Under the agreement, US tariffs on Chinese imports will be cut from 145% to 30%, while levies on the US will fall from 125% to 10%.
While this shows a softening in the Trump administration’s trade stance, there is still a degree of caution, with this suspension in place for 90-days, while many other economies are also waiting to strike deals. The major US equity markets saw strong gains for the week, with the S&P 500 adding 5.3% and the Dow Jones Industrial Average rose 3.4%. Both indices returned to positive territory for the year. The tech-heavy Nasdaq Composite surged 7.2% and is now less than 1% from being positive for the year.
Also supporting market sentiment was the latest consumer price index data, whereby inflation cooled to 2.3% year-on-year in April, its slowest pace since 2021. Later in the week the producer price index slowed to 2.4% and on a monthly basis it unexpectedly dropped 0.5%. Other data was more mixed with retail sales growing just 0.1% last month and the University of Michigan’s consumer sentiment index declined for a fifth consecutive month. Earlier in the week the yield on the 10-year Treasury note broke above 4.5% for the first time since February on the trade optimism. It later pulled back but for the week it ended higher.
Chinese equities benefited from the tariff relaxation, with the Shanghai Composite up 0.8% for the week. In Hong Kong, the Hang Seng index rose 2.1%. Gains were more prevalent at the start of the week, with enthusiasm beginning to wane as an improved trade picture dampened expectations for further government stimulus to help the economy.
Japanese stock markets also advanced, but gains were more muted than other regions. Negotiations between the US and Japan are ongoing, but as of yet there is no deal. The Nikkei 225 added 0.7%. The yen had weakened against the US dollar at the start of the week on the trade news, however it picked up over the week. Another notable Asia currency mover was the South Korean won, which rallied on news that US and South Korean officials had met to discuss the currency market, with wider speculation that the US could push for a weaker dollar as part of trade deals.
European markets welcomed the trade deal as well as strong corporate earnings. The pan-European STOXX 600 was up 2% in its fifth consecutive weekly gain, with regional indices also positive. The UK FTSE 100 added 1.5%, with better-than-expected GDP data. Switzerland’s economy also grew more than expected in the first quarter, however there may have been some frontloading of activity ahead of the tariffs, with more attention to be paid on data from April onwards. Oil had a volatile week, initially rising on the trade deal, however it pared gains on news that the US may be nearing a nuclear deal with Iran, which would increase supply pressures.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.