US equities saw a significant surge on Monday as investors reacted to the recent tariff agreement between the US and China. The agreement signaled a positive shift in the ongoing trade war, boosting confidence in the market. The S&P 500 closed 3.3% higher, while the Nasdaq Composite ended the day up 4.3%. The dollar also experienced a 1.5% increase against a basket of six major currencies, marking its largest daily rise since President Trump’s election in November.
In Asia, Japan’s Topix index rose 1.4% early Tuesday, with the yen strengthening by 0.3% following a sharp sell-off the previous day. Ajay Rajadhyaksha, global chair of research at Barclays, noted that the agreement signified a move past the peak tariffs, providing a sense of relief to investors. The US and China announced that they would reduce tariffs for the next 90 days, with US tariffs dropping to 30% and Chinese tariffs to 10%.
The negotiations between the two economic giants marked a significant de-escalation in Trump’s tariff offensive, which had previously rattled the markets. The S&P 500 had experienced a 15% decline following Trump’s tariff announcement last month but has now erased those losses, down only 0.6% for the year. The Nasdaq has also made a strong recovery, surging 27% from its recent low and is now only 3.1% lower for the year.
With the US-China deal in place, concerns about a potential recession have eased. Goldman Sachs revised its prediction of a recession probability from 45% down to 35%. The agreement has brought some stability to the markets, with traders adjusting their expectations and pulling back on recession bets. Treasury yields rose as a result, indicating a more positive outlook on economic growth.
Tech stocks and consumer goods companies were among the biggest winners as US stocks rallied on Monday. The Philadelphia Semiconductor index saw a 7% jump, with retailers like Target and Home Depot also posting significant gains. Despite the positive momentum, analysts warn that challenges still lie ahead, with potential sector-specific tariffs expected in the near future.
While the market has responded positively to the tariff agreement, uncertainty still lingers. Companies continue to navigate supply chain disruptions and investment decisions amid ongoing trade tensions. The road ahead remains uncertain, and investors are advised to proceed with caution as the situation continues to evolve.
