Trump Makes Conciliatory Remarks on U.S.-China Tariff War
Says of Powell, "No Intention to Dismiss"
Besant Also Says Situation with China Will "Ease in the Near Future"
Relief Rally Unfolds as Markets Reassured
Treasuries and Dollar Rise... Tesla Surges Over 3%
All three major indices on the New York Stock Exchange surged sharply in early trading on the 23rd (local time). An easing rally is underway as U.S. President Donald Trump made conciliatory remarks regarding the U.S.-China tariff war and Jerome Powell, Chair of the U.S. Federal Reserve (Fed). The Nasdaq index is currently soaring by nearly 4%.
As of 9:53 a.m. on the same day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average (Dow) was up 996.2 points (2.54%) from the previous trading day, standing at 40,183.18. The large-cap S&P 500 index jumped 159.22 points (3.01%) to 5,446.98, while the tech-heavy Nasdaq index soared 633.66 points (3.89%) to 16,934.08.
President Trump's statements are driving the stock rally. The previous day, he expressed optimism about the U.S.-China tariff negotiations and made it clear that he had no intention to dismiss Chair Powell. President Trump said negotiations with China are "going well" and that the current tariff rate of 145% is "too high" and will "come down significantly." Regarding Chair Powell, whom he had pressured for a rate cut just a day earlier, Trump said, "I have no intention of firing him," adding, "I just hope he will take a more active approach to cutting rates," thus taking a step back. It is analyzed that Trump sought to calm the markets as the U.S.-China tariff war escalated into a hardline standoff and as "Powell-bashing" led to simultaneous declines in U.S. stocks, bonds, and the dollar, causing turmoil in financial markets.
Francois Limoux, a strategist at La Francaise, commented, "While I believed the likelihood of Powell actually being dismissed was close to zero, the easing of the investigation into China has clearly provided relief."
The market also rose the previous day, buoyed by U.S. Treasury Secretary Scott Besant's outlook for an easing of the U.S.-China tariff war. Before President Trump's remarks, Secretary Besant attended a private investor event hosted by JPMorgan Chase in Washington, D.C., where he stated that the tariff war between the U.S. and China is unsustainable and "the situation will ease in the very near future." He acknowledged that negotiations between the two countries would be "difficult," but also said, "Neither side believes the current situation is sustainable." He also clarified that President Trump's policy goal is "not U.S.-China decoupling."
As President Trump and Secretary Besant have both moved to calm investor anxiety, not only stocks but also U.S. Treasury prices and the dollar are rising. Yields, which move inversely to bond prices, are climbing, especially for longer-term bonds. The yield on the U.S. 10-year Treasury, the global benchmark, is down 11 basis points (1bp=0.01 percentage point) from the previous day, standing at 4.27%. This indicates that the prices of long-term Treasuries, which had plunged due to Trump-related risks, are recovering. The yield on the 2-year Treasury, which is sensitive to monetary policy, is hovering at 3.78%, the same level as the previous day. The dollar index, which measures the value of the U.S. dollar against six major currencies, is up 0.35% from the previous day at 99.03.
However, extreme volatility in the market, with stocks rising and falling based on tariff news, is expected to continue going forward.
Strategist Limoux pointed out, "It is really difficult to predict the final stage of the trade dispute," and added, "Investors should prepare for a scenario in which the U.S. imposes tariffs at a level the global economy can manage three months from now."
U.S. manufacturing and services data released in the morning both indicated that the economy remains in an expansion phase. The S&P Global composite Purchasing Managers' Index (PMI) for April, released in the morning, stood at 51.2. Although this was lower than the March figure of 53.5, it remained above 50, indicating continued economic expansion. The manufacturing PMI rose from 49 in March to 50.7, signaling a shift from contraction to expansion. The services PMI fell from 52.8 to 51.4 over the same period, but still indicated expansion.
The Fed's Beige Book, a report on economic conditions, will be released in the afternoon.
By stock, U.S. electric vehicle maker Tesla is up 3.33%. Although its first-quarter results released the previous day were weak, CEO Elon Musk announced he would significantly reduce his duties as head of the Department of Government Efficiency (DOGE) starting next month, and as tariff concerns eased, these factors acted as catalysts for the stock's rise. Apple and Nvidia, both with significant business in China, are also up 3.63% and 4.49%, respectively. U.S. aircraft manufacturer Boeing is soaring 5.19% after reporting a first-quarter loss that was smaller than market expectations.
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