Asian markets rallied on Tuesday as a temporary pause in the US-China trade war boosted investor sentiment, easing fears of a global recession. The positive market response followed an agreement between the two economic giants to reduce tariffs for at least 90 days, prompting a shift in tone from recent confrontational rhetoric to one of “mutual respect” and “dignity”.
Japan’s Nikkei surged 2%, reaching its highest level since 25 February, while Taiwan’s tech-heavy index also rose by 2%. Chinese stocks saw moderate gains in early trading. Singapore’s Straits Times Index climbed more than 1.5% in morning trade, pushing the MSCI’s broadest index of Asia-Pacific shares outside Japan to a six-month peak. In the US, the S&P 500 advanced over 3%, while the Nasdaq jumped 4.3%.
The US agreed to cut tariffs on Chinese imports from 145% to 30%, while China reduced duties on US goods from 125% to 10%. This easing of trade tensions bolstered risk appetite across global markets. The US dollar, which had initially surged against the yen, euro, and Swiss franc, held on to most of its gains on Tuesday, although it weakened slightly as the trading session progressed.
Despite the positive momentum, analysts remained cautious. Christopher Hodge, chief US economist at Natixis, noted that while de-escalation was expected, tariffs would still be significantly higher, continuing to impact US economic growth. Fitch Ratings reported that the effective US tariff rate had dropped to 13.1% from 22.8% prior to the agreement, although it remained historically elevated.
Attention is now shifting to US inflation data, set to be released later on Tuesday. Soft consumer price index (CPI) figures could refocus market sentiment on Federal Reserve policy, potentially reducing expectations of further rate cuts. Traders are currently pricing in 57 basis points of cuts this year, down from over 100 basis points during the peak of tariff-related concerns in mid-April.
US Treasury yields reached a one-month high on Monday and remained near that level on Tuesday, with the two-year yield at 3.99% and the benchmark 10-year yield at 4.45%. Oil prices slightly declined after hitting a two-week high, driven by trade deal optimism, while gold prices remained stable after falling 2% on Monday as some investors moved away from safe-haven assets.
In the cryptocurrency market, bitcoin slipped 0.5% to $102,146, remaining above the key $100,000 mark it breached last week. Investors remain watchful as they assess the long-term impact of the trade truce and upcoming economic data.
-Reuters
