Trump on Friday said he would impose an additional 100% tariff on China’s US-bound exports, along with new export controls on critical US-made software in retaliation for Beijing tightening rare earth restrictions.
The revived trade tensions sent the S&P 500 and the Nasdaq, both previously on track to register weekly gains, to suffer their steepest weekly declines in months.
However, in a more conciliatory tone over the weekend, Trump posted that “it will all be fine” and the US did not want to “hurt” China.
Yesterday, China blamed the US for the escalation. However, Beijing did not roll out further countermeasures ahead of a potential meeting between Trump and his Chinese counterpart later this month, which the US president threatened to cancel.
“The path for markets in the near term depends heavily on the path escalation takes,” analysts at UBS Global Wealth Management said in a note.
“More generally, we think that the bull market remains intact and so pullbacks should offer an opportunity for investors, who are underallocated to equities, to consider adding long-term exposure,” they said.
The AI-driven momentum and optimism around US rate cuts have helped markets in recent months.
At 5.23am, Dow E-minis were up 448 points, or 0.98%, S&P 500 E-minis were up 89.75 points, or 1.36%, and Nasdaq 100 E-minis were up 462 points, or 1.89%.
Investor focus is also on the earnings season that kicks off this week with major US banks including JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo set to release quarterly results tomorrow.
The season will be a crucial litmus test for US stock markets and it will provide fresh clues on the economy at a time when major official data releases remain delayed due to a government shutdown that is currently in its 13th day.
In premarket trading, shares of “Magnificent Seven” companies rose following Friday’s pullback.
Nvidia was up 3.7%, Tesla gained 2.8%, Microsoft advanced 1.5%, while Meta and Alphabet rose 1.6% each.
In the Middle East, Hamas handed over the first group of the last surviving Israeli hostages, a key step in ending two years of devastating conflict in Gaza as part of a ceasefire deal pushed by Trump.