Top trade officials from the US and China will meet in London on Monday. The US delegation includes Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Ambassador Jamieson Greer. This meeting, set for June 9, 2025, aims to discuss the ongoing trade deal. Following the announcement, US stocks have risen sharply.

Change in Market Sentiment

The upcoming meeting signifies a clear change in attitude compared to the cautious tone earlier this year. With key officials like Bessent, Lutnick, and Greer attending, it’s more than just a routine discussion. The announcement triggered quick market reactions, showing new optimism in US equities. This wasn’t just speculation; we saw strong demand for S&P futures and a notable rise in major industrial and semiconductor stocks, indicating positive market sentiment. Beyond tariffs, there are important issues like intellectual property protection, sector-specific subsidies, and bilateral capital flows at play. These factors influence longer-term pricing in global derivatives. Traders are positioning themselves for more stable conditions in retail and manufacturing futures, which seems justified. However, implied volatility hasn’t dropped completely. While equity markets have stabilized, forward volatility curves remain somewhat high. This suggests that option writers are still cautious about potential risks from these discussions. It indicates careful optimism; disregarding the impact of headlines would be unwise.

Traders Change Strategies

Some traders have begun shifting from short-term contracts tied to policy-sensitive sectors to longer-term swaps and synthetic structures connected to international markets. This is a strategic move. Looking at trends in open interest in materials and logistics shows preparation for potential shifts as formal announcements approach. We’ve also observed differences in geographic spreads. Asian equity-linked derivatives have become less correlated with S&P movements compared to previous quarters. This suggests traders are selective and not adopting a uniform approach. Dealers seem to expect a gradual convergence, indicating that progress from the talks may affect year-end contracts more than those expiring in June. In summary, traders are adjusting their positions. The liquidity landscape is changing as well—bid-ask spreads on long-term options are tight, reflecting significant interest, especially in transport and commodities. This is intentional. Traders are not expecting a complete reversal, but they recognize the possibility of strong policy guidance. For those closely watching these discussions and managing their investments accordingly, now is a crucial time. Focus on the details within seemingly technical outcomes; be aware of basis point adjustments, as they often signal broader shifts in sentiment. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now