Dollar Jumps After U.S., China Agree to Cut Tariffs
The dollar surged and government bonds sold off as markets reacted to a de-escalation in the trade war between China and the U.S., which agreed to temporarily roll back some tariffs for 90 days.
A gauge of the dollar’s strength rose as much as 0.9% and the yen, a traditional safe haven, fell as progress in the talks boosted risk appetite across asset classes. The U.S. 10-year yield rose seven basis points to 4.45%, its highest in almost a month, while stocks got a boost on both sides of the Atlantic.
It’s a potentially key pivot point for markets, which have been roiled by U.S. President Donald Trump’s efforts to re-regulate global trade. He has targeted China with punishing tariffs, sparking a trade war and fears of a recession.
“This kind of coordinated tariff relief, even if temporary, changes the investment landscape,” said Nigel Green, chief executive of deVere Group. “It opens the way for businesses to recalibrate their outlook, and for markets to rise on something more than just hope.”
U.S., China Agree to Cut Tariffs Bigger for 90 Days
After weekend talks in Geneva, the U.S. and China issued a joint statement indicating they would temporarily lower tariffs on each other’s goods for 90 days. That gives the world’s two largest economies another three months to resolve their differences.
In the U.S., Nasdaq 100 futures jumped as much as 3.9% while S&P 500 futures rose 3.1%. The Stoxx Europe 600 Index rose as much as 1.2% but the gains were tempered by a decline in pharmaceutical stocks as Trump said he planned to order cuts in U.S. prescription drug prices.
However, the move toward a de-escalation of trade tariffs spurred some big sector moves in Europe, with shipping stocks including Danish container giant A.P. Moller-Maersk A/S jumping 13% and Germany’s Hapag-Lloyd AG rising about 10%. Automakers Stellantis NV, Mercedes-Benz Group AG and BMW AG all rose more than 5%.
“This is a much deeper tariff cut than expected,” said David Kruk, head of trading at La Financiere de L’Echiquier. “For those who have been pessimistic since the tariff announcement, this is a very painful trade. There are no more dips to buy so if you are not invested, it is very difficult to get in now.”
Source: Bloomberg
