(Bloomberg) — Stocks advanced after President Joe Biden signaled he’d reconsider China tariffs imposed by the Trump administration. The dollar and Treasuries retreated.
The S&P 500 rose, following a late Friday rebound that saved the index from a bear market. Shares of big banks rallied after JPMorgan Chase & Co.’s chief Jamie Dimon said “storm clouds” over the US economy may dissipate. Tech companies underperformed. The euro jumped after European Central Bank Chief Christine Lagarde said higher interest rates are coming in July. The yuan climbed.
Traders interpreted Biden’s comments that he’ll discuss the US tariffs on Chinese imports with Treasury Secretary Janet Yellen when he returns from his Asia trip as a signal there could be a reversal of some Trump-imposed measures.
“Today’s appetite for risk has been sparked by the US President’s announcement that trade tariffs imposed on China by the previous Trump administration will be discussed,” said Pierre Veyret, a technical analyst at ActivTrades. “Investors see this as a possible de-escalation of the trade war between the two economic superpowers, and this has revived trading optimism towards riskier assets.”
Separately, Biden said the US military would intervene to defend Taiwan in any attack from China, comments that appeared to break from the longstanding policy of “strategic ambiguity” before they were walked back by White House officials. Meanwhile, his administration announced that a dozen Indo-Pacific countries will join the US in a sweeping economic initiative designed to counter China’s influence in the region.
In a keynote speech at the World Economic Forum’s annual meeting in Davos, Ukrainian President Volodymyr Zelenskiy reinforced his call for embargoes on oil, technology and other trade with Russia, and said there should be no exceptions in sanctions on the country’s banking sector. International Monetary Fund Chief Kristalina Georgieva acknowledged that risks to the global economy have intensified but pushed back against concerns of a recession.
Equities have been volatile as investors assess the impact of China’s Covid policies and monetary tightening on the outlook for the world’s largest economies. Beijing reported a record number of cases, reviving concerns about a lockdown, and adopted multiple measures to further stabilize the economy.
Minutes of the most recent Federal Reserve rate-setting meeting will give markets insight this week into the US central bank’s tightening path. St. Louis Fed President James Bullard said the central bank should front-load an aggressive series of rate hikes to push rates to 3.5% at year’s end, which if successful would push down inflation and could lead to easing in 2023 or 2024.
“As macro-economic concerns stemming from aggressive monetary tightening, the Russia-Ukraine conflict and China’s stringent Covid lockdowns persist, we anticipate great volatility in the market,” Louise Dudley, portfolio manager global equities at Federated Hermes Ltd., said in a note.
Here are some key events to watch this week:
- Eurozone S&P Global PMIs Tuesday
- US new home sales, S&P Global PMIs Tuesday
- Reserve Bank of New Zealand rate decision Wednesday
- FOMC minutes Wednesday
- ECB publishes its Financial Stability Review Wednesday
- Bank of Korea rate decision Thursday
- US GDP, initial jobless claims Thursday
- US core PCE price index; personal income and spending; wholesale inventories; University of Michigan consumer sentiment Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.7% as of 9:30 a.m. New York time
- The Nasdaq 100 rose 0.1%
- The Dow Jones Industrial Average rose 0.8%
- The Stoxx Europe 600 rose 0.7%
- The MSCI World index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.6%
- The euro rose 0.8% to $1.0652
- The British pound rose 0.7% to $1.2562
- The Japanese yen rose 0.1% to 127.73 per dollar
Bonds
- The yield on 10-year Treasuries advanced four basis points to 2.82%
- Germany’s 10-year yield advanced four basis points to 0.99%
- Britain’s 10-year yield advanced six basis points to 1.95%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures rose 0.7% to $1,860.80 an ounce
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