2025-05-13
CNBC Daily Open: Is the trade agreement between the U.S. and China a ‘Trump put'?
The U.S. and China on Monday agreed to an initial trade deal that cuts “reciprocal” tariffs from 125% to 10% for 90 days. Chinese officials, influencers and state-run media on Monday were casting the trade agreement with U.S. as a victory. Now that the U.S. and China have struck an agreement over tariffs, major global banks are growing optimistic on Beijing’s economy and market in 2025. News of the two superpowers’ trade deal turbocharged U.S. stocks on Monday. Shares of technology and consumer discretionary stocks jumped. The idea of a “Trump put” was resurrected by the president’s trade agreement with China. The S&P 500 shot past a key technical indicator, and looks to be on its way to surpass another.Over the weekend, both the U.S. and China agreed to slash tariffs on each other for 90 days from 125% to 10%. That’s much more than expected, as Trump on Friday has said that an 80% tariff on China “seems right!” The U.S. is still keeping its 20% fentanyl-related levy on China, so the total duty on Beijing adds up to 30%.While high, 30% is a far cry from 145%. Investors were ecstatic, and sent stocks soaring. Technology names such as Nvidia and Broadcom, as well as consumer discretionary stocks including Nike and Starbucks, rallied. The market frenzy brought to mind the “Trump put,” the notion a falling market will prompt measures from the president that prop it up.That said, as Dario Perkins, managing director of global macro strategy at TS Lombard pointed out, it is “(sort of) of funny that the optimistic case for Trump 2.0 is basically that it will reverse most of what it has done so far.”A Trump put, perhaps, is just the president putting things back where they once were.What you need to know todayChina and U.S. suspend most tariffsThe U.S. and China on Monday agreed to an initial trade deal that suspends most tariffs on imports for 90 days. “Reciprocal” tariffs between both countries will be cut from 125% to 10%, but the U.S.′ 20% duties on Chinese imports relating to fentanyl will remain, meaning total tariffs on China stand at 30%. Treasury Secretary Scott Bessent told CNBC on Monday that the deal represents progress in the country’s “decoupling” from China for “strategic necessities.”A win for China, according to BeijingReferring to the U.S.-China trade deal, U.S. President Donald Trump said Beijing “agreed to open up,” but offered few other details. However, Chinese officials, influencers and state-run media on Monday were casting the trade agreement with U.S. as a victory and vindication of Beijing’s negotiating strategy, “China’s firm countermeasures and resolute stance have been highly effective,” said a social media account linked to China’s national broadcaster CCTV.Deal boosts China’s prospectsNow that the U.S. and China have struck an agreement over tariffs, major global banks are growing optimistic on Beijing’s economy and market in 2025. In a late Monday note, UBS hiked its forecast for China’s economic growth to between 3.7% and 4% from 3.4%, while Nomura raised China equities to “tactical Overweight” and rotated some funds out of its position in India to China, the Japanese said in a note following the trade talks.Investors cheered trade dealNews of the two superpowers’ trade deal turbocharged U.S. stocks on Monday. The S&P 500 shot up 3.26%, the Dow Jones Industrial Average climbed 2.81% and the Nasdaq Composite surged 4.35%. U.S. Treasury yields and oil prices jumped during U.S hours as the chance of a recession appeared to diminish. However, Asia-Pacific markets were mixed Tuesday. Even though Japan’s Nikkei 225 rose more than 1.7%, Hong Kong’s Hang Seng Index fell nearly 1.5%.Technology shares rallied stronglyMembers of the so-called Magnificent 7 group added an aggregate $837.5 billion in market value on Monday, the largest collective move for the group since April 9. Outside this bag of stocks and their technology peers, consumer discretionary stocks also rallied. The U.S.-China agreement resurrected the idea of the “Trump put,” in which the president will take action to prevent markets from falling too drastically.[PRO] S&P shoots past key levelWith the S&P’s rally on Monday, the broad-based index has broken through a key technical level. The speed of the movement, however, is not typical, and suggests that investors were caught off guard by trade developments — and might continue to be for the next market milestone.And finally...Betty Laura Zapata | Bloomberg via Getty ImagesThe app icons for Revolut and Monzo displayed on a smartphone.Fintechs that raked in profits from high interest rates now face a key testFinancial technology firms were initially the biggest losers of interest rate hikes by global central banks in 2022, which led to tumbling valuations.But with time, that change in the interest rate environment steadily boosted profits for fintechs. This is because higher rates boost what’s called net interest income — or the difference between the rates charged for loans and the interest paid out to savers.Now, fintechs — especially digital banks — face a key test as a broad decline in interest rates raises doubts about the sustainability of relying on this heightened income over the long term.
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