, Anthropic).

NVIDIA rallies:

• Trump may revoke the global chip export ban (excluding China)– opening new markets.
• Export zones now classified into 3 tiers: Allies (full access), Neutrals (limited), and Restricted (e.g. China).

• Strong profit growth, free cash flow +66% YoY.
• Operating margin up from 2% → 11%.
• Despite a slight dip in ride volume, overall revenue and profits improved, signaling Uber’s transition to margin-driven scalability.

• Crude oil inventories fell ~2 million barrels, supporting prices.
• But gasoline stockpiles increased slightly for the first time in months, hinting at softening consumer demand.
• S. oil production dipped from 13.6M → 13.4M barrels/day – reflecting margin pressure.

• India conducted airstrikes, Pakistan responded with artillery fire.
• However, no ground invasion or escalation occurred → oil markets responded positively.

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