Global markets rally as US-China tariff deal boosts investor confidence

US stocks strengthened on Monday, following a significant breakthrough in trade negotiations between the US and China. Both countries announced a sweeping 90-day reduction in tariffs after high-level talks were held over the weekend in Switzerland. The US agreed to lower tariffs on Chinese imports from 145% to 30%, while China pledged to cut levies on American goods from 125% to 10%. The move was widely interpreted as a sign that both sides are serious about de-escalating trade tensions, boosting investor sentiment and prompting a broad shift back into riskier assets. The Nasdaq Composite soared by 3.70% to close at 18 592.56, while the S&P 500 gained 2.60%, ending the day at 5 806.80 and the Dow Jones Industrial Average gained 2.33% to finish at 42 212.51. Consumer discretionary was by far the best-performing sector, jumping around 5.50%, while more defensive sectors such as consumer staples and utilities underperformed. Technology megacaps posted strong gains amid renewed optimism, with Amazon climbing 8.30%, Apple rising 5.30%, Nvidia up 4.50%, Meta gaining 5%, Alphabet adding 3.40%, and Tesla surging 6%.

On the downside, pharmaceutical stocks weakened after President Donald Trump announced he would sign an executive order aimed at lowering prescription drug prices, raising concerns about tighter regulation in the sector. In a separate move, at a press briefing, President Trump announced he is weighing the possibility of lifting sanctions on Syria. He also indicated that he may make a stop in Türkiye to attend anticipated talks between Russia and Ukraine set to take place later this week.

Following the US-China announcement, Asian markets rallied with the Hang Seng leading the gains, climbing by 2.98% to close at 23 549.46, marking its highest level since late March. The Hang Seng Tech Index outperformed, surging 5.16% to end the day at 5 447.35, as technology stocks attracted renewed investor interest . On the mainland, China's CSI 300 Index rose 1.16% to finish at 3 890.60, reflecting broad-based gains across Chinese equities. The Nikkei rose by 0.38%, closing at 37 644.26. Analysts noted that the scale of the tariff reductions exceeded market expectations, suggesting a mutual recognition by both nations of the economic drawbacks of prolonged trade tensions. While the 90-day period may not suffice for a comprehensive agreement, it maintains momentum in the negotiation process and alleviates immediate concerns over escalating trade barriers.

On the Eurozone front, stock markets also closed higher. The EURO STOXX 50 rose 1.58% to close at 5 393.45, with gains also seen across major European indices: Germany’s DAX advanced 0.09% ending the day at 23 519.92, while France’s CAC 40 climbed 1.37% and the FTSE 100 added 0.62% to finish at 8 608.12. The upbeat mood was driven by hopes of reduced trade tensions and stronger global growth. 

Although global sentiment is becoming more favourable, South Africa continues to grapple with domestic challenges and in the short term, attention will be firmly focused on the third budget, which is scheduled to be presented next week Wednesday. Due to the strengthening of the dollar, the rand weakened by 0.67% against the dollar to trade at 18.32 by 19h14 SAST.

Commodities declined with gold prices falling by 5.01%% to close at $3 221.68 per ounce as improving global relations reduced the metal’s appeal as a safe-haven asset. The easing of the trade tensions, alongside a ceasefire agreement between India and Pakistan, boosted market confidence and led investors to shift towards riskier assets. The stronger US dollar also added downward pressure on gold. Meanwhile, Brent crude oil gained 1.99% to settle at $65.18 per barrel, as expectations of stronger global demand supported energy markets.