Markets Cheer US-China Agreement to Cut Tariffs

The biggest news yesterday emerged after weekend talks in Geneva between representatives from the US and China. Keep reading to find out more about this, important economic announcements from the week ahead and news from last week's earnings announcements.

This material is for informational purposes only and is not financial advice. Consult a financial advisor before making investment decisions.

Wall Street Soars on Tariff Reprieve

Yesterday, the world’s two largest economies announced they would slash tariffs for the next 90 days. The US will lower tariffs on Chinese exports from 145% to 30%, whilst China will cut its retaliatory duties from 125% to 10%.

The news sent Wall Street soaring in Monday’s session on hopes that the US will de-escalate its trade war with China.

The Dow Jones, S&P 500 and Nasdaq Composite closed the session with gains of 2.81%, 3.26% and 4.35% respectively. These gains propelled all three indices back above the level they were prior to President Trump’s ‘liberation day’ tariff announcement on 2 April.

Megacap tech stocks were amongst the biggest beneficiaries of the news, with the so-called Magnificent Seven stocks adding an aggregate $837.5 billion in market value during the session. Gains were greatest for those with high exposure to China, with Meta and Amazon jumping 7.92% and 8.07% respectively.

Meanwhile, gold dropped 1.22% whilst the Swiss franc and Japanese yen both lost ground against the US dollar, dropping by 1.45% and 1.67% respectively, as investors scaled back exposure to safe havens. The Dollar Index, which measures the greenback against a basket of foreign currencies, rose 0.97%.

Economic Announcements

This week will see a number of important economic announcements. Today, following last week’s decision by the Federal Reserve to hold interest rates steady, investors await the latest news on inflation data from the US. 

Annual headline and core inflation in the US are both expected to have remained flat in April, unchanged from the previous month at 2.4% and 2.8% respectively.  

Then, on Thursday, the UK’s Office of National Statistics (ONS) will announce Gross Domestic Product data for the first quarter.  

This latest GDP data arrives after last week's decision by the Bank of England (BoE) to cut its base rate for the fourth time since last summer in an attempt to spur economic growth. In the first three months of the year, UK GDP is expected to have grown by 0.6% from the previous quarter and 1.2% year on year. 

As always, any deviation from the expected outcomes of these announcements could provoke a reaction in the market. 

Earnings Watch

Earnings season continued last week, with a number of US companies announcing quarterly results for the first three months of the year. Let’s take a closer look at a couple of the announcements.

Disney

On Wednesday last week, the Walt Disney Company announced earnings for its fiscal second quarter which soundly beat expectations. 

Revenue rose 7% to $23.62 billion, whilst adjusted Earnings per Share (EPS) jumped 20% to $1.45. Analysts had expected these figures to be reported at $23.14 billion and $1.20 respectively.

Amidst economic uncertainty and weakening consumer sentiment in the US, revenue for domestic parks and experiences rose 9% year on year, whilst Disney+ subscriptions grew 1% from the previous quarter, despite price increases.

In light of the positive results, Disney noted a strong outlook for the remainder of the year, raising its fiscal 2025 EPS guidance to $5.75, which would represent a 16% increase from the previous year. The entertainment giant also unveiled plans to build a new theme park in Abu Dhabi, its first such venture in the Middle East.

Nevertheless, Disney noted that it continued to “monitor macroeconomic developments for potential impacts to our business and recognize that uncertainty remains in the operating environment”.

Uber

Also on Wednesday, Uber announced mixed first quarter earnings, in which revenue missed expectations. 

Revenue rose 14% to $11.53 billion, whilst EPS swung to $0.83 from a loss of $0.32 the previous year. Although EPS soundly beat analyst expectations of $0.50, revenue fell short of the anticipated $11.62 billion.

Despite the revenue miss, Uber provided upbeat guidance for the current quarter. It said it anticipates gross bookings between $45.75 billion and $47.25 billion; analysts had been expecting $45.85 billion.

CEO Dara Khosrowshahi stated that the company views autonomous vehicles (AVs) as “the single greatest opportunity ahead for Uber”. He further noted that Uber had reached an “annual run-rate of 1.5 million Mobility and Delivery AV trips”, having already launched robotaxi rides in some US markets.

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