Stock futures rose on Monday due to optimism following positive progress in U.S.–China trade talks and expectations that the Federal Reserve will cut interest rates. But there was also fresh uncertainty after Beijing escalated tensions with Washington by accusing Nvidia of violating its anti-monopoly laws.
On Monday morning, Dow Jones Industrial Average futures rose by 78 points, or 0.2%. S&P 500 futures rose 0.2%, and the Nasdaq-100 rose by about 0.1%. The stock market’s increases reflected the cautious optimism in a week where trade relations and monetary policy were dominant.
U.S.–China talks: TikTok, tariffs, and tech
Former President Donald Trump offered a positive prognosis on Truth Social, indicating that discussions with Chinese officials were “going well.” He wrote: “The big Trade Meeting in Europe between The United States of America, and China, has gone VERY WELL! It will be concluding shortly,” Trump wrote on Truth Social. He also referred to a deal regarding keeping TikTok running in the US: “A deal was also reached on a ‘certain’ company that young people in our Country very much wanted to save. They will be very happy!”
The app-sharing platform has been the focal point of controversy between both countries for years. Washington has threatened to ban the app unless its Chinese parent firm gives up ownership, in response to fears over data privacy and national security threats.
Reuters reported that the U.S. stands ready to go ahead with the ban if Beijing fails to agree to provide concessions in tariffs and limits on technology.
China escalates against Nvidia
Even as Treasury Secretary Scott Bessent was quoted as saying in Madrid that the negotiations were “going well,” Beijing intensified pressure on the United States by striking Nvidia.
China’s State Administration for Market Regulation on Monday announced that Nvidia had violated anti-monopoly laws following an initial investigation. The regulator said the case involved the company’s 2020 purchase of Mellanox Technologies, which had at the time been approved conditionally. This action comes after the U.S. Department of Commerce barred two Chinese chipmakers, GMC Semiconductor Technology Co. and Jicun Semiconductor Technology, from acquiring American technology by adding them to the Entity List.
The timing had the effect of highlighting that the investigation of Nvidia is not just about company compliance. It also reflects China’s willingness to counter strategically Washington’s growing strictures on the export of high-end chip technology. Both countries regard semiconductors and AI as the vital components of national security, and while there is an American advantage, China wishes to close the gap.
Trump last month made a deal with Nvidia and AMD that would allow both companies to continue selling modified versions of their AI chips in China. In exchange, the companies proposed sharing 15% of the revenues from such sales with the United States government. The deal was designed to preserve America’s technological advantage while still enabling exports to proceed.
But Beijing’s latest message suggests Chinese officials are not as certain. State media reports have questioned the security implications of Nvidia’s H20 chip, launched in 2024 as a way of remaining plugged into China despite American sanctions. The chip accounted for most of Nvidia’s Chinese revenue, 13 percent of total revenue last year. While Trump eased export controls in January, Chinese newspapers raised concerns about the security implications of the chip.
Adding to the intrigue, there are rumors that China may already be obtaining access to the H20 chip through backdoor methods. Analysts comment that the hardware has been used in DeepSeek, a Chinese AI program that caught Silicon Valley off guard a few months ago with its advanced capabilities. The scandal raised suspicions about whether China’s AI advancement is further ahead than individuals originally thought.
For investors, the Nvidia probe shows how tightly wedded geopolitical risk has become to the trade in AI. Nvidia remains the unchallenged leader in chip design, and its chips are hotter than ever. But as it relies on China, further regulatory or retaliatory action can take a heavy toll on its growth prospects. Nvidia’s shares dropped 1.4% during early Monday trading following the report.
Fed meeting and rate cuts
The Federal Reserve’s meeting will be the week’s highlight. Traders are betting on a 96% chance of a quarter-point rate cut and merely a 3.6% chance of a half-point move, according to the CME FedWatch Tool.
The Fed does have some room to ease policy because inflation is said to have moderated and the labour market has softened. Lower interest rates would be a boost to equities by reducing the cost of borrowing and making stocks more attractive relative to bonds. Investors will also be closely watching the tone from the Fed concerning upcoming policy moves, which could be as important as the short-term move. Another wild card is if Stephen Miran, a Trump ally nominated to serve as a Fed governor, is sworn in in time to participate. His presence would cast a subtle shadow over the policy debate.
Weakening manufacturing weighs on Fed’s decision
The case for Fed easing was also strengthened by the latest data on manufacturing. The New York Fed’s Empire State Manufacturing Index fell hard in September to minus 8.7, weaker than forecast of a positive 4.5 reading. It was the first negative print since June and generated new concerns about the health of the sector.
The report showed steep declines in new orders and shipments, both falling 35 and 30 points respectively. Measures of prices paid and received crept lower, as did employment. The weakness underscored the weak state of U.S. manufacturing and placed greater pressure on the Fed to provide more stimulus for the economy.
What happens next?
The confluence of diplomacy, regulatory controls and monetary policy has made this one of the most eventful weeks of the year so far. Stock futures may have crept higher on Monday, but the real test comes in whether U.S.–China negotiations deliver credible momentum, whether Nvidia’s troubles worsen further, and how the Federal Reserve chooses to steer a shaky economy.
In a global economy in which geopolitics remains the driver of financial markets, investors now must deal with a backdrop in which earnings reports and economic data are merely some of the factors. The nuance of the U.S.-China competition calculus, the regulatory fate of companies like Nvidia, and the policy direction of the Federal Reserve will stand a good opportunity of determining the direction of markets for several weeks after this week.
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