S&P/ASX 200 Index (ASX: XJO) investors are favouring their buy buttons today.
This comes following surprisingly rapid, positive results in trade negotiations between the United States and China.
Yesterday (overnight Aussie time), investors learned that the US agreed to cut the 'Trump tariffs' on imported Chinese goods from 145% to 30%. China, in turn, reduced its retaliatory tariffs on most imported US products from 125% to 10%.
The trade deal is not final, however, but rather runs for a 90-day period to allow for ongoing negotiations.
Commenting on the agreement on Bloomberg TV, US Treasury Secretary Scott Bessent said:
Both sides agree we do not want a generalised decoupling. The US is going to do a strategic decoupling in terms of the items that we discovered during Covid were of national security interests, whether it's semiconductors, medicine, steel.
ASX 200 lifts off on US-China tariff pause
Buoyed by news of the US-China tariff deal, the ASX 200 is up 0.6% in late morning trade on Tuesday.
That trails the much stronger gains we saw in US stock markets. The S&P 500 Index (SP: .INX) closed up 3.3% overnight, and the tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC) rocketed 4.4%.
Turning to Australia's three biggest listed companies, shares in Commonwealth Bank of Australia (ASX: CBA) are down 0.9%, changing hands for $165.68 apiece.
Shares in Australia's biggest mining stock, BHP Group Ltd (ASX: BHP), are heading the other way, up 2.3% at $39.28.
And shares in ASX 200 biotech giant CSL Ltd (ASX: CSL) are also enjoying a strong run, up 2.2% to $240.32.
What are the experts saying?
Commenting on the détente in the US-China tariff spat, Mena Theodorou, co-founder at crypto exchange Coinstash, told The Motley Fool:
The US-China trade deal signals a de-escalation of tariff tensions that have shaken markets over the past month. For markets, this could be the beginning of easing pressure on supply chains and inflation, key drivers of recent volatility and fear.
Offering a word of caution to potentially overexuberant ASX 200 investors, HSBC Bank strategists said (quoted by Bloomberg):
There's very clearly upside risk for the broader risk asset spectrum now as markets will likely extrapolate a higher likelihood of further deals in the coming weeks.
Things could easily turn out a bit bumpier in future trade negotiations, but clearly the US administration has altered its tone such that future episodes of weakness should be used as buying opportunities.
Kapstream Capital portfolio manager Kris Bernie noted that the outcome of the trade negotiations was materially better than expected (quoted by The Australian Financial Review).
"This was a far more positive outcome than I would have been expecting over any time frame," Bernie said. "The level of tariffs that were negotiated was actually below what we were expecting that would eventually be reached."
With today's tariff-reprieve rebound factored in, the ASX 200 is up 12.8% since its 7 April trade war-fuelled lows.
