Global markets rallied on Monday on the news that a trade peace deal that would include a promise by China and the United States to roll back the tariffs they have imposed on each other in recent months and that had struck fear into markets would be on track.
The announcement on Friday was made less than four weeks after President Donald Trump abruptly added tariffs on Chinese imports, slamming global equities and causing fears of renewed trade tensions. These fears now seem to be receding, at least for now.
The breakthrough came after weekend negotiations in Geneva in which both countries also committed to unwinding "the bulk" of tariffs imposed between the April 2 Trump tariff decision and Nov. 11, according to trade officials. A joint statement issued on Monday said those tariffs would be substantially reduced, a drastic turn in trade diplomacy between the two largest economies in the world.
Markets cheered. Stock futures in the United States pointed to a strong open: The S&P 500 was up about 2.6 percent and the Nasdaq 100 3.8 percent. The rally leaves Nasdaq set for its biggest one-day gain in more than a month. Asia also rose, with Hong Kong's Hang Seng Index rising 6 percent and mainland China's yuan rising to a six-month high of 7.2001 to the dollar.
The dollar also rocketed higher as risk appetite flooded back into the market. The U.S. dollar gained 0.9% on a basket of world currencies, and the safe-haven Japanese yen slid 1.5% against the dollar to 147.08. The euro fell 1.1% to $1.1131 as investors' appetite for riskier assets returned.
The surge in global markets immediately boosted major indexes in Europe. The German DAX surged 1.5% to a record high, Italy's FTSE MIB rose more than 2% to its highest since 2007, and the pan-European STOXX 600 added 1.1%.
"We expect these developments to lead to strong improvements in China trade," U.S. Treasury Secretary Scott Bessent said, adding that "a 90-day Hunter's Island truce for more measures, starting average tariffs of more than 100 percentage points," would fall to 10%. "It's a significant pivot," Bessent said, noting that the pause allows room for a more durable solution.
"The rollback in tariffs was larger than we expected," says Tai Hui, Chief APAC Market Strategist at JPMorgan Asset Management. "That reflects both sides recognizing that tariffs are a drag on global growth. Although the 90-day period may be brief, it ensures that both parties remain engaged in negotiations, according to Tai Hui.
Global stocks had already begun to rebound in recent sessions from post-tariff announcement declines—helped by ameliorating sentiment and reducing geopolitical risks. An uneasy cease-fire between India and Pakistan stood, and Ukrainian President Volodymyr Zelenskiy said he would be open to a peace summit with Russian President Vladimir Putin in Turkey later in the week.
Commodities, too, followed the market optimism. Spot gold fell 3% as investors sold off safe-haven assets. Crude oil prices shot up by as much as 5 percent, with Brent futures up 3.3 percent to $64.14 per barrel and U.S. WTI futures up 3.5 percent to $63.14.
However, data from China showed problems were starting to appear in its economy, with factory-gate prices recording their biggest fall in six months and consumer prices dropping for a third straight month. Analysts said the falls were due to persistent trade uncertainty before the rollback of the tariffs.
The focus now shifts to retail earnings in the United States, specifically Walmart's numbers set for release on Thursday. Analysts anticipate the figures will show the degree of supply chain disruption from Chinese goods.
The pullback also played out in bond markets, where investor fears abated. The U.S. 10-year yield skated to a one-month high at 4.447%, and the German Bund to 2.622%.
The U.S. and China are next due to hold talks this weekend in Switzerland.
