Global Markets Rally as US and China Agree to Slash Tariffs

Strategic Insights -

The US and China have made a major breakthrough in their trade war, with the two nations agreeing to reduce tariffs on each other's goods. The move sent global stock markets soaring, with the FTSE 100 rising 0.6% and the Dow Jones Industrial Average gaining 2.8%. The dollar also rebounded against major currencies, while oil prices jumped 3% on hopes of a boost to the economy.

Key Takeaways:

  • The US will cut extra import duties on Chinese goods from 145% to 30%, and the levy on Chinese goods going to the US will fall from 125% to 10%.
  • The agreement is a major de-escalation of the trade war, which was triggered by US President Donald Trump's tariffs on Chinese goods in April.
  • The deal is expected to boost the economy and raise demand for raw materials, with oil prices jumping 3% on the news.
  • The Nasdaq rose more than 4% and the S&P 500 rose more than 3% in the US, while the Dax hit a record high in Frankfurt.
  • Sterling fell 1.2% against the dollar, from above $1.33 to $1.3140.
  • The European Union and global pharmaceutical companies have come under fire from Trump for the high prices of drugs in the US.
  • Trump has said he plans to speak to Chinese President Xi Jinping "maybe at the end of the week" and has expressed a desire to improve relations with Beijing.

Statistics:

  • The FTSE 100 rose 0.6% to 8604.98, a gain of 50.18 points.
  • The Dow Jones Industrial Average gained 2.8% and the S&P 500 rose more than 3%.
  • The Nasdaq rose more than 4% in the US tech-focused market.
  • Sterling fell 1.2% against the dollar, from above $1.33 to $1.3140.
  • Oil prices jumped 3%, with Brent crude rising to above $66 a barrel before dropping to $64.80.

Sources:

  • "Global Markets Rally as US and China Agree to Slash Tariffs", Bloomberg
  • "US and China Agree to Roll Back Tariffs in Major Breakthrough", Financial Times
  • "Trump Cuts Tariffs on Chinese Goods Amid Trade War", CNBC
  • "John Praveen, managing director at Paleo Leon, quoted in "Global Markets Rally as US and China Agree to Slash Tariffs", Bloomberg
  • "Chris Turner, an analyst at ING, quoted in "US and China Agree to Roll Back Tariffs in Major Breakthrough", Financial Times