U.S.-China tariff deal lifts markets, stocks surge across board
There is clear optimism in the markets after the U.S. and China agreed to reduce 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—on American stocks rose after the Trump 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, representing a 1.3 percent increase. Meanwhile, futures on the S&P 500 and Nasdaq-100 rose by 1.4 percent and 1.5 percent, respectively.
The stock market responds to the U.S.-China tariff shift
Investors are evaluating the information regarding U.S.-China relations. The combined U.S. tariffs amounting to 145 percent on most Chinese imports will be reduced to 30 percent by May 14, while Chinese tariffs of 125 percent on American goods will be reduced to 10 percent.
Amazon and Apple rose by 8.5 percent and 6.5 percent, respectively. Nvidia gained 4.5 percent. Best Buy rose by 10.5 percent in pre-market trading. Dell Technologies and On Semiconductor climbed by 6 percent and 8 percent, 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 U.S. 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 – colorful characters and a plot that takes years to unfold," pointed out Edelsten.
Pfizer and Johnson & Johnson fell by 2 percent each, while Eli Lilly lost 3 percent 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 percent to 80 percent.
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, declined to 19.83 points.
