Headlines:
Markets:
- USD leads, JPY lags on the day
- European equities higher; S&P 500 futures up 3%
- US 10-year yields up 7.6 bps to 4.451%
- Gold down 3.0% to $3,224
- WTI crude up 4.0% to $63.50
- Bitcoin down 0.5% to $103,794
The big news of the day and likely for this week already is that the US and China have come to an agreement to de-escalate trade tensions while seeking further talks in the weeks/months ahead.
The tariff levels for both sides are brought down by 115%. So, that means the US is still imposing 30% tariffs on China while China is imposing 10% tariffs on the US during this 90-day pause period.
That said, the agreement today will not cover the de minimis exemption that was abolished as of 2 May and China is also still keeping their restriction on rare earth exports in the meantime.
US Treasury secretary Bessent had a lot to say during the session, reaffirming that the new mechanism in place for discussions will facilitate much calmer discussions and actions between both sides. He made sure markets know that the mechanism “will avoid the type of escalation” from last month.
The dollar and risk trades rallied on the news unsurprisingly and held gains throughout. S&P 500 futures were already up 1.5% before doubling gains to be up 3% now. Nasdaq futures are up 3.8% and poised to reenter a bull market again.
As for the dollar, the gains were solid across the board. USD/JPY jumped up by a good 300 pips at the highs today, extending gains from around 146.20 to above 148.00 now on the day. Meanwhile, EUR/USD is down over 1% to 1.1100 and GBP/USD also down 1% to 1.3175 currently.
Besides that, USD/CAD is up slightly by 0.3% and nudging closer to 1.4000 while AUD/USD is down 0.4% to 0.6390 after some stubbornness following the initial headlines.
In other markets, bond yields are also racing higher on the optimism as markets pare back rate cut bets as well. Oil is a strong beneficiary as it climbs up by 4% to $63.50. And gold is one of the bigger casualties in all this, down over 3% to $3,224 on the day.
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