Global equity markets jumped on Monday after the US and China agreed to walk back sky-high tariffs they had built up during weeks of tit-for-tat escalation.
Following talks in Switzerland, officials from the world’s two largest economies said in a joint statement that several recent tariff increases would be altered or suspended, resulting in a remaining 30% US tariff on Chinese goods and a 10% Chinese tariff on US goods. Before the weekend, those figures had stood at 145% and 125%.
Europe’s Stoxx 600 index rose 1%, led higher by stocks most exposed to global trade including shipping giant A.P. Moeller-Maersk MAERSK, up 11%, and car maker Stellantis STLAM, up 7%.
US equity futures pointed to sharp increases at the opening, with contracts on the S&P 500 benchmark up 2.5% and on the technology-focused Nasdaq 100 index up 3.3%. Tech mega-caps outperformed in pre-market trading as Tesla TSLA rose 7%, Apple AAPL rose 5% and Nvidia NVDA rose 4.5%.
There’s “a lot of potential for good news, but the markets are getting very excited too early,” Morningstar’s chief European markets strategist Michael Field said. “The US-China deal has 30% import taxes on Chinese goods which could stem trade flow still. The EU hasn’t even begun negotiations with the US, and if we get anything like the UK deal, then it’s bad news.”
Dollar Jumps Against Euro, Treasury Yields Up
The risk-on sentiment on equity markets weighed on safe-haven assets, with the euro erasing the past month’s gains against the dollar.
Meanwhile, both German bund yields and 10-year US treasury yields jumped to their highest levels in about a month. Bunds were up seven basis points to 2.62% and treasury yields at 4.43%.
“Although the reductions are temporary, they represent a notable shift in the overall effective tariff burden,” according to Stuart Rumble, head of investment directing in the Asia-Pacific region at Fidelity International. “The high US-China tariff regime has already caused major disruption, reducing bilateral trade between the world’s two largest economies and increasing the risk of a broader global slowdown.”
Trump’s Drug Pricing Plans Roil Pharma Stocks
Also over the weekend, US President Donald Trump said on social media that he’d force a reduction in prescription drug prices by 30-80% in the US by mandating that manufacturers charge US consumers in line with the lowest prices offered in other nations.
The announcement sent health care stocks plunging in Asia and Europe. Takeda Pharmaceutical 4502 dropped 6.5% in Tokyo while Europe’s Stoxx 600 Health Care sector index fell 2.8% on Monday morning, led lower by Genmab GMAB‘s 8% decline and Novo Nordisk NOVO.B falling 5.7%.
New Hope for Ukraine Truce
Reports over the weekend indicate Ukraine’s Volodymyr Zelensky may be set to meet Russian leader Vladimir Putin in Istanbul as soon as Thursday, aiming to pave the way to peace talks with an initial ceasefire of 30 days, the first pause in fighting since Russia’s illegal full-scale invasion more than three years ago.
Shares of weapons makers declined on Monday morning, including Germany’s Rheinmetall RHM, Italy’s Leonardo LDO and France’s Dassault Aviation AM all down by more than 7%.
James Gard and Sunniva Kolostyak contributed to this story.
