Global financial markets kicked off the week with renewed confidence, as major geopolitical and economic breakthroughs brought a much-needed breath of relief to investors. At the center of this momentum was a landmark agreement between the U.S. and China to drastically slash tariffs Washington reducing duties from 145% to 30%, and Beijing from 125% to 10%. While the deal signals a meaningful deescalation of a years-long trade war, questions remain about its durability, especially given that U.S. officials have left room to reimpose tariffs if progress stalls. Nonetheless, markets cheered the shift. Wall Street saw its best day in over a month, with the Dow Jones closing up more than 1,100 points and the S&P 500 breaking above its 200-day moving average, signaling a possible shift in investor sentiment.
In Asia, optimism spread quickly though with some restraint. Chinese equities had already priced in much of the relief, especially after Beijing flagged fewer trade-related headwinds could mean less urgency for stimulus. Citi analysts pointed to weaker April inflation and PMI data, suggesting China still faces structural pressures that trade relief alone can’t solve. Oil markets also reflected this cautious optimism. After Monday’s strong rally on trade relief, crude prices slipped slightly Tuesday amid rising supply concerns and uncertainty about what happens when the 90-day truce expires. Brent and WTI both dipped around 0.3% after climbing to two-week highs.
Closer to home in South Asia, Indian markets reacted positively to a U.S.-mediated ceasefire between India and Pakistan the most significant easing of tensions between the two since the early ’90s. The truce appears to be holding after a rocky weekend, and while India remains wary of external involvement, especially in sensitive regions like Kashmir, the pause in conflict helped Nifty futures hold ground after a sharp rally the day prior. Investors are now turning their attention to Indian inflation data expected later today, which may reinforce the bullish sentiment if price pressures show further cooling.
Meanwhile, U.S. inflation data and Fed signals are now under the microscope. With CPI expected to hold steady at 2.4% annually, and core inflation at 2.8%, any upside surprise could complicate the Fed’s rate outlook. Traders began taking profits on the dollar, which had recently strengthened on easing recession fears and strong risk flows. Gold prices, traditionally a haven, struggled under the weight of resurgent risk appetite, with any direction now hinging on the inflation print.
While short-term relief has swept across global markets, the underlying fractures whether geopolitical or macroeconomic remain. These recent developments may mark progress, but the path forward demands cautious optimism, not blind celebration.
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