Stocks Surge on US–China Trade Deal – Nasdaq Up 4.35%
Global markets surged in trading yesterday as China and the US agreed to pause tariffs for 90 days and drop reciprocal taxes by 115%. The three major US indices all surged higher to record their best days in over a month. The Dow rose 2.81%, the S&P 3.26%, while the Nasdaq leapt 4.35% on the day. The dollar drove higher against all the majors, the DXY gaining 1.09% to close at 101.79, whilst treasury yields also spiked—the 2-year notably closing above 4% at 4.011% after adding 12 basis points, and the 10-year gaining 9.2 basis points to move up to 4.471%. Oil prices also jumped as demand hopes increased, Brent up 1.63% to $64.95 and WTI up 1.52% to $61.95. Gold prices slumped as haven flows pulled out, dropping 2.74% on the day to close out at $3,233.75 an ounce.
Tariff Relief, But Caution Remains
Global markets surged higher yesterday, and US assets in particular got a big shot in the arm from news that tariffs would be paused for 90 days and reduced considerably. However, investors, traders, and businesses alike remain cautious in the current environment where we have seen sharp turnarounds, particularly from the US side of negotiations in recent weeks. Markets will now look to try and price in yesterday’s updates in the sessions and days ahead to see just how much of a retracement of recent moves is warranted. That could come with further trade updates, as well as looking at the underlying fundamentals. So once again, expect geopolitical updates to continue to dominate short-term sentiment; however, we could see some strong moves if fundamental data starts to shift, and tonight’s US CPI numbers could be the start.
Economic Calendar Picks Up Today with US Inflation Numbers in Focus
Geopolitical updates most certainly dominated market flow yesterday, and the impact of the US–China trade update looks likely to influence moves in the Asian session today with little on the macroeconomic event calendar to distract traders. However, as we move through the trading day, the focus will switch—however short-term—to fundamental numbers, with some key data due out in the latter two sessions. The European session will see the initial focus on the UK market with employment data due out. Claimant Count data is expected to come in around the +22K mark, Average Earnings at 5.2%, with the Unemployment Rate pushing up to 4.5%, with any significant deviations likely to see strong moves in the pound. The data highlight of the week is set to come out shortly after the New York open, with the key CPI numbers scheduled. The headline month-on-month and Core month-on-month numbers are both expected to show a 0.3% increase, with the year-on-year number remaining steady at 2.4%. Later in the day, the focus will swing back to the UK, with Bank of England Governor Andrew Bailey speaking in Amsterdam.
