Asian stocks rose Tuesday after learning that China and the United States announced a 90-day trade war ceasefire agreement, however, analysts warned that President Donald Trump's policies could still change rapidly due to a curb of uncertainty over the long-term outlook.
The United States and China said in a joint statement that they would reduce tariffs on Chinese goods to 30%, after the tariffs reached 145%. At the same time, China also said it would reduce the tariffs imposed on U.S. goods from 125% to 10%. The 90-day suspension provides time for more discussions after the weekend negotiations in Geneva, Switzerland, which the U.S. says have made "substantial progress."
Stephen Innis of SPI Asset Management said the results exceeded most expectations, which gave investors confidence.
Don't misunderstand it, this is a carefully planned diplomatic method. However, its visual effect is quite good and its impact is quite far-reaching. This shows that even in the current government, it is aware of the drag on the economy of ongoing tariffs, he said in his comments.
Tokyo's Nikkei 225 index rose 1.8% to 38,326.37 points, while South Korea's Kospi index also rose slightly by 0.2% to 2,612.30 points.
The Hang Seng Index in Hong Kong rose 3% after Chinese and U.S. officials announced yesterday that they would suspend the imposition of tariffs and gradually lower the tariffs, and fell 0.7% today to close at 23,374.06 points.
The Shanghai Comprehensive Index rose slightly, up 0.2%, to 3374.93 points. Taiwan's Taiwan Stock Index rose sharply, reaching 1.9%.
Australia's S&P/ASX 200 index rose 0.6%, climbing to 8281.40 points.
On Monday, the world's two largest economies reached an agreement to temporarily reduce most of their tariffs.
The S&P 500 soared 3.3%, bringing it only 5% away from its all-time high in February. After falling nearly 20% last month, the market is looking forward to a possible reduction in tariffs after President Trump reached a trade deal with other countries, pushing stocks further upside.
At 5,844.19 points, the core index of the numerous 401(k) accounts has rebounded to levels at Trump's "liberation day" on April 2, when he announced tough global tariffs, raising concerns about a possible homemade bitter fruit recession.
The Dow Jones Industrial Average soared, reaching 1,160 points, or 2.8%, and finally closed at 42,410.10 points. The Nasdaq Composite Index also rose sharply, with an increase of 4.3%, and closed at 18,708.34 points.
The global economy may consume more fuel when the tariff burden is reduced, so the agreement on tax cuts exceeding many investors' expectations has also pushed up oil prices. However, on Tuesday morning, oil prices fell. U.S. benchmark crude oil prices fell 6 cents to $61.89 a barrel. International standard crude oil Brent crude price fell 8 cents to $64.88 a barrel.
The value of the US dollar has increased compared to currencies such as the euro, the yen and the Swiss franc. At the same time, the U.S. Treasury yields also rose as the market generally expects the Fed to not need to lower interest rates significantly this year as previously expected.
On Tuesday morning, the dollar against the Japanese yen fell to 147.98 yen, down from the previous 148.47 yen. However, the dollar exchange rate rose slightly from $1.088 to $1.1101 compared to the euro.
The measures announced on Monday, according to Credit Suisse's chief economist Jonathan Pinkel, is expected to contribute 0.4 percentage points to U.S. economic growth this year. This is already a considerable share, and every percentage point is crucial given the US economy shrinking at an annual rate of 0.3% in the first three months of this year.
The negotiations between Beijing and Washington still face many major challenges.
The temporary pause between the United States and China comes after the U.S. announced a deal with the United Kingdom last week that would reduce tariffs on many British imports to 10%, but it will take weeks to complete the finalization of all details.
However, many Asian countries have not negotiated an agreement to reduce tariffs on their own.
The economic report released later this week, covering inflation and U.S. consumer sentiment, may reveal the extent of damage caused to the economy by tariff uncertainty.
Many retailers have risen because a large portion of the goods they sell come from China and other Asian regions. For example, Best Buy shares rose 6.6%, while Amazon shares rose 8.1%.
Shares of small U.S. companies rebounded on Monday. The survival of these companies relies on the strong U.S. economy, rather than those larger and more defensive competitors, so small-cap stocks in the Russell 2000 index rose 3.4%.
Many clothing companies, especially those who purchase raw materials from China, have also achieved profit growth. For example, Lululemon's share price rose 8.7%, while Nike's share price rose 7.3%.
Travel agencies have seized on the expectation that lowering tariffs may attract more customers to spend on travel. Carnival shares rose 9.6%, while Delta's shares climbed 5.8%.
