Global equity markets staged a rally as optimism about an easing of American trade tensions with China and better-than-expected US jobs data alleviated some anxiety about tariffs.
Investor sentiment changed at the start of the trading day on Friday when the commerce ministry in Beijing said it was “evaluating” an offer from Washington to hold talks over President Trump’s 145 per cent tariffs.
Confidence was further boosted by US non-farm payrolls adding 177,000 new hires last month, beating expectations. The stand-out performer in stock market terms was the FTSE 100, which by the close in London had marked 15 days of consecutive gains, its longest winning run yet.
Marco Rubio, the US secretary of state and now acting national security adviser, set the tone of the day when he told Fox News that China was “reaching out”. He said: “They want to meet, they want to talk. We’ve got people involved in that.”
In a change of language to previous statements denying that any contact had been made between the two sides, Beijing confirmed that talks about talks were under way, but said it was the White House that had “reached out”.
“China has noted the repeated statements from senior US officials expressing a willingness to negotiate with China on tariff issues,” the ministry said. “At the same time the US side has recently taken the initiative to relay messages to China through relevant channels expressing a desire to engage in talks. China is currently evaluating this matter.”
President Trump’s tariffs policy has morphed into a specific trade war with China since early April
STR/AFP/GETTY IMAGES
One significant US tariff that came into force on Friday was the cancellation of the “de minimis exception”, which allowed packages from China valued at under $800 to enter tariff-free. It had benefited online purchases from companies such as Shein and Temu.
Paul Nolte, a senior adviser and market strategist at Murphy and Sylvest, a wealth manager, said: “The fact that China is willing to come to the table is encouraging. But right now, it’s talk. Let’s see what happens next.”
Trump inaugurated his tariffs policy on April 2, which he dubbed “liberation day”, raising import taxes on goods from countries around the world using a formula based on the size of each country’s trade surplus with the US. In China’s case that amounted to an additional 54 per cent on tariffs left behind by President Biden.
Since then, the policy has morphed into a specific trade war with China, which unlike other countries almost immediately imposed retaliatory tariffs of its own. Most of the other “additional tariffs” have been suspended but those on China have been raised further, to 145 per cent.
The fallout from the trade war has already begun to cause economic pain to the US itself as big companies such as Apple that have most of their production in China scramble to source products from elsewhere and importers and retailers put up prices.
The tariffs have also had an effect in China, where factories have begun to suspend production and put workers on furlough. The authorities have, however, used the tariff war as an opportunity to deflect responsibility for broader, longstanding economic problems and to mount a propaganda campaign reminding citizens of previous efforts to “humiliate China”, saying that it would never again “kneel down”.
Despite testy exchanges between Washington and Beijing, in which each tries to make out that the other side was “blinking first”, investor sentiment improved enough to push the Nikkei 225 in Japan 1 per cent higher. Markets in mainland China were closed for a long holiday.
In Europe, stock markets opened higher on the apparent sign of direct contact between America and China and gained further momentum from the latest US jobs data and hopes that the US will avoid a recession. In Germany the Dax closed up 2.6 per cent and the CAC 40 in Paris rose 2.3 per cent. In London the FTSE 100 rose 99.55 points, or 1.2 per cent, to 8,596.35.
On Wall Street, which has endured mixed earnings reports from big tech companies, not least with disappointing forecasts from Apple and Meta Platforms on Thursday, indices continued the end-of-week rally on the latest jobs figures. By the close in New York on Friday night, the S&P 500 was 1.47 per cent higher at 5,686.67 while the technology-heavy Nasdaq was up 1.5 per cent at 17,977.73.
American employers added 177,000 new hires last month, beating expectations that jobs growth would have slowed to 138,000, according to figures from the US Bureau of Labor Statistics.
New jobs in American factories and other workplaces beat expectations
RICK FRIEDMAN/CORBIS/GETTY IMAGES
Government jobs contracted by 9,000 in the month to April and are down by 26,000 since January. The newly created Department of Government Efficiency, headed by Elon Musk, has overseen a drive to reduce public spending.
Samuel Tombs, chief US economist at Pantheon Macroeconomics, a consultancy, said: “Some of the increase in employment in April … reflects a burst of pre-tariff activity, which will unravel over the next couple of months. It would be astonishing if payrolls in the logistics, manufacturing and retail sectors were unscathed by the looming decline in goods entering US ports over coming weeks.”
April’s stronger-than-expected employment figures will further fuel speculation that the US Federal Reserve could keep interest rates on hold this year, at a range of 4.25 per cent to 4.5 per cent. Economists think that Trump’s tariffs will put upwards pressure on US inflation, which dropped to 2.4 per cent in March from 2.8 per cent in the previous month.
In a post on Truth Social in response to the jobs figures, Trump said: “Consumers have been waiting for years to see pricing come down. NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!”
