Global stock markets are rising as Trump eases his tariff threat against China

Global stock markets ended the week at record highs after US President Donald Trump indicated in an interview with Fox News that he would prefer not to impose tariffs on China. The comment sparked optimism among investors and led to a strong rally in financial markets.

Trade policy under scrutiny

In his statement, Trump emphasized that he is open to negotiations with China, although he previously threatened broader trade tariffs. The president has so far refrained from imposing tariffs on Europe, but again warned Canada and Mexico of import duties. Deutsche Bank analysts point out that the postponement of tariffs gives China an opportunity to consider policy changes and start negotiations. According to them, this could temporarily reduce escalating trade tensions.

Positive reactions on the markets

Trump’s statements caused a sharp rise in global stocks. Europe’s Stoxx 600 index hit a record high and posted its fifth consecutive week of gains. In the United States, the S&P 500 rose to a new peak, while stock markets in emerging economies posted their strongest weekly gains since July 2023.

The dollar fell to a one-month low as investors shifted to higher-yielding assets. Emerging-markets currencies benefited, with a broad increase in value against the US dollar.

Movements in the currency market

The Japanese yen strengthened significantly against the dollar after an unexpected decision by the Bank of Japan to raise interest rates. This was the first rate hike since July and reflects a change in the central bank’s monetary policy. This development strengthened the yen’s position on the international currency market, marking an important shift for the Asian economy.

Eurozone growth and corporate results

In the eurozone, the private sector returned to growth in January. The Composite Purchasing Managers’ Index rose to 50.2, a level that suggests a slight economic expansion and surprised analysts positively. This indicator points to a possible revival of economic activity in the region, despite the uncertainties surrounding trade tensions.

At company level the picture was mixed. Shares of Burberry Group Plc rose after better-than-expected sales results, while Ericsson AB fell due to disappointing quarterly results. In Italy, shares of Banca Monte dei Paschi di Siena SpA, which made a takeover bid for Mediobanca SpA, fell. However, Mediobanca shares benefited from the announced deal.

Changing dynamics in trade

The softening in Trump’s trade rhetoric gives investors hope that further escalation in trade tensions can be prevented. At the same time, other threats, such as possible tariffs against Canada and Mexico, remain prominent. Global markets remain sensitive to changes in Trump’s policies and signals about negotiations with other economic powers such as China and the EU.

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