US/China trade talks to begin:

• US’ Bessent and Greer to meet with China rep on Economic Matters this week
• Bessent with juicy China trade talk details – we’ll decide what we are going to talk about
• China’ s Ministry of Commerce says is has “decided to agree to engage with the US”
• China confirms Vice Premier He Lifeng to talk trade with Bessent this week

PBOC rate cuts:

• PBOC/CSRC China supportive measures – in summary
• China unlocks more insurance capital for stocks, signals property support
• People’s Bank of China to cut Standing Lending Facility rate by 10bp
• China promises more local stock market support from sovereign fund
• China will help A-share listed companies affected by tariffs to cope with difficulties
• PBOC governor says will lower interest rates on structural policy tools by 25 bps
• People’s Bank of China sets 7-day reverse repo rate at 1.4% (from 1.5% previously)
• PBOC rate cuts: 7-day RR to 1.4% (from 1.5%), LPR 10bp cut also, RRR 50 bp cut
• PBOC sets USD/ CNY reference rate for today at 7.2005 (vs. estimate at 7.2124)
• PBOC Governor Pan says world is full of uncertainties – cuts rates
• Gold has been slammed lower, under US$3370

Other:

• Trump expected to announce the US will refer to the Persian Gulf as the “Arabian Gulf”
• Australia – Santos CEO says over 200 wells underwater due to floods in Cooper Basin
• Japan Jibun / S&P Global Services PMI for April 52.4 (flash was 52.2, prior 50.0)
• US may deport people to Libya
• New Hampshire governor signs crypto reserve bill into law
• ICYMI: US-UK trade talks make some progress on steel, autos, but deal timing still unclear
• WSJ reports “U.S. Orders Intelligence Agencies to Step Up Spying on Greenland”
• New Zealand employment report, Unemployment rate 5.1% vs. 5.3% expected
• Japanese media reports that Fujifilm will build a semiconductor materials factory in India
• 58 wallets made over $10 million each from Trump’s meme coin vs. 764,000 wallets that lost
• RBNZ says risks to the financial system have increased over the past six months

India/Pakistan conflict:

• Reports on intense shelling between Indian and Pakistani troops at 3 frontier locations
• India Launches Missile Strikes on Alleged Terror Camps in Pakistan

Other

• Forexlive Americas FX news wrap: US dollar slumps as trade deals remain stuck
• Oil: private survey of inventory shows headline crude oil draw larger than expected
• S&P closes lower for the second consecutive day
• Trade ideas thread – Wednesday, 7 May, insightful charts, technical analysis, ideas

It was an eventful day in Asia today with two nuclear powers exchanging fire, a beginning to US/China talks scheduled, and rate cuts/further supportive measures from the People’s Bank of China and other Chinese authorities.

FX rates swing around in response, as did gold and equities.

• India-Pakistan tensions escalate after cross-border strikes. India and Pakistan are both nuclear powers.

  India carried out strikes on nine sites in Pakistan and Pakistan-administered Kashmir early Wednesday, describing the taregts as “terrorist infrastructure” used to plan and direct attacks. Indian authorities stressed the operation was “focused, measured, and non-escalatory,” adding that no Pakistani military assets were hit.

• Pakistan responded with artillery, resulting in both sides exchanging heavy fire along the Line of Control that separates Pakistan-administered Kashmir from Indian-administered Kashmir
• India’s strikes follow weeks of intensifying hostilities after a deadly assault in the town of Pahalgam on April 22, where 26 civilians — mostly Hindu men — were killed by militants. It was the worst attack on civilians in the region in 20 years.

U.S. and China to (finally) begin high-level trade talks

• The United States and China will hold formal trade negotiations this weekend in Geneva, their first high-level engagement since the eruption of a fresh tariff-driven trade conflict. China’s Ministry of Commerce confirmed Vice Premier He Lifeng will meet with U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, in what both sides are framing as a critical effort to de-escalate tensions.

• Treasury Secretary Bessent said the talks aim to address “shared interests” and called current tariff levels “unsustainable,” while rejecting the notion of decoupling. “What we want is fair trade,” he said, noting that the world has been engaging with the U.S., but “China has been the missing piece.” The USTR added that Greer will engage directly with his Chinese counterpart to discuss paths forward on trade.
• China, for its part, said it agreed to the meeting after “repeated” outreach from Washington and following consultations with its domestic stakeholders. The Commerce Ministry emphasised that the talks must be conducted on equal footing and warned it would not tolerate coercion or double-dealing. The ministry also expressed concern that other nations in ongoing trade discussions with the U.S. might coordinate tariff measures against China, adding a strategic layer to Beijing’s decision to engage.

• Bessent tempered expectations, saying that the two sides have agreed to talk. The plan is that on Saturday and Sunday, we’ll agree on what we’re going to talk about. Bessent added that this initial meeting will be about de-escalation.

People’s Bank of China rate cuts

• Then it was over to China, where a joint briefing by officials from the People’s Bank of China, the National Financial Regulatory Administration and the China Securities Regulatory Commission. The officials included PBOC Governor Pan.

I posted a bit of a summary of the measures, repeating that here, but there is more detail in the posts above.

Equity Market Stabilisation:

• Central Huijin, along with the PBOC, will step in as a quasi-stabilisation fund to help maintain stock market confidence.

• An additional 60 billion yuan (US$8.3 billion) from long-term insurance funds will be channelled into equities under an expanded pilot program.

Targeted Liquidity and Credit Support:

• RMB 300 billion in new re-lending funds will be allocated to support technological innovation and industrial upgrades.

• A new RMB 500 billion re-lending facility will be introduced to finance elderly care infrastructure and broader service consumption.

• The People’s Bank of China (PBOC) will expand the quota for capital market support tools to RMB 800 billion to deepen market-based financing.

• A new risk-sharing mechanism will be established to back technology innovation bonds, improving credit support for strategic sectors.

Monetary Tools and Interest Rate Adjustments from the People’s Bank of China:

• The Reserve Requirement Ratio (RRR) will be lowered by 0.5 percentage points to boost banking system liquidity.

• A temporary cut in the reserve ratio for auto finance and leasing firms will bring it down from 5% to 0%, aiming to ease sector-specific funding constraints.

• The 7-day Reverse Repo rate, a key short-term policy rate, will be trimmed by 10 basis points to 1.4%.

• The structural monetary policy rate will be reduced by 25 basis points to support targeted credit expansion.

• Interest rates on individual housing provident fund loans will be lowered by 0.25 percentage points to reduce mortgage borrowing costs.

• The Standing Lending Facility (SLF) rate will be cut by 10 basis points, further easing interbank lending conditions.

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Gold continued its Tuesday swing higher, getting to above US$3430. It wobbled around that level and down just a touch on the news of the India/Pakistan fighting. When news subsequently broke of the Bessent/Greer/He meeting ahead gold sold of heavily to lows circa US$3360 before stabilising.

Major FX was a little less wild. The USD broadly gained on the trade talk meeting news. AUD/USD was an exception, the Australian dollar found bids on China hopes. After topping above 0.6510 its subsided back below 0.6490 though.

USD/JPY is 100 points higher on the trade talk news.

US equity index futures rose on the trade talk news, these have stabilised off their early highs.

This article was written by Eamonn Sheridan at www.forexlive.com.