U.S. markets posted strong gains last week, driven by a 90-day suspension of tariffs between the U.S. and China.
The Nasdaq Composite led major indexes with a 7.15% rise, followed by the S&P 500 and Dow Jones, which gained 5.27% and 3.41%, respectively.
The agreement, reached after high-level talks in Switzerland, reduced U.S. tariffs on Chinese goods from 145% to 30%, while China lowered levies on American imports from 125% to 10%.
This de-escalation significantly boosted investor sentiment.
Additional positive momentum came from news that Saudi Arabia intends to purchase advanced U.S. AI chips, underscoring strength in the tech sector. Inflation data added to the optimistic tone, with April’s consumer price index (CPI) rising 2.3% year-over-year — slightly below estimates and marking the slowest pace since early 2021.
Producer prices also declined, with April’s PPI falling 0.5% month-over-month, indicating that companies may be absorbing costs rather than passing them on to consumers.
However, retail sales data was softer, rising only 0.1% in April versus 1.7% in March. The slowdown suggests consumers may be turning cautious after a March buying surge tied to tariff fears. Consumer sentiment fell for a fifth month, with inflation expectations jumping to 7.3%, indicating persistent economic uncertainty.
Bond markets reflected the broader shift in sentiment. While Treasury yields rose — putting pressure on government bonds — investment-grade and high-yield corporate bonds performed well in the risk-on environment. Demand for new bond issues remained healthy as investor appetite strengthened alongside equity markets.
Europe: Growth Strengthens Amid Industrial and Trade Revival
European equities followed global trends higher. The STOXX Europe 600 Index rose 2.10%, supported by de-escalation in U.S.-China trade tensions. National benchmarks also advanced: Germany’s DAX rose 1.14%, France’s CAC 40 added 1.85%, Italy’s FTSE MIB surged 3.27%, and the UK’s FTSE 100 gained 1.52%.
The UK economy grew 0.7% in Q1 — its strongest pace in a year — driven by expansion in services, exports, and investment. However, signs of labor market softening emerged, with the unemployment rate rising to 4.5% and payroll numbers falling. Wage growth also slowed, potentially easing inflationary pressures.
Despite this, the Bank of England remains cautious. Chief Economist Huw Pill noted that inflation could remain higher than expected, while other policymakers urged restraint on rate cuts until more clarity emerges.
In the eurozone, industrial output rose 2.6% in March, with Germany posting a 3.1% increase. Strong performance in capital goods and durable consumer goods pointed to a possible end to a prolonged industrial slowdown. The region’s trade surplus reached a record EUR 36.8 billion, driven by exports to the U.S., and employment continued to rise, supporting a gradually strengthening recovery across the bloc.
Asia: Modest Gains in Japan and China on Trade Relief
Asian markets ended the week higher. Japan’s Nikkei 225 gained 0.67%, while China’s CSI 300 rose 1.12%, and the Hang Seng Index advanced 2.09%. Sentiment was boosted by the tariff truce between the U.S. and China, which met most of Beijing’s key demands.
Japan, however, faced economic headwinds. GDP contracted by an annualized 0.7% in Q1 — worse than the expected 0.2% declined by weak consumption and trade concerns. Government bond yields edged higher, and the yen saw mixed movement amid easing safe-haven demand and speculation about the dollar’s direction.
In China, investor enthusiasm faded midweek as hopes for additional government stimulus diminished. The recent agreement with the U.S. reduced the urgency for further easing measures. Earlier this month, China’s central bank had cut key interest rates and reserve requirements to support liquidity, but further actions may now be delayed as broader negotiations continue.
Conclusion
Last week’s global rally was driven by a temporary easing of trade tensions and a favorable inflation outlook in the U.S. While optimism has returned, underlying challenges — from mixed consumer sentiment to slowing growth in Japan — remain in focus. Markets will closely monitor progress in trade negotiations and central bank decisions in the weeks ahead.
