Stocks surge following China-U.S. tariff reduction: President Trump celebrates a 'complete restart' with Beijing, while targeting EU with criticism.
Global stock markets soared yesterday as the US and China agreed to slash tariffs for 90 days, marking a major de-escalation in the trade war that threatened to plunge the world into recession. In a groundbreaking move, Trump described it as a "total reset" in relations with Beijing, with the US cutting extra import duties on Chinese goods from 145% to 30%. Meanwhile, tariffs on goods going the other way will fall from 125% to 10%.
This historic deal between the world's two largest economies, almost six weeks after Trump unleashed a wave of tariffs on a global scale, sent markets and the dollar soaring. Oil also saw gains as fears of recession faded, while gold tumbled having hit record highs recently.
According to John Praveen, managing director at asset manager Paleo Leon in New Jersey, this is a "relief rally" as the worst-case scenario in tariffs is not likely to materialize. "We may not get zero tariffs," Praveen admitted, "but the worst-case is unlikely. We've pulled back from the brink."
Trump plans to speak to Chinese President Xi Jinping "maybe at the end of the week" and stated, "We're not looking to hurt China." The deal came just days after an agreement between the UK and US saw Trump slash tariffs on British cars, steel, and aluminum. However, his comments regarding the European Union and global pharmaceutical companies may give investors pause.
Despite these remarks, the positive mood on the markets continued. The FTSE 100 rose 0.6%, or 50.18 points, to 8604.98, now up 5.3% this year. On the continent, both the Dax in Frankfurt and the Cac in Paris hit record highs, and gains were even stronger on Wall Street.
The Nasdaq rose nearly 4%, the Dow Jones Industrial Average 2.7%, and the S&P 500 over 3%. The dollar recovered losses against currencies, including the pound and euro, with sterling falling as much as 1.2% against the greenback. Oil jumped more than 3%, while gold fell towards $3,200 an ounce having hit a record high of $3,500 last month.
Chris Turner, an analyst at ING, pointed out that these were earlier and larger concessions on tariffs than the market had been expecting. "Certainly, it's an important step in terms of de-escalation, but it's too early to say the trade war is ending."
Bond Yields Bounce
Borrowing costs surged around the world after the US-China deal on tariffs eased concerns about global growth and dented expectations of interest rate cuts. The yield on ten-year UK gilts jumped from 4.56% to 4.66%, and the equivalent in the US rose from 4.37% to 4.47%. Investors also trimmed their bets on interest rate cuts across the globe, including the U.S. and the UK, on hopes of a brighter outlook for the global economy.
DIY Investing Platforms
With renewed optimism in the markets, investors might be looking to build or expand their investment portfolios. Here are some popular DIY investing platforms in the UK:
- AJ Bell
- Hargreaves Lansdown
- interactive investor
- InvestEngine
- Trading 212
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- The historic deal between the US and China, which reduced tariffs significantly, led to a surge in global stock markets, including the FTSE 100, Dax, Cac, Nasdaq, Dow Jones Industrial Average, and S&P 500.
- In the world of personal-finance, with the improved business environment, investors might be considering building or expanding their investment portfolios using popular DIY investing platforms such as AJ Bell, Hargreaves Lansdown, interactive investor, InvestEngine, or Trading 212.
- The easing of the trade war fears resulted in a bounce in bond yields worldwide, with the yield on ten-year UK gilts and the equivalent in the US both rising.
- While optimism filled the general-news and finance sectors due to the US-China tariff agreement, Trump's comments about the European Union and global pharmaceutical companies might give investors pause, suggesting that the trade war might not have ended entirely.
