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What’s happening: US stocks closed sharply higher on Monday, following trade talks between the US and China.
What happened: The US and China agreed to temporarily cut tariffs, raising hopes of easing tensions between the world’s two largest economies.
The S&P 500 jumped to its strongest mark since early March, with Apple’s shares providing a further boost.
Why it matters: The US and China announced plans on Monday to temporarily lower tariffs for 90 days. The US agreed to slash tariffs to 30% from 145% on imports from China, while Beijing said it would lower duties to 10% from 125% on goods imported from the US.
A lift in market sentiment led to investors buying riskier assets. Wall Street stocks had declined significantly after the US announced tariffs on several countries last month.
Apple’s stock jumped 6.3% on Monday on easing production concerns due to the cooling-off period on tariffs. Shares of other tech majors, including Nvidia, Meta and Alphabet, also recorded sharp gains.
Solid earnings reports from US corporates also helped US stock indices recover losses.
The Dow Jones index, S&P 500 and Nasdaq 100 recorded their biggest single-session gain in terms of percentage since April 9. The Dow jumped 1,160.72 points, or 2.81%, to close at 42,410.10, recording its highest settlement since March 26. The S&P 500 surged 3.26% to settle at 5,844.19, its highest finish since March 3.
Of the eleven major sectors on the S&P 500, defensive utilities was the only loser, down 0.68% on Monday. Consumer discretionary and tech stocks were the top performers, gaining 5.66% and 4.66%, respectively.
What to watch: Data on NFIB small business optimism index (1400 UAE time) and inflation rate from the US (1630 UAE Time) will be released today. The NFIB small business optimism index, which declined 3.3 points to 97.4 in March, is expected to fall further to 94.5 in April. The annual inflation rate is projected to remain at 2.4% in April.
Speeches from Fed members, including Chairman Jerome Powell, will also remain in focus this week. The US Federal Reserve is widely expected to announce two rate cuts of 25 basis points each by the end of the year.
Context: The GBP/USD forex pair recovered slightly this morning, after falling to a four-week low on Monday.
Details: The US and China agreed to temporarily lower reciprocal tariffs following talks over the weekend.
Earlier this month, the UK had closed two trade agreements with the US and India. Meanwhile, the Bank of England slashed interest rates by a quarter of a point during its latest meeting.
Data released this morning showed UK retail sales grew by 6.8% year-over-year in April. This was the fastest pace of growth in over three years and significantly topped market estimates of 2.4%.
Weakness in the US dollar lent further support to the GBP/USD forex pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.1% to 101.67.
The GBP/USD pair rose around 0.1% to 1.3185 this morning.
What to watch: Investors await economic reports on GDP growth, industrial production and balance of trade from the UK on Thursday. The UK economy, which grew by 1.5% year-over-year in the final quarter of 2024, is expected to expand by 1.2% in the first quarter. Analysts expect industrial production in the UK to decline by 0.5% in March, following a 1.5% gain in February.
The UK’s trade balance deficit is expected to widen from £1.96 billion in February to £2.7 billion in March.
Other Markets: Asian indices traded mixed on Tuesday, with the Japan’s Nikkei 225 and China’s Shanghai Composite Index up by 1.65% and 0.14%, respectively, and Hong Kong’s Hang Seng Index down by 1.42% this morning.
US President Donald Trump told Ukraine’s President Volodymyr Zelenskyy to meet Russia’s President Vladimir Putin immediately for talks on ending the war. The news sent the safe-haven US dollar index lower in forex trading this morning.
Australia’s NAB business confidence index improved to -1 in April, from -2 in the previous month. Another decline in business confidence exerted pressure on the AUD/USD forex pair.
Ireland’s BNP Paribas real estate construction PMI fell to 52.4 in April, from 53.9 in the previous month. The latest reading signalling expansion in construction activity for the second straight month sent the EUR/USD pair higher in forex trading this morning.
Mexico’s industrial production grew 1.9% year-over-year in March, recovering from a 1.2% decline in February, which lent support to the MXN/USD forex pair.
India and Pakistan announced a ceasefire deal on Saturday, easing concerns over an extended war between the two nations. The news helped the INR/USD pair recover past the key 85 level in forex trading this morning.
Spain’s 3-month Letras auction (1240 UAE Time) and 9-month Letras auction (1240 UAE Time), Eurozone’s ZEW economic sentiment index (1300 UAE Time), Germany’s ZEW economic sentiment index (1300 UAE Time), ZEW current conditions (1300 UAE Time), 2-year Schatz auction (1330 UAE Time) and current account (1645 UAE Time), Italy’s 20-year BTP auction (1310 UAE Time), 3-year BTP auction (1310 UAE Time) and 7-year BTP auction (1310 UAE Time), South Africa’s unemployment rate (1330 UAE Time) and unemployed persons (1330 UAE Time), US Redbook index (1655 UAE Time), total household debt (1900 UAE Time) and 52-week bill auction (1930 UAE Time), India’s inflation rate (1430 UAE Time), Central Bank of Brazil’s Copom meeting minutes (1500 UAE Time), as well as Russia’s foreign exchange reserves (1700 UAE Time).
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