Markets rally on tariff de-escalation. Focus on US CPI

Show notes

The week kicked off with the news that the US and China would announce ‘substantial’ progress in trade negotiations — and the progress was indeed close to substantial. Markets rallied with joy, gold and the franc softened, the US dollar rallied, US treasuries retreated.
Gains are being given back today as European and US futures are also down — a bit of a hangover after yesterday’s party, a moment to question how good the news really is, and how long the truce might last. Recent days have brought major progress to the table, this isn’t the end. Talks could be interrupted at any point, as strategic decoupling between the US and China will continue for national security reasons — keeping pressure on key sectors, including semiconductors. The so-called de minimis exemption that allows cheap Chinese products into the US remains at 120% — meaning Shein and PDD won’t massively benefit from the tariff relief. And of course, uncertainty over what happens after the 90-day pause will keep many companies in wait-and-see mode, delaying investment decisions until a more durable truce emerges.
Today, investors are walking into the US CPI update with a lighter heart. There’s a chance that the 90-day tariff pause — along with the latest dip in consumer sentiment — could help temper inflationary pressures in the US and give the Fed more room to act, if needed. A softer-than-expected data could further fuel appetite while an unpleasantly stronger read could be taken with a pinch of salt.
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