Swap contracts are leaning towards a 25 basis point rate cut in September, as traders reduce their bets on the magnitude of interest rate cuts from major Central Banks this year.

On May 12, with a new rally triggered by a major consensus reached at the high-level economic and trade talks between China and the United States, the U.S. stock market is now trading as if Trump's "Liberation Day" shock had never happened. Futures point to the S&P 500 (SPX) opening nearly 4% higher, which could push the index well above April 2 levels. The Nasdaq 100 (NDX) is poised to re-enter the bull market. Traders have also cut bets on how big central banks will cut interest rates this year. Swap contracts tied to the Fed meeting are now leaning towards a 25bp rate cut in September. Last week, these contracts hinted at a Fed policy change as early as July. However, some investors are concerned about the lack of details in the agreement announced on Monday and the risk of a resurgence of conflict. Three months is not enough time to negotiate a complex trade dispute. And it is not clear what the goal will be at the end of the reprieve. Asked how to avoid another tariff hike after the 90-day moratorium ends, Treasury Secretary Scott Bessen said on Monday that a further extension is possible. (Golden Ten)