Dollar Jumps, Gold Slumps as U.S. and China De-escalate Trade War

Global markets surged on Monday as Wall Street stock futures climbed, the U.S. dollar strengthened, and gold prices slumped following a historic trade agreement between the U.S. and China. After talks in Geneva over the weekend, both nations agreed to temporarily reduce tariffs imposed on each other, alleviating fears of an escalating trade war.

Details of the Agreement

Under the terms of the agreement, the U.S. will slash tariffs on Chinese imports from 145% to 30% for a 90-day negotiation period. In return, China will cut its reciprocal duties from 125% to 10%. This breakthrough deal is seen as a significant step toward easing trade tensions between the two largest economies in the world.

Markets Respond 

The announcement triggered a global relief rally. Futures tracking the S&P 500 jumped 2.7%, while contracts on the Nasdaq 100 soared by 3.8%, marking the tech-heavy index's best trading day in over a month. The dollar index, which tracks the greenback against other major currencies, rose 0.9%, continuing its recovery from last month’s three-year low. European stock indices followed suit, with Germany's DAX hitting a record high and Italy's FTSE MIB reaching its highest level since 2007.

Oil Prices and Other Assets

The tariff cuts also sparked optimism in other asset classes. Brent crude oil futures rose nearly 3%, reaching $65.69 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 3% to $62.90.

A Positive Surprise

Both the U.S. and China issued a joint statement, acknowledging the importance of their bilateral trade relationship to the global economy. Analysts hailed the announcement as a positive surprise, noting that it exceeded market expectations. Deutsche Bank strategists remarked that the agreement was a "substantial relief" for both countries, and Societe Generale's chief FX strategist, Kit Juckes, called the tariff pause a "significant relief."

Temporary Reprieve

Despite the positive market response, some economists warned that this agreement may not signal the end of trade volatility. Data from China showed a sharp drop in factory-gate prices, indicating the ongoing economic strain from the trade conflict. Analysts like Sheldon MacDonald, CIO at UK asset manager Marlborough, cautioned that the U.S. maintaining a 30% tariff on China could still hurt growth. "There's no all-clear on recession fears just yet," he said.

Read This Also: A Lens on the Law: Teen Curates Art Exhibition to Expose Legal Gaps in Urban India