United States
Global asset prices surged on Monday following a weekend agreement between the United States and China to temporarily reduce tariffs. Under the deal, the US will lower tariffs on Chinese imports to 30%, while China will reduce its tariffs to 10%—both measures set to last for 90 days. In addition, China has agreed to withdraw or cancel several restrictive measures, including the ban on certain US companies. The agreement has fuelled optimism that broader negotiations may lead to a more comprehensive trade resolution.
The US equity markets responded positively to the news. The Dow Jones Industrial Average jumped 1,160 points, or 2.81%, closing at 42,140. The S&P 500 rose 3.26% to finish at 5,844, with gains across 10 of its 11 sectors. The only laggard was the utilities sector, which declined as investors rotated out of defensive assets. The Nasdaq Composite saw the strongest move, rallying 779 points or 4.35%, to close at 18,708.34.
Stocks with strong ties to US-China trade rebounded sharply. Apple rose 6.31% to $210.79 amid reports that the company may raise iPhone prices later this year. CEO Tim Cook also stated on Monday that Apple plans to expand its manufacturing presence in the US. Tesla shares surged 6.82% to $318.60, while Amazon gained 8.07% to close at $208.64. The so-called “Magnificent Seven” index advanced 5.35% in the session.
The healthcare sector climbed 2.43%, rebounding alongside the broader market. An executive order from the Biden administration, initially feared to be damaging to the industry, turned out to be less severe than anticipated. The order is expected to reduce reliance on pharmacy benefit managers and insurers, potentially preserving revenue for pharmaceutical companies. Merck, for example, jumped 5.87%.
Bond yields rose in response to the risk-on sentiment. The yield on the US 10-year Treasury increased 9 basis points to 4.47%, the highest in a month, while the 2-year yield rose 11 basis points to 4.00%. The US dollar also strengthened, with the Bloomberg Dollar Index up 1%.
Looking ahead, investors will turn their focus to key economic data, including the release of Consumer Price Index (CPI) figures on Tuesday and retail sales later in the week.
Europe
European equities rose on Monday, lifted by the US-China agreement to pause and reduce tariffs, which raised hopes that a similar deal could be negotiated with the European Union. The Euro Stoxx 600 gained 6.53 points, or 1.21%, to close at 544.49, with seven of its eleven sectors finishing in positive territory. Consumer discretionary and technology led the gains.
The FTSE 100 rose 0.59% to close at 8,604, while Germany’s DAX reached another record high, underpinned by strength in export-driven sectors.
Banking stocks outperformed the broader index, with HSBC climbing 3.9%, reclaiming its status as the UK’s most valuable listed company. In the consumer discretionary sector, sportswear giants Adidas and Puma rallied 6.47% and 3.78%, respectively, on renewed investor appetite for growth-sensitive stocks.
Resource companies were also buoyed by the rise in commodity prices and growing sentiment that a global economic slowdown may be less severe than initially feared. Glencore surged 6.1%, while Anglo American advanced 5.5%. The rally extended to the logistics sector, with Maersk soaring 11.2% and Hapag-Lloyd gaining 12.95% as improved trade prospects and easing supply chain concerns lifted sentiment.
Bond yields climbed in line with global counterparts. Germany’s 10-year bund yield rose 8 basis points to 2.64%, while the UK’s 10-year gilt added 7 basis points to 4.64%. Over the weekend, ECB board member Isabelle Schnabel cautioned that potential global inflationary pressures could keep eurozone inflation above the central bank’s 2% target, suggesting rate cuts may need to be delayed.
Australia
The Australian share market experienced a modest gain to start the week, rising by 0.03%, or 2 points, with the ASX 200 closing at 8,233.50. Initial optimism following positive statements from the White House about the results of weekend talks with China faded throughout the day. The market reached its peak in the first hour, climbing 0.55%, but gradually drifted lower as the day progressed. This movement contrasted with the US S&P futures, which closed 1.4% higher at the end of Sydney trading. On the ASX200, 5 sectors saw gains, while 6 declined.
The top-performing sectors were energy (+2.03%) and materials (+0.88%), while healthcare was the worst performer, dropping 1.35%.
Energy stocks gained as oil prices surged, driven by optimism around trade. Woodside added 1.96% to reach $20.80, and Santos rose 3.30%, closing at $6.26. Iron ore stocks also performed well, as the price of iron ore rose on similar optimism. BHP climbed 2.39% to $38.40, and Fortescue rose 1.32%, up 21 cents to $16.17. However, gold prices slipped, putting pressure on gold stocks. Evolution Mining fell 3.71% to $8.31, and Newmont dropped 3.20%, closing at $80.85.
After the Australian market closed, it was announced that the US and China had temporarily agreed to lower tariffs on each other for 90 days.
The healthcare sector fell, influenced by a weak lead from the US and reports that the US administration was set to sign an executive order to reduce prescription drug prices. CSL dropped 1.74% to close at $235.14, and Neuren Pharmaceuticals saw a significant decline, plummeting 9.56% to $12.02.
In individual stock news, Macquarie Bank continued its positive momentum after last week’s results, gaining 2.11% to $207.61 as brokers upgraded the stock. CQG Partners, a global boutique asset manager, surged 7.96% to $2.44 following the announcement of an increase in funds under management to $163.6 billion in April. The stock has risen 13% over the last two days.
Woolworths fell 1.47% to $32.77 after announcing plans to cut prices in a bid to reclaim market share from Coles. CEO Amanda Bardwell revealed that the company would reduce prices by 10% on up to 400 products, primarily focusing on home brands. Coles shares also declined, dropping 0.93% to $22.27. The consumer staples sector ended 0.99% lower, driven by expectations of a price war among supermarkets and a shift towards higher-risk assets, fuelled by optimism surrounding tariff reductions.
Australian bond yields rose in response to the news of the 90-day tariff reduction between the US and China. The 10-year bond yield increased by 7 basis points to 4.35%, while the 2-year bond yield rose by 6 basis points to 3.43%.
The news of the tariffs saw immediate buying of the ASX200 futures with that market closing this morning with a gain of 1.11% having added 92 points. The Australian dollar slipped against the US as broad-based buying of the US currency was seen. The AUDUSD is currently at 0.6375, a loss of 0.60%.
Commodities
Iron ore prices rose 2% on Monday to close at US$99.40, buoyed by speculation surrounding tariff concessions between the US and China. Early gains in Asian trade, driven by optimism for improved growth prospects, briefly pushed the commodity above the key US$100 level after the official announcement before retreating slightly in latter trade. Other industrial metals also gained, with copper rising US$75 or 0.80% to settle at US$9,520 per tonne on the London Metal Exchange.
Crude oil prices continued to firm. West Texas Intermediate (WTI) climbed 1.72%, adding US$1.05 to close at US$62.07, while Brent crude advanced 1.77% to finish at US$65.04. The rally was driven by expectations of stronger global demand under a softer tariff environment, alongside supply-side support from temporary production outages in Norway. Although geopolitical tensions remain an underlying concern, they took a backseat to the day’s growth narrative.
Gold prices fell sharply as investors rotated into risk assets. The precious metal declined 2.68%, shedding US$89.05 to trade at US$3,236.05. The stronger US dollar further weighed on gold, compounding the pressure from reduced safe-haven demand.
Bitcoin also eased from recent highs, falling 1.7% to close at US$102,482, as traders took profits following a strong rally.
Economic Calendar
AU:
- Westpac Consumer Confidence (May) – 10.30am
- NAB Business Confidence (May) – 12.30pm
EU:
- ZEW Economic Sentiment Index (May) – 7:00pm
US:
- NFIB Small Business Optimism Index (Apr) – 8:00pm
- CPI – Consumer Price Index (Apr) – 10:30pm
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
