Good morning. The trade spat between the US and China drags on. Politics eclipse central banks in the bond market. And Apple’s smart glasses are a step in the right direction. Listen to the day’s top stories.

— Sara Marley

The US opened the door for a potential trade truce with China just days after Donald Trump announced an additional 100% levy and export controls on critical software. Vice President JD Vance signaled openness to a pact, calling on Beijing to “choose the path of reason.” For its part, China said the US should back off its tariff threats and urged further talks, warning of retaliation. The prospect of a revived trade war threatens to undermine this year’s rally in Chinese stocks and weigh on the yuan.

Cryptocurrencies went into a tailspin after the escalation, with a record $19 billion in bets evaporating Friday as token prices sank. After the biggest one-day selloff, everyone in the industry was trying to figure out who was left holding the bag. Bitcoin and Ether recovered some losses Sunday.

Trump will look to seal the biggest diplomatic achievement of his second term when he travels to the Middle East to herald a deal ending the Israel-Hamas war and greet hostages emerging from two years of subjugation. Still, anything could go wrong in the coming days that could render the deal just another short-lived pause in a conflict between Arabs and Jews in the Middle East that long predates Israel’s founding 77 years ago.

Elsewhere in geopolitics, Pakistan and Afghanistan exchanged heavy fire along their shared border, as tensions escalated after days of clashes and accusations that each had breached the other’s territory. The Pakistani military said 23 of its soldiers were killed by Afghan forces, and another 29 were injured. That contrasted with an Associated Press report that cited an Afghan spokesman as saying 58 Pakistani soldiers were killed during overnight border operations.

In corporate news, Warner Bros Discovery has rebuffed Paramount Skydance’s initial takeover approach—at around $20 per share—as too low, according to people familiar. Paramount has several options, including boosting its bid, going directly to shareholders or finding additional backing through a financial partner, they added.

Deep Dive: The Politics Premium

Bond holders want an ever-higher incentive to hold the debt of developed-nation governments as turmoil in France and Japan underscores how politics is eclipsing central bank policy globally as a key market driver.

• In Japan, longer-maturity bonds plummeted as Sanae Takaichi’s surprise elevation to the top of the ruling party spurred concern about greater spending. Days later, her governing coalition had collapsed.
• Geopolitical tensions are compounding the pressure. Trump’s threats of a “massive increase” of levies on Chinese goods stoked renewed fears of another shock for the global economy, compounding warnings of surging government debt and an AI bubble in technology stocks.

The Big Take

Opinion

China’s new K visa—akin to the US H-1B—couldn’t have come at a worse time, writes Juliana Liu. Meant to draw global tech workers, it has outraged local job seekers who are struggling to find work after the real estate collapse left a gaping void in the economy.

Our daily word puzzle with a plot twist.

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Before You Go

Source: Bloomberg

Apple made the right call pivoting from the so-called Vision Air to spectacles, Mark Gurman writes. Pausing work on a lighter, cheaper version of its Vision Pro to refocus on smart glasses will help the iPhone maker compete with Meta.

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