Markets rally as US‑China agree to cut tariffs for 90 days
There is a clear optimism in the markets after the US and China agreed to lower mutual tariffs for 90 days. The dollar is strengthening, oil prices are rising, and bonds are weakening.
Futures (contracts for the future sale or purchase of a specified quantity of an asset - editor's note) on American stocks rose after Donald Trump's administration announced the conclusion of a trade agreement with China. The negotiations took place in Switzerland. Futures on the Dow Jones Industrial Average rose by 524 points, which represents 1.3 per cent. Meanwhile, futures on the S&P 500 and Nasdaq-100 rose by 1.4 per cent and 1.5 per cent respectively.
The stock market responds to the US-China tariff shift
Investors are evaluating the information regarding US-China relations. The combined US tariffs amounting to 145 per cent on most Chinese imports will be reduced to 30 per cent by 14th May, while Chinese tariffs of 125 per cent on American goods will be reduced to 10 per cent.
Amazon and Apple rise by 8.5 per cent and 6.5 per cent respectively. Nvidia gains 4.5 per cent. Best Buy rises by 10.5 per cent in pre-market trading. Dell Technologies and On Semiconductor climb by 6 per cent and 8 per cent respectively.
"Today’s announcement even exceeds our constructive expectations. In our view, this announcement is not only better than we expected but also better than the market would have expected back in March," strategists at Deutsche Bank stated in a report. "The result far exceeds market expectations. Previously, the hope was just that the two sides can sit down to talk, and the market had been very fragile. Now, there's more certainty. Both China stocks and the yuan will be in an upswing for a while," said William Xin, president of the hedge fund Spring Mountain Pu Jiang Investment Management.
Simon Edelsten, fund manager at Goshawk Asset Management, said that it is too early to expect an easy resolution to the long-standing issues between the US and China and warned that even slightly higher tariffs could disrupt trade flows. "China may devalue the renminbi to make up for the change of terms of trade, which will reignite another old argument. This is like a mix of Chinese opera and soap opera – colourful characters and a plot that takes years to unfold," pointed out Edelsten.
Pfizer and Johnson & Johnson fall by 2 per cent each, while Eli Lilly loses 3 per cent after Trump announced on Sunday that he would sign an executive order on Monday lowering prescription drug prices to levels seen in other highly developed countries. The prices for these medications are expected to drop by 30 per cent to 80 per cent.
Bitcoin fell by 0.6 percent, and its price is $103,897 per token.
The VIX index, a measure of expected volatility and a sentiment assessment tool, declines to 19.83 points.
