A significant breakthrough in US-China trade relations has sent ripples through global markets, with European equities experiencing notable gains. The agreement to suspend and reduce tariffs has not only alleviated immediate trade tensions but also sparked renewed confidence among investors, particularly in sectors previously burdened by the trade war.
Over the weekend, the United States and China reached a consensus to implement a 90-day suspension on their respective tariffs, marking a substantial de-escalation in their ongoing trade dispute. Under this agreement, the US will reduce tariffs on Chinese imports from 145% to 30%, while China will lower its tariffs on US goods from 125% to 10%. This development has been met with enthusiasm across global financial markets.
European stock markets responded positively to the news. Germany’s DAX index climbed 1.8%, France’s CAC 40 rose 1.3%, and the UK’s FTSE 100 increased by 1% in early trading. The optimism was particularly evident in sectors previously affected by the tariffs. European logistics companies, such as Maersk and Hapag-Lloyd, saw their shares surge by over 10%, reflecting expectations of increased trade volumes.
The MedTech sector also experienced a boost. Companies like Philips, Siemens Healthineers, and Carl Zeiss Meditec reported share price increases ranging from 4% to 5%. Analysts attribute this to the anticipated reduction in supply chain costs and improved profitability resulting from the eased trade restrictions.
However, not all sectors shared in the gains. Pharmaceutical stocks faced pressure following President Trump’s announcement of plans to lower drug prices in the US by up to 80%. This policy shift led to declines in shares of major pharmaceutical companies, including AstraZeneca and GSK.
Beyond equities, the trade agreement influenced other financial markets. Oil prices rose, with Brent crude increasing by 2.1% to $65.27 per barrel, and West Texas Intermediate crude climbing by 2.1% to $62.29 per barrel, driven by expectations of heightened demand. Conversely, gold prices fell as investors shifted away from safe-haven assets amid the improved trade outlook.
While the 90-day tariff suspension offers a temporary reprieve, it sets the stage for further negotiations aimed at achieving a more comprehensive trade agreement. Investors remain cautiously optimistic, recognising that sustained progress in US-China trade relations could have lasting positive effects on global markets.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
