‘Buy America' sweeps across global markets after trade talks
With Wall Street kicking off another rally, American stocks are now trading like Donald Trump's 'Liberation Day' shock never happened.
ADVERTISEMENT The S&P 500 jumped 2.8% at the open, surpassing levels from early April. The Nasdaq 100 Index was on the cusp of a bull market, powered by a resurgence in megacap tech shares. The dollar rose and Treasuries fell.
The easing of trade tensions between the US and China gives investors their clearest indication yet that the Trump administration is taking a softer approach to the clashes that upended global markets just a few weeks ago. With hopes riding high that the US economy can avoid a recession, traders also pushed back their bets that the Federal Reserve may not need to cut interest rates as quickly.
'This news was much better than expected,' said Geoffrey Yu, a currency and macro strategist for EMEA at BNY Mellon. 'We doubt the market will forget April, but worst-case scenarios are now a distant memory and people will allocate accordingly.'
Big tech stocks, which had been hammered in the selloff, led the advance, with the Nasdaq 100 Index jumped 3.4%. Meanwhile, safe haven assets dropped, with gold, the Japanese yen and the Swiss franc sinking in unison. The euro fell as much as 1.5% to $1.1084, putting it on track for its worst day this year.
ADVERTISEMENT Swaps tied to Fed meetings now favor a quarter-point reduction in September. Last week, they indicated a change as soon as July. 'Were the last six weeks just some sort of nightmare? The weekend suspension of most of the tariffs between the US and China has suddenly left trade policy looking a lot more like the optimistic expectations from the beginning of April.'— Cameron Crise, Macro StrategistSome investors were wary about the lack of detail in Monday's announcement and the risk of another flare-up between Beijing and Washington. While the two countries have three months to work through their differences, that's not a lot of time to negotiate a complex trade dispute. It's also unclear what the goal is at the end of the cooling-off period. Asked what would happen at the end of 90 days to avoid tariffs ratcheting back up, Treasury Secretary Scott Bessent indicated on Monday that there's a chance to extend the truce further.
In the meantime, Chinese exporters will likely use the time to ship even more products to the US or through other countries, exacerbating imbalances. It's unlikely that US equities will return to their record highs anytime soon, said Roberto Scholtes, head of strategy at Singular Bank. He cautioned that even if an agreement is reached, companies will suffer the economic damage from the confusion and uncertainty of US economic policy.
ADVERTISEMENT 'We took advantage and bought the dips,' he said. 'Now we're on hold, but weighing whether sell the rally.'Trade pressures are already starting to hit businesses, with companies from United Parcel Service Inc. to Ford Motor Co. to Mattel Inc. withdrawing guidance, citing tariff uncertainty that's getting too hard to navigate.
ADVERTISEMENT The average company in the S&P 500 made 6.1% of its revenue from selling goods in China or to Chinese companies in 2024, according to an analysis from Bloomberg Intelligence.Other investors said the shift in sentiment will be enough to drive a recovery in global markets.
ADVERTISEMENT After falling nearly 19% since a peak in February amid fears of a global trade war, the S&P 500 has now recouped about half of these losses. In currency markets, the bounce back has been more restrained. The Bloomberg Dollar Index is 2.7% below its April 2 level.
For equity investors, 'there is no more dip to buy, so if you were not invested, it's really hard to go in now,' said David Kruk, head of trading at La Financiere de L'Echiquier. 'It's a real pain trade for those who missed the rebound.'
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