After the tumultuous fluctuations seen last week, financial markets started the week on a more stable note, buoyed by Friday’s news that the White House would exempt electronics such as smartphones, semiconductors, and computers from additional tariffs. This decision provided a much-needed boost to investor sentiment, which had been shaken by the US president’s erratic tariff policies and the retaliatory measures from China.
Wall Street saw solid gains across all three major indexes, with optimism further supported by comments from a top Federal Reserve official who indicated that the central bank was prepared to step in if needed to support financial markets. Asian markets followed suit, with tech companies helping push Hong Kong’s stock market up by more than 2%, while other markets such as Tokyo, Shanghai, Sydney, Seoul, and several Southeast Asian cities also posted strong gains.
In Europe, London, Paris, and Frankfurt all saw significant morning rallies, and US futures pointed to further strength. Chris Weston from Pepperstone highlighted the shift in market sentiment, saying, “After a period of chaotic price action, chinks of light poke through the forest canopy providing a much-needed guide to the entities that price risk and liquidity for a living, which in turn, may see liquidity conditions improve and a relative calm return to markets.”
However, President Trump sought to temper optimism on Sunday, writing on his Truth Social platform that “NOBODY is getting ‘off the hook’… especially not China which, by far, treats us the worst!” Trump clarified that new tariffs on semiconductors would be announced in the coming week, and his commerce secretary suggested these chip levies could be in place in a month or two.
Global Tensions and the Impact on Trade
Chinese President Xi Jinping responded on Monday, stating that protectionism “leads nowhere” and that a trade war would have “no winners.” This came after Beijing imposed 125% tariffs on U.S. goods but also indicated it might refrain from further retaliation in the future. The ongoing trade war between the U.S. and China has seen Washington ramp up tariffs on Chinese goods to 145%, and recent measures have excluded China from a 90-day tariff pause announced by the White House.
Recent data showed that Chinese exports soared by more than 12% last month, as businesses rushed to ship goods before the new tariffs took effect, with the United States remaining the largest single destination for these exports. However, economists warn that shipments are expected to decline in the coming months, and it could take years for Chinese exports to recover to current levels.
Dollar Weakens, Gold Soars
The uncertainty surrounding trade policies has also impacted the U.S. dollar, with the greenback extending its losses against major currencies. The euro reached a three-year high, and the Swiss franc hit its strongest level in a decade. Treasury yields also remained under pressure, amid concerns that China and other nations could begin offloading their vast holdings of U.S. debt, which could threaten the dollar’s status as a safe-haven asset.
Amid these concerns, gold, traditionally seen as a safe-haven asset in times of financial turmoil, surged to a new record high of $3,245.75 on Monday, driven by the weakened dollar. As investors flocked to the precious metal, concerns about the long-term effects of tariff measures continued to weigh on market sentiment.
Boston Federal Reserve President Susan Collins highlighted the potential economic risks, noting that “the higher the tariffs are, the more the potential slowdown in growth as well as elevation and inflation that one would expect.” While she anticipates inflation to rise “well above” 3% this year, she did not foresee a significant economic downturn in the immediate future.
With the global economic outlook uncertain and the trade war intensifying, investors are keeping a close eye on further developments, particularly in the areas of tariffs, inflation, and central bank actions.
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