Short-term US Treasury bond yields jumped in London trading on Tuesday, after a member of the Federal Reserve Board of Governors, Christopher Waller, said that the US central bank should raise short-term interest rates next month, even if government data shows a slowdown in inflation.
Waller added that the Federal Reserve should also consider a larger interest rate increase, by 50 basis points, if inflation indicators worsen.
Markets are awaiting the release of US inflation data for October later on Tuesday. Economists polled by Reuters expect the core index, which excludes volatile food and energy prices, to rise by a moderate rate of 0.2 percent last month compared to September, compared to an increase of 0.3 percent in the previous month.
Waller said that if core consumer prices rose 0.3 percent or more from September, “stronger monetary policy action may be needed.” He added: “In this case, I think that raising the interest rate by 50 basis points during the December meeting should be considered.”
The two-year US Treasury bond yield, which is most affected by interest rate expectations, rose by 6 basis points to 4.61 percent in London trading, while the 10-year bond yield rose by about two basis points to 4.88 percent.
The rise in US Treasury bond yields was contrary to the prevailing trend in Europe, where government bond yields generally declined during today's trading, coinciding with the continued decline in oil prices.
In the financial markets, traders are now fully pricing in the possibility of raising US interest rates by 25 basis points in December, compared to a probability of about 80 percent last week.
Global markets rose on Tuesday, after US stocks rose, recovering most of the sharp losses incurred last week, at a time when investors awaited the release of inflation data in the United States for the month of October.
US stock futures recorded limited gains, while oil prices continued to decline, with Brent crude falling below the level of $91 per barrel, recording its lowest level in three months, after US President Donald Trump said on Monday that the war in Iran had “effectively ended from a military standpoint,” which eased fears of additional escalation, according to the Associated Press.
In early European trading, the German DAX index rose by 1.3 percent to 26,267.19 points, the French CAC 40 index rose by 1.2 percent to 8,233.30 points, while the British FTSE 100 index increased by 0.4 percent to 10,830.12 points.
Standard & Poor's 500 futures rose by 0.3 percent, while Dow Jones Industrial Average futures increased by 0.7 percent.
Global demand for artificial intelligence chips remains strong, after the Taiwan Semiconductor Manufacturing Company announced, after the markets closed, that its revenues in October amounted to about six times their level a year ago.
In Asian trading, the Taiwanese TAEX index jumped by 2.5 percent, while the Japanese Nikkei 225 index closed up by 2.9 percent at 60,459.58 points.
Shares of SoftBank Group, an investor in OpenAI, jumped by 13.9 percent before announcing its business results, after its share price fell on Monday to its lowest level in a year. The group had announced a loss of $7 billion during the three months ending in September, amid the impact of concerns related to artificial intelligence investments on the results of the Japanese company.
Shares of Tokyo Electron, which specializes in chip manufacturing equipment, also rose by 6.1 percent, and shares of Advantest, a testing equipment company, increased by 4.6 percent.
In South Korea, the KOSPI index rose 4.4 percent to 5,239.13 points, with Samsung Electronics rising 4.7 percent and SK Hynix rising 6.7 percent.
In Hong Kong, the Hang Seng Index rose by 0.6 percent to 24,584.81 points, while the Shanghai Composite Index increased slightly by 0.1 percent to 3,663.72 points.
Chinese customs data, issued on Tuesday, showed that exports increased by 35.2 percent during October compared to the same period last year, while imports increased by 41.6 percent. This puts China on track to record a new record trade surplus during the year, after its trade surplus since the beginning of 2026 has already exceeded one trillion dollars.
In Australia, the Standard & Poor's/ASX 200 index rose 1.1 percent to 9,129 points, while Indian markets were closed for a public holiday.
US inflation is in the spotlight
Investors are awaiting the US Consumer Price Index report for October, amid expectations that the inflation rate will reach 3.9 percent, compared to 3.7 percent in September.
The Standard & Poor's 500 index jumped 2.3 percent on Monday, recording gains for the second day in a row, after suffering sharp losses amid fears that Democratic victories in the US midterm elections would slow the pace of building artificial intelligence data centers.
The Dow Jones Industrial Average also rose by 2.2 percent, and the Nasdaq Composite Index rose by 2.7 percent.
The rise in stocks was supported by a decline in Brent crude prices, which fell after Trump told CNN that resuming strikes on Iran was “extremely unlikely” if the United States saw progress in negotiations aimed at ending the war.
On the other hand, US Secretary of State Marco Rubio said on Sunday that Iranian demands were sometimes “exaggerated and ridiculous.”
Nvidia shares rose 1.8 percent in pre-market trading on Tuesday, after falling 4.3 percent on Monday. The chip company announced the opening of an investigation after its CEO, Jensen Huang, admitted that he had a romantic relationship with a business executive. The New York Times said that US intelligence concluded that she was collecting information for the benefit of China.
Nvidia's board of directors said there was "no reason to believe" that national security or company secrets had been compromised, but made clear that the investigation would include reviewing all available information. China denied these accusations.
In the commodity and currency markets, Brent crude, the global standard, fell by 2.2 percent to $90.52 per barrel, and US crude fell by the same amount to $84.94 per barrel.
The dollar stabilized against the Japanese yen at 157.91 yen, compared to 157.90 yen, while the euro fell to $1.1249 from $1.1266.
China's trade surplus exceeded the trillion dollar mark during the first ten months of this year, driven by a boom in global demand for technology and semiconductor products related to artificial intelligence, at a time when weak domestic consumption and the real estate crisis continue to pressure the second largest economy in the world.
On Tuesday, Chinese customs data showed that exports rose by 35.2 percent year-on-year during October, exceeding economists’ expectations of 33.5 percent, although slightly lower than September’s growth of 36.3 percent.
The strong performance of exports contributed to raising the trade surplus to $1.04 trillion since the beginning of the year, exceeding the $1 trillion mark for the second year in a row, but a full month before this level was achieved last year.
The figures reveal Beijing's growing dependence on foreign markets to compensate for weak domestic demand, but in return they raise fears of escalating protectionist measures among its trading partners. Global demand for artificial intelligence infrastructure has been a major driver of Chinese export growth, with companies and governments racing to invest in data centres, chips and technology equipment.
China's semiconductor exports jumped by 111.1 percent during the first ten months, compared to the same period last year, in dollar terms, while exports of high-tech products overall rose by 47.9 percent.
These increases reflect Chinese factories benefiting from a broad global investment cycle in technology, which helped compensate for the slowdown witnessed by traditional sectors within the economy.
Lin Song, chief economist for the Greater China region at ING, said that trade growth may slow over the next year as a result of the increased comparison base, but he expected demand related to artificial intelligence to continue to be strong in the coming months, despite the recent fluctuations in stock markets.
Analysts believe that the technological investment boom may support Chinese exports until 2027, but continued reliance on it carries risks if the cycle of global spending on artificial intelligence slows.
Trade tensions with Washington and Brussels
The widening trade surplus comes ahead of the Asia-Pacific Economic Cooperation (APEC) summit, scheduled for next week in Shenzhen, where Chinese President Xi Jinping is expected to meet his American counterpart, Donald Trump, for the third time this year.
Trade relations and customs duties are likely to come to the forefront of the talks, especially as trade imbalances continue between the two largest economies in the world.
China's trade surplus with the United States declined to $32.71 billion in October, compared to $34.01 billion in September, but it remains a source of tension between the two sides.
On Monday, Beijing and Washington announced the extension of the trade truce for an additional two months, while China linked the expansion of its purchases of American agricultural products to the implementation of the mutual tariff reductions agreed upon.
In Europe, concern is growing about the influx of Chinese products, after the European Union and Beijing reached an agreement to limit exports of Chinese hybrid cars in the coming years.
Delayed implementation of restrictions may prompt Chinese companies to accelerate their shipments before the measures take effect, giving exports an additional short-term boost.
Trivium China's chief macroeconomist, Joe Bissell, warned that the risks of additional tariffs and trade barriers would continue to rise through 2027, as Chinese companies expand into foreign markets.
Imports are accelerating and raw materials are moving
On the other hand, Chinese imports rose by 41.6 percent in October, exceeding Reuters’ expectations of 32 percent, and accelerating from September’s growth of 31 percent. The data showed that exports of rare earth elements increased slightly compared to the previous month, in a possible indication of the easing of some restrictions imposed on the export of these strategic materials.
Nguyen Hoang Nam, an economist specializing in China at Capital Economics, said that the decline in export quantities may indicate the start of easing the application of some controls, perhaps in response to American pressure to improve supplies.
Crude oil imports also rose to their highest levels since March, with buyers adjusting their plans to confront supply disruptions in the Middle East.
The data did not have a significant impact on the financial markets, as the CSI 300 index of leading stocks and the Shanghai Composite rose by 0.1 percent each by the mid-session break.
Weak consumption threatens the sustainability of growth
Despite the strength of foreign trade, the Chinese economy still faces internal challenges, most notably the continued stagnation of the real estate sector, which has weakened household wealth and their confidence in economic prospects.
The slowdown in domestic demand prompted automakers to intensify expansion in foreign markets, as car exports continued their strong growth during October, while domestic sales recorded a decline for the twelfth month in a row. This discrepancy reflects the widening gap between an export sector that benefits from global demand, and a local market that still suffers from weak spending.
Although exports provide the Chinese economy with important support at the current stage, the continued inflation of the trade surplus may increase frictions with trading partners and expose companies to further restrictions.
Thus, Beijing faces a delicate economic equation: taking advantage of the artificial intelligence boom to enhance growth, while reducing dependence on external demand and stimulating domestic consumption, to avoid export success turning into a new source of trade tensions.
