Stock Market optimism fuelled by potential tariff relaxation
Hope For Trade Deal Boosts Wall Street As Inflation Worries Linger
As the week ends, Wall Street sees a wave of optimism due to signs of easing in US-China trade disputes, driving stocks higher. However, economic data indicates that President Trump's trade policy is fueling inflation.
On the last trading day, the Dow Jones Index closed 0.8% higher at 42,655 points. The S&P-500 and the Nasdaq Composite advanced by 0.7 and 0.5%, respectively.The positive sentiment stems from the easing tensions in the US-China trade dispute, which supports prices despite discouraging economic data. A total of 1,916 stocks gained, 831 declined, and 61 remained unchanged according to preliminary data. Ten-year bond yields provided some support, falling by 2 basis points to 4.44%.
Economy Braces for Inflationary Pressure
The US dollar recovered slightly, and oil prices stabilized despite higher import prices and inflation expectations pointing against further rate cuts by the U.S. Federal Reserve. A recent report shows increasing inflationary pressure due to Trump's tariffs, particularly against China, driving up import prices.
The agriculture sector is at the center of the market as the US wants to discuss agricultural tariffs and other trade barriers with the European Union in trade talks. People familiar with the matter reveal the US aims to address economic security and digitalization as well.
Although the trade issue remains unresolved, investors see reasons for optimism. A strong first-quarter earnings season and the easing of tensions in the US-China trade dispute have boosted investor confidence, according to Alexandra Wilson-Elizondo of Goldman Sachs. However, the trade dispute could pose a risk in the next 90 days, with issues such as the budget, taxes, and deregulation dominating the discussion.
Trade Disputes and Their Influence on the Market
Two of the largest cable and broadband providers in the U.S. are merging: Charter Communications is acquiring rival Cox Communications for $21.9 billion. In the deal, Cox is valued at $34.5 billion including debt. Charter Communications shares gained 1.8%. However, the technology sector may experience fluctuations based on the perceived impact on profit margins and consumer demand due to tariffs.
Despite Etihad Airways ordering 28 wide-body aircraft from Boeing, the stock lost 0.2% due to production issues and criticism over the number of planes produced, particularly following the crash of two 737 MAX aircraft in 2019, the start of the Covid pandemic, and the incident in January 2024 when an Alaska Airlines Boeing plane lost an emergency exit door.
Investors are assessing the risks associated with tariffs, including potential price increases, supply chain disruptions, and the impact on consumer demand. Companies heavily reliant on international trade are particularly scrutinized. The overall impact of trade tariffs on inflation has been somewhat mixed and less pronounced than initially anticipated, with consumer expectations of prices rising at a rate of 3.2% over the next three years.
Sources: ntv.de, mau/DJ
- Wall Street
- Tariffs
- Inflation
- Trade disputes
- The ongoing trade disputes between the US and China, as well as tariffs imposed by President Trump, are raising concerns about inflation among investors, although the easing of tensions has boosted investor confidence on Wall Street.
- In the context of business and politics, understanding the impact of tariffs on both prices and consumer demand is crucial for investors, particularly for companies heavily reliant on international trade.
- As the US pursues trade talks with the European Union, addressing agricultural tariffs and other trade barriers could have significant implications for the broader economy, especially considering the influence of these issues on finance, investments, and general-news.
