(Bloomberg) -- The dollar soared and government bonds sold off as markets reacted to a de-escalation in the trade war between China and the US, which agreed to temporarily lower some tariffs for 90 days.

Most Read from Bloomberg

A New Central Park Amenity, Tailored to Its East Harlem Neighbors As Trump Reshapes Housing Policy, Renters Face Rollback of Rights Is Trump’s Plan to Reopen the Notorious Alcatraz Prison Realistic? What’s Behind the Rise in Serious Injuries on New York City’s Streets? NYC Warns of 17% Drop in Foreign Tourists Due to Trump Policies

A gauge of dollar strength rose as much as 1% and the yen, a traditional haven, plunged as progress in talks stoked appetite for risk assets. The US 10-year yield climbed seven basis points to 4.45%, its highest in nearly a month, while stocks got a boost on both sides of the Atlantic.

It’s a potential pivot point for markets, which have been roiled by US President Donald Trump’s attempts to rewire global trade. He targeted China with particularly punitive tariffs, sparking a trade war and fears of a recession.

“This kind of coordinated tariff relief, even if temporary, changes the investment landscape,” said Nigel Green, chief executive officer of deVere Group. “It clears a path for businesses to recalibrate their outlook, and for markets to rally on something more than just hope.”

After weekend talks in Geneva, the US and China issued a joint statement indicating that they would temporarily lower tariffs on each other’s products for 90 days. It buys the world’s two largest economies three more months to resolve their differences.

In the US, Nasdaq 100 futures surged as much as 3.9% while S&P 500 futures rose 3.1%. Europe’s Stoxx 600 index climbed as much as 1.2% but gains were tempered by a drop in pharmaceutical stocks as Trump said he planned to order a cut in US prescription drug costs.

Still, the move toward de-escalation of trade tariffs spurred some big sector-level moves in Europe, with shipping stocks including Danish container giant A.P. Moller-Maersk A/S surging 13% and Germany’s Hapag-Lloyd AG up around 10%. Automakers Stellantis NV, Mercedes-Benz Group AG and BMW AG all rose over 5%.

“These are cuts in tariffs which are much deeper than what was expected,” said David Kruk, head of trading at La Financiere de L’Echiquier. “For those who were bearish since the tariffs announcement, this is a real pain trade. There is no more dip to buy so if you were not invested, it’s really hard to go in now.”

Havens Slide

The Swiss franc and euro also fell against the greenback following the announcement. The common currency, which had emerged as a haven amid the rout in US assets, fell as much as 1.5% to $1.1084, putting it on track for its worst day this year.

Story Continues

“This is positive for G-10 risk especially the Antipodean currencies and the US dollar,” said Valentin Marinov, head of G10 FX strategy at Credit Agricole SA. “Easing US growth fears should further help restore market confidence in the USD-denominated assets.”

Traders rushed to pare wagers on the extent of interest-rate cuts from major central banks this year, as concerns over the economic outlook ebbed.

Swaps now favor a quarter-point reduction in September from the Federal Reserve, compared to as soon as July last week. The European Central Bank is expected to cut rates by around 50 basis points for the remainder of the year, versus more than 60 basis points at Friday’s close.

Still, the relief for US assets may prove temporary. Even before Monday’s announcement, investors were warning that the US administration’s aggressive trade policies exposed the risk of significant overweights to the region, meaning outflows would likely endure even if trade tensions dissipated.

“We believe concerns around the US hard-data outlook persist, and potential asset allocation shifts away from US assets remain medium- to longer-term headwinds for the greenback,” said Mohamad Al-Saraf, an analyst at Danske Bank.

--With assistance from Kit Rees, Julien Ponthus and Vassilis Karamanis.

(Updates prices throughout.)

Most Read from Bloomberg Businessweek

US Border Towns Are Being Ravaged by Canada’s Furious Boycott How the Lizard King Built a Reptile Empire Selling $50,000 Geckos With the New York Liberty, Clara Wu Tsai Aims for the First $1 Billion Women’s Sports Franchise Maybe AI Slop Is Killing the Internet, After All Pre-Tariff Car Buying Frenzy Leaves Americans With a Big Debt Problem

©2025 Bloomberg L.P.

View Comments