The stock market is buzzing – and for good reason. Over the weekend, a surprising agreement between the U.S. and China – a reciprocal slashing of tariffs – has ignited a market frenzy, reviving a familiar concept: the “Trump put.” But is this a genuine turnaround, or just a temporary boost? Let’s break down what’s happening.
A Dramatic Tariff Reduction
The deal, announced just before the weekend, sees the U.S. and China cutting tariffs on imports from 125% to a more manageable 10% – effective for 90 days. However, a key caveat remains: the U.S. is maintaining its 20% tariff on Chinese imports related to fentanyl, bringing the total duty on Chinese goods to a hefty 30%.
Investors React with Enthusiasm
The news has been met with overwhelming enthusiasm. The S&P 500 jumped a remarkable 3.26%, the Dow Jones Industrial Average climbed 2.81%, and the Nasdaq Composite surged a staggering 4.35%. Even the pan-European Stoxx 600 index rose 1.21%. Shares of shipping giant Maersk even “popped” – meaning they rose dramatically – 10%.
The ‘Trump Put’ Returns
The rapid market movement has resurrected the idea of the “Trump put” – the notion that a falling market will trigger presidential intervention to prop it up. As Dario Perkins, managing director of global macro strategy at TS Lombard, succinctly put it, “it’s (sort of) funny that the optimistic case for Trump 2.0 is basically that it will reverse most of what it has done so far.”
China Celebrates Victory
Chinese officials and state-run media are celebrating the agreement as a vindication of Beijing’s negotiating strategy. “China’s firm countermeasures and resolute stance have been highly effective,” according to a social media account linked to China’s national broadcaster CCTV.
What You Need to Know Today
- U.S.-China suspend most tariffs: The U.S. and China on Monday agreed to an initial trade deal that suspends most tariffs on imports for 90 days.
- China’s firm countermeasures and resolute stance have been highly effective: According to CCTV.
- Investors cheered trade deal: The S&P 500 shot up 3.26%, the Dow Jones Industrial Average climbed 2.81% and the Nasdaq Composite surged 4.35%.
- Technology shares rallied strongly: Members of the so-called Magnificent 7 group added an aggregate $837.5 billion in market value on Monday, the largest collective move for the group since April 9.
- Tariff pause means new surge in freight shipments, and higher prices: A surge in exports from China to the U.S. should be expected, according to retailers and logistics executives, as the initial trade deal struck by the U.S. and China leads importers to move forward with shipments during the 90-day pause on prohibitive tariffs. “I have clients with thousands of containers pre-loaded in China that is ready to come in,” said Paul Brashier, vice president of global supply chain at ITS Logistics. Rick Muskat, president of family-owned shoe retailer Deer Stags, tells CNBC that the 30% tariffs will allow it to resume shipments from China, but container rates will likely skyrocket due to pent-up demand. “Our costs will go up closer to 40%,” said Muskat. “So we will have to raise prices for fall deliveries.”
[PRO] S&P shoots past key level
With the S&P’s rally on Monday, the broad-based index has broken through a key technical level. The speed of the movement, however, is not typical, and suggests that investors were caught off guard by trade developments — and might continue to be for the next market milestone.
Sourced from https://www.cnbc.com/
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