Wall Street rallied sharply on Monday, erasing recent losses fueled by escalating trade tensions between the United States and China. The Dow Jones Industrial Average closed at 46,067 points, a 1.3% increase, while the S&P 500 reached approximately 6,655 points, up 1.6% and the Nasdaq 100 surged to around 24,750 points, posting a 2.2% gain.
The rebound followed a period of significant market volatility triggered by President Trump’s threat to impose 100% tariffs on all imports from China. This initial shock resulted in a broader sell-off across asset classes, with the cryptocurrency market particularly hard hit, reportedly wiping out billions in paper gains and potentially jeopardizing business operations. The subsequent recovery demonstrates a pattern of short-term volatility followed by index rallies, a phenomenon analysts have termed the “TACO-Trade” – a cyclical response to Trump administration trade policy.
However, analysts warn against dismissing the underlying risks. Christine Romar, Head of Europe at CMC Markets, cautions that China possesses considerable leverage in the negotiations due to its dominant position in the supply of rare earth minerals. This gives Beijing a powerful bargaining chip and the country is unlikely to concede easily under the mounting pressure. “The Eurozone lacked such an asset when facing US tariffs and was compelled to accept them” Romar noted, highlighting the asymmetry of power in the current negotiations.
A full-blown trade war over these critical resources could trigger a more substantial and protracted sell-off in global stock markets, far beyond the recent rebound. The fragility of the recovery underlines the deep uncertainty surrounding the US-China relationship and the potential for further disruptions to the global economy.
The euro weakened to $1.1566 on Monday evening, reflecting the heightened risk sentiment and ongoing trade anxieties. Gold prices experienced a robust increase, reaching $4,108 per fine ounce (+2.2%), valued at €114.20 per gram. Crude oil prices also rose, with Brent North Sea crude fetching $63.49 a barrel, a $0.76 or 1.2% increase from the previous day’s close.