United States and China strike a 90-day tariff cease-fire

United States

Equities surge on truce-driven optimism

U.S. share prices powered higher as investors cheered a weekend breakthrough in Switzerland that froze most of the fresh duties between Washington and Beijing for three months. The tech-heavy Nasdaq Composite outperformed with a 7.15 % jump, while the S&P 500 and Dow Jones Industrial Average rose 5.27 % and 3.41 %, respectively. Mid-caps and small-caps chalked up a sixth consecutive weekly advance.

The deal slices U.S. levies on Chinese goods to 30 % from 145 % and trims China’s tariffs on U.S. imports to 10 % from 125 %. Additional tailwinds included reports that Saudi Arabia will buy large volumes of U.S. AI chips, helping most benchmarks vault back above their April 2 levels by Friday’s close.

Inflation readings ease

Momentum carried into Tuesday after the Bureau of Labor Statistics showed April consumer prices rising 2.3 % y/y, a hair below forecasts and the slowest pace since early 2021. Month-on-month, headline and core CPI both increased 0.2 %. Wholesale prices surprised even more: April PPI fell 0.5 % versus an expected +0.2 %, reflecting thinner margins as firms absorb tariff costs.

Consumers tap the brakes

Thursday’s Census Bureau report revealed retail sales up just 0.1 % in April, cooling sharply from March’s 1.7 % pop. Big-ticket categories such as autos, sporting goods and apparel retrenched, hinting that shoppers front-loaded purchases ahead of tariff hikes. On Friday, the University of Michigan’s sentiment gauge slipped to 50.8—a fifth straight dip—with ~75 % of respondents spontaneously citing tariffs. One-year inflation expectations jumped to 7.3 %.

Credit markets mixed

Treasury yields drifted higher, leaving government bonds in the red, while munis outperformed despite heavy supply. Investment-grade corporates eked out gains in the risk-on mood, and high-yield paper benefited from lively equity markets and well-received new issues.

(Data: Reuters via Yahoo! Finance and Bloomberg)

Europe

The STOXX Europe 600 advanced 2.10 % as the tariff détente buoyed risk appetite. Germany’s DAX added 1.14 %, France’s CAC 40 1.85 %, Italy’s FTSE MIB 3.27 %, and the UK’s FTSE 100 1.52 %.

UK: growth accelerates, labour slackens

Q1 GDP expanded 0.7 % q/q, the best in a year, driven by services, capex and exports. Yet job-market data showed unemployment ticking up to 4.5 % and payroll employment posting the biggest slide in 12 months. Core private-sector pay grew 5.6 % y/y, the slowest since November 2024.

BoE Chief Economist Huw Pill cautioned that inflation might linger, while dovish-voting colleagues Lombardelli and Greene warned against premature rate cuts.

Eurozone: industrial rebound

March industrial production jumped 2.6 % m/m, led by capital and durable consumer goods. Germany printed a robust +3.1 %. The trade surplus ballooned to €36.8 bn, and employment rose 0.3 % q/q.

Japan

The Nikkei 225 edged up 0.67 % and TOPIX 0.25 % as the U.S.–China thaw lifted sentiment. The 10-year JGB yield climbed to 1.46 %. After an initial dip, the yen firmed into the high-JPY 145 zone amid a broader Asian-FX rally.

Q1 GDP contracted an annualised 0.7 % q/q—the first drop in a year—owing to soft consumer spending and trade-war worries. The Bank of Japan trimmed growth and inflation forecasts but reiterated that further hikes hinge on data.

China & Hong Kong

The CSI 300 rose 1.12 % and the Shanghai Composite 0.76 %, while Hong Kong’s Hang Seng gained 2.09 %. Markets jumped on the tariff news—Beijing secured almost all its key demands—then faded as hopes for a large domestic stimulus diminished. Earlier in May, the PBoC had cut the reserve-requirement ratio and trimmed the seven-day reverse-repo rate to 1.4 %, but expectations for fresh easing are now tempered by the trade truce.

Other Key Markets

Hungary

April CPI slowed to 4.2 % y/y but exceeded forecasts. T. Rowe Price’s Ivan Morozov sees underlying pressures persisting and doubts the central bank will cut rates in 2025.

Brazil

April inflation printed 0.43 % m/m (5.6 % y/y). Softer gasoline and airfare costs masked sticky core prices, suggesting policy tightening since September has yet to deliver core disinflation.