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US stocks soared on Monday as investors bet that the tariff agreement between Washington and Beijing meant Donald Trump’s trade war was moving beyond its most intense phase.
The blue-chip S&P 500 ended the day 3.3 per cent higher, while the tech-heavy Nasdaq Composite closed up 4.3 per cent. The dollar jumped 1.5 per cent against a basket of six peers, leaving it on track for its biggest daily rise in the wake of Donald Trump’s election on November 5.
“Peak tariffs are very much in the past. We will take a growth hit this year, but that is different from a recession,” said Ajay Rajadhyaksha, global chair of research at Barclays.
The US and China said on Monday that they would both cut tariffs for at least the next 90 days, following talks in Geneva at the weekend. US tariffs would be lowered to 30 per cent, while China’s would go down to 10 per cent.
The negotiations mark a significant de-escalation in Trump’s global tariff offensive, which had sent the blue-chip S&P 500 tumbling as much as 15 per cent following Trump’s “liberation day” announcement. The S&P 500 has now erased those losses, and is down only 0.6 per cent for 2025.
Trump had paused most of the so-called reciprocal tariffs on April 9, a week after they were announced, but had left those on China, a huge source of US imports, in place. Some economists were forecasting a recession this year as a result of the levies, with higher inflation and supply chain problems upending US companies.
The US-China deal, however, is now lessening those worries.
“Markets are defaulting to assuming we’re now in a 10-30 world: 10 per cent (tariffs) on most of the world, 30 per cent on China,” said Rajadhyaksha, who does not believe there will be significant changes to policy after the 90 days are up.
US Treasury yields rose Monday, indicating traders were pulling back their bets on a recession this year and expectations that the Federal Reserve will keep interest rates higher.
The 10-year Treasury yield, which moves with growth expectations, rose to its highest level in a month, up 0.09 percentage points to 4.46 per cent. The two-year yield, which moves with interest rate expectations, rose 0.11 percentage points to 4 per cent, as odds of big interest rate cuts from the Fed were lowered by traders.
Tech stocks and groups selling discretionary consumer goods were the biggest winners as US stocks surged on Monday. All 30 stocks on the Philadelphia Semiconductor index ended the session higher as the index jumped 7.2 per cent, while retailers Target and Home Depot climbed 4.9 per cent per cent and 3.8 per cent, respectively.
Strategists said the S&P 500’s rally may have further to run as systematic traders — which often do well in clearly directional markets but tend to lose out during periods of volatility — gradually rebuild the positions in stocks that they had slashed after Trump’s tariff announcements on April 2.
But “stocks are not out of the woods yet”, said Deutsche Bank analysts, who highlighted that “far-reaching sectoral tariffs” on pharmaceuticals, semiconductors and copper are still expected in the coming weeks.
Priya Misra, a fixed income portfolio manager at JPMorgan Asset Management, added that “the uncertainty is still with us”.
She added: “Companies still have to think about supply chains, investment, hiring . . . some damage has been done. The dust hasn’t fully settled yet.”
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