Wall Street stock futures surged on Monday, the dollar strengthened, and gold prices dropped sharply as the United States and China struck a surprise deal to temporarily reduce punitive tariffs and resume trade negotiations, lifting investor sentiment worldwide.
Following high-level talks in Geneva over the weekend, the two sides announced a 90-day ceasefire on further tariff hikes.
As part of the agreement, the US will lower tariffs on Chinese imports from 145% to 30%, while China will cut its retaliatory duties from 125% to 10%.
In a carefully worded joint statement, Washington and Beijing acknowledged the importance of their trade ties not only for domestic growth but also for global economic stability, phrasing that analysts said marked a clear improvement in tone.
S&P 500 futures rise more than 3% , Nasdaq 100 contracts up 4%, Dow futures up 2.5%
Markets, long battered by trade war jitters, reacted with enthusiasm.
Futures tied to the S&P 500 index jumped by more than 3%, while Nasdaq 100 contracts soared more than 4%, pointing to the tech-heavy benchmark’s strongest performance in over a month.
Dow Jones Industrial Average Index Futures jumped by 2.53%.
The dollar index (DXY) climbed 1.44%, pulling further away from its recent three-year low, while global equity markets from Hong Kong to Frankfurt posted solid gains in a broad relief rally.
“This announcement is not only better than we expected but also better than the market would have expected back in March,” Deutsche Bank strategists said in a note to clients.
Kit Juckes, chief FX strategist at Societe Generale, described the truce as a “substantial relief,” especially after months of escalations that had rattled businesses and consumers alike.
Chinese data released over the weekend showed factory-gate prices declining at their steepest pace in six months, underscoring the toll that trade tensions have taken on sentiment and spending across the global economy.
Hong Kong, Chinese equities to also get boost; Citi chooses Tencent, BYD, AIA as top picks
Citi Research said the rollback should provide a meaningful boost to Chinese and Hong Kong equities.
Analysts pointed to sectors like communications infrastructure, tech hardware, solar equipment, and semiconductors as key beneficiaries, particularly those firms with large US exposure, such as Innolight, Eoptolink, TFC Optical, Tongfu, JCET, Jinko, and JA Solar.
Citi remains overweight on internet, tech, and consumer stocks, with top picks including Tencent, Trip.com, Atour, BYD, AIA, and Anta.
The bank favours H-shares over A-shares on expectations of more rate cuts in the US, which would benefit Hong Kong’s currency.
Why is caution advised?
Despite the optimistic market reaction, many analysts urged caution, noting that the underlying issues in the US-China trade relationship remain unresolved.
“Markets have welcomed the tentative US-China trade agreement with open arms,” said Russ Mould, investment director at AJ Bell, however, warning that President Trump has shown a willingness to walk away from such deals abruptly in the past.
“The next 90 days will be crucial. It would only take one misstep for the US to rip up the agreement and return to punitive tariffs,” Mould said.
Sheldon MacDonald, chief investment officer at Marlborough, also said that it may not be the end of volatility.
“Even if tariffs fall to 30%, that’s still a high burden on trade and growth. There’s no all-clear on recession fears just yet,” he said.
Simon Edelsten of Goshawk Asset Management also said that the deal is fragile and could be derailed at any moment.
“China may devalue the renminbi to make up for the change of terms of trade, which will reignite another old argument. This is like a mix of Chinese opera and soap opera (with) colourful characters and a plot that takes years to unfold,” he said.
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