Stocks, Dollar Surge After US And China Slash Tariffs

Economic

Stocks

Summary:

Global equity markets jumped on Monday after the US and China agreed to walk back sky-high tariffs they had built up during weeks...

Global equity markets jumped on Monday after the US and China agreed to walk back sky-high tariffs they had built up during weeks of tit-for-tat escalation.

Following talks in Switzerland, officials from the world’s two largest economies said in a joint statement that several recent tariff increases would be altered or suspended, resulting in a remaining 30% US tariff on Chinese goods and a 10% Chinese tariff on US goods. Before the weekend, those figures had stood at 145% and 125%.

Europe’s Stoxx 600 index rose 1%, led higher by stocks most exposed to global trade including shipping giant A.P. Moeller-Maersk MAERSK B, up 11%, and car maker Stellantis STLA, up 7%.

US equity futures pointed to sharp increases at the opening, with contracts on the S&P 500 benchmark up 2.5% and on the technology-focused Nasdaq 100 index up 3.3%. Tech mega-caps outperformed in pre-market trading as Tesla TSLA rose 7%, Apple AAPL rose 5% and Nvidia NVDA rose 4.5%.

There’s “a lot of potential for good news, but the markets are getting very excited too early,” Morningstar’s chief European markets strategist Michael Field said. “The US-China deal has 30% import taxes on Chinese goods which could stem trade flow still. The EU hasn’t even begun negotiations with the US, and if we get anything like the UK deal, then it’s bad news.”

Dollar Jumps Against Euro, Treasury Yields Up

The risk-on sentiment on equity markets weighed on safe-haven assets, with the euro erasing the past month’s gains against the dollar.

Meanwhile, both German bund yields and 10-year US treasury yields jumped to their highest levels in about a month. Bunds were up seven basis points to 2.62% and treasury yields at 4.43%.

“Although the reductions are temporary, they represent a notable shift in the overall effective tariff burden,” according to Stuart Rumble, head of investment directing in the Asia-Pacific region at Fidelity International. “The high US-China tariff regime has already caused major disruption, reducing bilateral trade between the world’s two largest economies and increasing the risk of a broader global slowdown.”

Trump’s Drug Pricing Plans Roil Pharma Stocks

Also over the weekend, US President Donald Trump said on social media that he’d force a reduction in prescription drug prices by 30-80% in the US by mandating that manufacturers charge US consumers in line with the lowest prices offered in other nations.

The announcement sent health care stocks plunging in Asia and Europe. Takeda Pharmaceuticals TAK dropped 6.5% in Tokyo while Europe’s Stoxx 600 Health Care sector index fell 2.8% on Monday morning, led lower by Genmab GMAB‘s 8% decline and Novo Nordisk NVO falling 5.7%.

New Hope for Ukraine Truce

Reports over the weekend indicate Ukraine’s Volodymyr Zelensky may be set to meet Russian leader Vladimir Putin in Istanbul as soon as Thursday, aiming to pave the way to peace talks with an initial ceasefire of 30 days, the first pause in fighting since Russia’s illegal full-scale invasion more than three years ago.

Shares of weapons makers declined on Monday morning, including Germany’s Rheinmetall RHM, Italy’s Leonardo LDO, and France’s Dassault Aviation AM all down by more than 7%.

Source: Morningstar

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Glendon

Economic

Forex

The U.S. dollar surged higher Monday, boosted by the announcement of a trade deal between China and the U.S. over the weekend, raising hopes that the U.S. economy can avoid a damaging prolonged trade war.

At 03:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 1.3% to 101.455, trading at a one-month high.

That said, the gauge is still down over 3% from the April 2 announcement of Trump’s "Liberation Day"

Dollar surges on trade deal

The White House on Sunday announced that a trade deal with China had been reached after U.S. officials spent the weekend negotiating with their Chinese counterparts in Geneva.

More substance emerged Monday, with the two sides agreeing to a 90-day pause to soaring tariffs placed on each other. Additionally, Washington has moved to slash tariffs on China to 30% and Beijing’s duties on U.S. imports are being cut to 10%, the nations said in a rare joint statement.

Heading into the talks, U.S. President Donald Trump had raised tariffs on China to at least 145%, leading China to respond with retaliatory levies on American imports of 125%.

More trade negotiations are planned between the two, while both sides may conduct working-level consultations on relevant economic and trade issues.

“We have argued in recent weeks that the dollar likely requires a constant flow of positive news on trade de-escalation to keep recovering,” said analysts at ING, in a note.

“The Trump administration has so far provided it, and while the dollar’s recovery hasn’t been nearly as spectacular as in equities, there is a strong sense that Trump’s pragmatic shift on trade has trimmed the tail risks for the greenback.”

Aside from more trade news, this week’s focus is likely to center around the release of the latest consumer price index on Tuesday, as investors look for indications of how the trade spat has impacted the economy and thus expectations for further rate cuts by the U.S. Federal Reserve.

The odds for a June easing are now priced at just 17%, with July at 59%.

Euro potentially overvalued

In Europe, EUR/USD traded 1.2% lower to 1.1109, with the single currency hit hard as traders surged back into the dollar in the wake of the news of a U.S.-China trade deal.

“A decisive break lower looks on the cards,” said ING. “The pair is trading 3% off its 21 April peak, but remains around 3% overvalued according to our short-term fair value model. That misvaluation is largely justified by the short-term rate differentials, which continue to heavily favor the dollar.”

The European Central Bank has cut interest rates seven times in the past year as inflation has been rapidly retreating, and policymakers have already started to lay the groundwork for another cut in early June.

Financial markets see a 90% chance of a rate cut in June and see another cut or two in subsequent months, while the odds of Fed rate cut next week are considerably lower.

Traders are also keeping an eye on events in Ukraine, after President Volodymyr Zelenskiy said he was ready to meet Russian President Vladimir Putin in Turkey on Thursday for talks.

“A breakthrough in peace negotiations will be beneficial for EUR/USD, but the extent of the impact will be highly dependent on the market’s assessment of the sustainability of any truce,” ING added.

GBP/USD fell 1% to 1.3180, with sterling holding up slightly better than the single currency after last week’s announcement of a trade deal between the U.S> and the U.K..

Safe-haven yen slips back

In Asia, USD/JPY traded 1.8% higher to 147.92, with the safe haven yen hit hard by the announcement of a U.S.-China trade deal.

USD/CNY traded 0.3% lower to 7.2143, with the Chinese currency supported by the easing trade tensions between Washington and Beijing.

Data on Saturday showed that China’s inflationary pressures persisted in April, with consumer prices declining for the third consecutive month and factory-gate prices experiencing their sharpest drop in six months.

The nation continues to grapple with the economic fallout from its ongoing trade battle with the U.S..

Source: Investing

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Diana Wallace

Cryptocurrency

Key Takeaways:

●Bitcoin sees strong ETF inflows amid Ethereum's fluctuating performance.

●May 9 recorded a net $17.6M inflow for ETH ETFs.

●"Pectra" upgrade boosts Ethereum’s competitive market edge.

Bitcoin, Ethereum ETFs Show Diverging May Flows

Summarizing the recent cryptocurrency market activities, Bitcoin and Ethereum ETFs experienced contrasting flows between May 5-9, 2025. Notably, Bitcoin ETFs recorded $142.3 million net inflows, whereas Ethereum ETFs faced volatility following its "Pectra" upgrade.

The variations in ETF flows highlight differing institutional outlooks on Bitcoin and Ethereum. Market dynamics suggest these shifts may influence investment strategies and crypto valuation.

Ethereum ETF Inflows and Upgrades

Ethereum ETFs recorded a net inflow of $17.6 million on May 9, 2025, a reversal from previous days. Volatility was noted due to the Pectra upgrade affecting prices and performance, even as Bitcoin ETFs showed strong inflows.

"Ethereum is now focused on increasing transaction capacity and speed, which is likely to help it play 'catch up' to alternatives like Solana. This is a stark change from the 'slower' and more academic approach that Ethereum developers were taking previously." - Luke Nolan, Senior Ethereum Research Associate, Coinshares

Bitcoin ETFs attracted $142.3 million on May 7, 2025, continuing a pattern of investor preference. The data shows larger interest in Bitcoin despite Ethereum's notable network adjustments, impacting market sentiment.

Institutional Perspectives and Market Competition

The "Pectra" upgrade significantly affected Ethereum's price, with a 25% gain within 48 hours, enhancing its competitive stance against Solana. However, recent market dynamics suggest institutional hesitancy in Ethereum ETFs.

The financial landscape indicates Ethereum's struggle to maintain positive ETF flows. Institutional investors exhibited varied responses, balancing upgrades' benefits against potential risks, unlike Bitcoin's consistent attraction.

Technological Advancements in Ethereum

Ethereum's advancements in transaction capacity and speed are pivotal for its competitive strategy. Such technological directions are crucial, intensified by data-driven market forecasts and institutional leanings.

Historical trends reveal potential price strength for Ethereum, influenced by its ETF structures and evolving scalability. These technological enhancements and financial outcomes could redefine its rivalry in the crypto markets.

Source: CryptoSlate

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Catherine Richards

Political

The Kurdistan Workers Party (PKK) militant group, which has been in conflict with the Turkish state for more than four decades, has decided to dissolve itself and end its armed struggle, a news agency close to the group reported on Monday.

The PKK decision is set to have far-reaching political and security consequences for the region, including in neighbouring Syria where Kurdish forces are allied with U.S. forces.

The Firat news agency published what it said was the closing declaration of a congress that the PKK held last week in northern Iraq, in response to a call in February from its jailed leader Abdullah Ocalan to disband.

Turkish President Tayyip Erdogan's office and the foreign ministry did not immediately comment on the announcement.

More than 40,000 people have been killed in the conflict since the PKK launched its insurgency in 1984. It is designated a terrorist group by Turkey and its Western allies.

Source: Reuters

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Glendon

Forex

China–U.S. Trade War

Economic

The Government of the United States of America (the “United States”) and the Government of the People’s Republic of China (“China”),

Recognizing the importance of their bilateral economic and trade relationship to both countries and the global economy;

Recognizing the importance of a sustainable, long-term, and mutually beneficial economic and trade relationship;

Reflecting on their recent discussions and believing that continued discussions have the potential to address the concerns of each side in their economic and trade relationship; and

Moving forward in the spirit of mutual opening, continued communication, cooperation, and mutual respect;

The Parties commit to take the following actions by May 14, 2025:

The United States will (i) modify the application of the additional ad valorem rate of duty on articles of China (including articles of the Hong Kong Special Administrative Region and the Macau Special Administrative Region) set forth in Executive Order 14257 of April 2, 2025, by suspending 24 percentage points of that rate for an initial period of 90 days, while retaining the remaining ad valorem rate of 10 percent on those articles pursuant to the terms of said Order; and (ii) removing the modified additional ad valorem rates of duty on those articles imposed by Executive Order 14259 of April 8, 2025 and Executive Order 14266 of April 9, 2025.

China will (i) modify accordingly the application of the additional ad valorem rate of duty on articles of the United States set forth in Announcement of the Customs Tariff Commission of the State Council No. 4 of 2025, by suspending 24 percentage points of that rate for an initial period of 90 days, while retaining the remaining additional ad valorem rate of 10 percent on those articles, and removing the modified additional ad valorem rates of duty on those articles imposed by Announcement of the Customs Tariff Commission of the State Council No. 5 of 2025 and Announcement of the Customs Tariff Commission of the State Council No. 6 of 2025; and (ii) adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the United States since April 2, 2025.

After taking the aforementioned actions, the Parties will establish a mechanism to continue discussions about economic and trade relations. The representative from the Chinese side for these discussions will be He Lifeng, Vice Premier of the State Council, and the representatives from the U.S. side will be Scott Bessent, Secretary of the Treasury, and Jamieson Greer, United States Trade Representative. These discussions may be conducted alternately in China and the United States, or a third country upon agreement of the Parties. As required, the two sides may conduct working-level consultations on relevant economic and trade issues.

Source：Whitehouse

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Gerik

Economic

Currency Appreciation Adds Pressure on Export Margins

A sharp and synchronized rise in Southeast Asian currencies during May has raised alarm among export-reliant economies. This appreciation, driven by global dollar weakness and positive sentiment surrounding U.S.–Asia trade talks, is eroding price competitiveness for exporters in Thailand, Vietnam, Indonesia, and others.

According to MUFG Bank, Thailand is particularly vulnerable, leading the region in sensitivity to foreign exchange volatility. Senior currency analyst Michael Wan noted that Thailand’s export sector could be significantly impaired in the near term due to the baht’s strong performance against the U.S. dollar.

The HSBC forex report dated May 5 identified three waves of appreciation across ASEAN currencies. The first came after the U.S. temporarily postponed retaliatory tariffs on April 10, the second followed a broader USD sell-off on April 21, and the third stemmed from easing U.S.–China trade tensions around April 29. Collectively, these movements pushed several ASEAN currencies to their strongest levels since early 2025.

Tariff Uncertainty Returns as 90-Day Deadline Approaches

Overlaying this forex trend is the nearing expiration of President Trump’s 90-day tariff delay, set to end in July. If the U.S. resumes its protectionist stance, Southeast Asian exporters—especially in electronics, textiles, and food—could see margins compressed further. These economies, many of which have already lost share to reshoring trends or competition from India and China, now face additional pricing pressures.

Economists argue that countries will prioritize preserving access to the U.S. market, even at the cost of short-term profitability. Philip Wee of DBS predicts that policymakers will avoid competitive devaluation and instead focus on maintaining stable trade relations with Washington.

Strategic Reactions from ASEAN Central Banks

Despite currency surges, central banks across the region are showing restraint. Analysts observe no direct intervention so far from Singapore, Malaysia, or Thailand, though volatility management remains a likely tool. In Indonesia, the rupiah’s rebound is being welcomed, given the country’s previous double-digit depreciation between September 2024 and April 2025.

The People's Bank of China, meanwhile, is maintaining a tightly managed daily reference rate for the renminbi, signaling its intent to control regional currency dynamics and limit appreciation relative to other Asian peers. As China’s RMB acts as a regional benchmark, its stability is helping mitigate excessive volatility in ASEAN currency markets.

Wider Impact and Portfolio Shifts Underway

With Asian central banks sitting on large holdings of U.S. assets, including Treasuries and corporate equities, any significant change in U.S. trade balances could trigger long-term portfolio rebalancing. This may not immediately translate to capital outflows, but it could redirect flows toward alternative global assets less exposed to dollar-denominated risks.

The Taiwanese dollar has led the regional appreciation, posting one of its largest single-day gains in decades. Analysts see this as a catch-up effect rather than a new macro trend, though the scale of adjustment highlights how quickly sentiment has shifted against the dollar.

Navigating a Delicate Balancing Act

Southeast Asian exporters are facing a complex environment marked by currency appreciation and renewed tariff risks. While regional central banks are adopting a cautious “hands-off” stance, the strategic imperative remains clear: sustain access to the U.S. market while navigating shifting forex dynamics and global trade realignments.

Whether these economies can balance exchange rate pressures without sacrificing trade competitiveness will determine the stability of their export-driven recoveries in the second half of 2025.

Source: The Business Times

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Gerik

Economic

Streamlining Gulf Investment Amid AI and Infrastructure Ambitions

Just days ahead of President Donald Trump’s diplomatic visit to Saudi Arabia, Qatar, and the United Arab Emirates, the U.S. government has unveiled a “priority” investment channel targeting strategic allies—especially wealthy Gulf nations that collectively manage nearly 40% of global sovereign wealth fund assets.

A centerpiece of this shift is a new digital investment portal announced by the U.S. Treasury on May 8. Through this platform, the Committee on Foreign Investment in the United States (CFIUS) will begin pre-screening foreign investors before they formally file investment proposals. This system aims to reduce procedural delays and streamline approvals for vetted allied investors, particularly those from countries deemed non-threatening to U.S. national interests.

Geopolitical Calculations Shape Investment Access

This investment fast lane reflects deeper geopolitical dynamics. With UAE pledging $1.4 trillion in U.S. investments over the next decade—and Saudi Arabia promising $600 billion in just four years—the Biden administration (under Trump’s continuity) is positioning America as the premier destination for Gulf capital. Much of this funding is earmarked for critical sectors such as artificial intelligence, semiconductor technology, and green infrastructure.

In particular, the UAE has aggressively courted U.S. tech partnerships, distancing itself from Chinese platforms and seeking better access to American-made advanced chips, including from leaders like Nvidia. Abu Dhabi has lobbied Washington for smoother regulatory engagement, emphasizing alignment with U.S. strategic interests and national security goals.

Balancing Open Investment with National Security Scrutiny

While facilitating Gulf investment, the Treasury remains committed to safeguarding U.S. security. Secretary Scott Bessent reaffirmed that the goal is not to dilute CFIUS’s oversight but to enhance efficiency without compromising scrutiny. Investments from adversarial nations, notably those linked to the Chinese government, will continue to face tight restrictions under Trump’s "America First Investment Policy" directive signed in February.

This dual-track approach creates a clear delineation between “trusted capital” from allied nations and “strategically sensitive” investments from geopolitical rivals. It also enables Washington to leverage economic diplomacy as a tool to reinforce alliances and shift global capital away from competitors like China.

Implications for U.S. Economic and Strategic Positioning

The Gulf states' eagerness to deepen economic ties with the U.S. is driven by a mix of security dependence, technological ambition, and portfolio diversification. Their sovereign wealth funds, flush with energy-derived capital, are now actively seeking exposure to high-growth sectors in stable jurisdictions—making the U.S. an ideal target.

President Trump’s upcoming visit is expected to solidify these intentions, with senior U.S. executives joining him to explore bilateral partnerships. While specific investment agreements may be finalized later, the groundwork being laid now signals a strategic recalibration of Gulf-U.S. economic relations under the lens of national interest and mutual security.

By easing bureaucratic hurdles and enhancing trust-based vetting, the U.S. is sending a clear signal: capital from allied nations—particularly the Gulf—is not only welcome but strategically prioritized. As geopolitical rivalry with China intensifies, the Biden-Trump axis is leveraging financial alignment as a new pillar of global influence.