Morning Bid: Trump says hit that brake; no, not that one

U.S. President Donald Trump prepares to enter a crucial week, grappling with two significant issues on his agenda: the need for the Federal Reserve to reduce interest rates, and concerns over the rapid advancement of artificial intelligence (AI). Despite Trump's claim that the U.S. should have the world's lowest interest rates, the majority of market participants anticipate a rate hike led by Federal Reserve Chair Kevin Warsh during the upcoming two-day meeting.

The ongoing geopolitical tensions in the Middle East continue to fuel inflation fears, with attacks on Saudi Arabian energy infrastructure exacerbating concerns about potential oil supply disruptions. As a result, oil prices have risen, with Brent crude reaching $106.94 per barrel and U.S. crude up 1.32% at $102.73.

In a contrasting development, U.S. benchmark 10-year Treasury yields have surged to a psychological level not seen since October 2023, registering at 5%. This surge has prompted Japan's benchmark 10-year government bond yield to also climb to 3%, ahead of the Bank of Japan's policy meeting, where a quarter-point rate increase to 1.25% is expected.

These rising yields could potentially dampen enthusiasm for AI-driven equities in the U.S. However, concerns are mounting as industry leaders warn that AI could pose risks to people's safety and urge Washington to establish regulatory measures. Despite these apprehensions, Trump dismisses such worries on Monday, asserting that the U.S. already possesses sufficient safeguards to regulate and penalize AI companies.

In a social media post on Truth Social, Trump claimed that China would profit from impeding AI development, stating that the U.S. possesses a "STRONG AND SMART (High IQ!)" President. He further argued that the U.S.A. possesses the necessary qualities to regulate and manage AI effectively.