Markets Celebrate Temporary Truce in Trade War and Reach Multi-Month Highs
Market news 13 may
Monday, May 12, 2025. Global equity indices posted strong gains today, buoyed by an unexpectedly large temporary tariff rollback between the U.S. and China, alongside encouraging geopolitical developments.
Growth Driver: 90-Day Tariff Rollback
Late last week, Washington and Beijing announced a mutual reduction of import duties for a three-month period. The U.S. cut its tariffs on Chinese goods from 145 % to 30 %, while China lowered its duties on U.S. products from 125 % to 10 %. Though these measures are temporary, markets immediately priced in the potential relief for supply chains and corporate costs. As a result, in a single session:
Dow Jones gained over 1,100 points,
S&P 500 rose 3.3 %,
Nasdaq Composite jumped 4.4 %.
Additionally, the U.S. Treasury Secretary’s remark that the talks were “very robust and productive” further fueled intraday optimism.
Geopolitics and Risk Appetite
Alongside this easing of U.S.-China tensions, geopolitical pressures also receded:
India and Pakistan agreed to an immediate ceasefire along their border,
Ukrainian President Zelensky announced a May 15 visit to Istanbul for direct talks with President Putin.
These developments supported risk-on sentiment, tilting investors toward equities and away from safe-haven assets.
Fed Comments and Inflation Watch
Amid the rally, Federal Reserve Governor Lisa Kugler cautioned that even with tariff cuts, U.S. trade policy could stoke inflation and prompt companies to delay investments or adopt less efficient workarounds. Her warning of potential “significant effects on productivity” gave bond markets reason to pause.
Key Economic Calendar This Week
All eyes are on U.S. inflation and retail data:
Tuesday, May 13: April CPI (est. +0.3 % m/m; +2.4 % y/y) and core CPI (+0.3 % m/m; +2.8 % y/y).
Thursday, May 15: April retail sales (+0.1 % m/m; ex-auto +0.3 % m/m), Producer Price Index, and industrial production.
Friday, May 16: Existing-home sales (+3.1 % m/m to 1.365 M), building permits (–1.2 % m/m to 1.450 M), and the preliminary May University of Michigan consumer sentiment index (est. 53.3).
Markets currently assign just 11 % probability to a 25 bp Fed rate cut at the June 17–18 meeting.
Q1 Earnings Season
As Q1 earnings season winds down, of the 412 S&P 500 companies reporting so far, 78 % have beaten consensus EPS estimates. Bloomberg Intelligence now forecasts Q1 earnings growth of +6.7 % y/y, down from +11.1 % expected in early November. Full-year S&P 500 profit growth is projected at +9.4 %, compared to +12.5 % in January.
The “Magnificent Seven” (AMZN, META, AAPL, TSLA, NVDA, GOOGL, MSFT) closed up between +2 % and +8 %.
Semiconductors (MCHP, LRCX, TXN, AMAT, etc.) gained +7 % to +10 %.
Conversely, utilities and gold miners underperformed on rising bond yields: XEL fell 4 %, Gold Fields Ltd. and AngloGold Ashanti plunged 9 %–10 %.
Overseas, European and Asian indices also rallied: Euro Stoxx 50 (+1.56 %), Shanghai Composite (+0.82 %), and Nikkei 225 (+0.38 %) all hit multi-week highs.
Bond Market Moves
U.S. 10-year Treasury yields rose to 4.571 % (a four-week high).
German 10-year Bund yields reached 2.65 % (monthly high).
U.K. Gilt yields climbed to 4.655 % (3½-week high).
ECB Governing Council member Martins Kazaks noted markets are pricing in an 83 % chance of a 25 bp rate cut at the June 5 ECB meeting.
Short-term optimism, driven by a temporary tariff truce and reduced regional conflicts, propelled markets to fresh multi-month highs. Yet Fed warnings and looming inflation and macro data remind investors that risks remain. In the coming days, market participants will look to corporate reports and official statistics for confirmation of this market rebound.