Stocks bounce back in the futures market, regaining some of Friday’s lost ground after Trump softens China stance
Here we go again.
US equity markets are starting the federal holiday broadly in the green, recapturing some of the losses from Friday, after President Trump signalled some softening in his stance on China just two days after threatening an additional 100% tariff on Chinese goods. Amidst a flurry of Israel-Gaza posts, the President told his followers on Truth Social not to worry:
Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!
The re-emergence of tariffs-as-a-threat to the economy on Friday roiled traders, who have largely been treating trade hiccups as a solved problem, with the S&P 500 Index down 2.7%. That was the worst day for the index since April, when the impact of the Liberation Day tariff announcements first punctured the global economic order.
Currently, trading in the futures markets suggests that more than half of that loss could be clawed back once the full session begins, with S&P 500 futures up ~2% from the lows of last week.
High-growth winners of the AI trade were caught up in Friday’s carnage, but many of those same high-beta momentum stocks are also leading the bounce back in early trading this morning: Nvidia, Tesla, AMD, Micron, IREN and Palantir were among the most heavily traded names as of 7:05am ET, and were up between 2.5% and 6.5%.
So, where do we go from here?
In a note published yesterday, analysts at Goldman Sachs said that the policy moves suggest “a wider range of outcomes than was the case ahead of prior US-China talks over the last few months, with the possibility of greater concessions (and possibly lower tariffs) but also a risk of substantial new export restrictions and higher tariffs, at least temporarily.”
Led by the firm’s Chief Economist, Jan Hatzius, the Goldman team also noted that the events of the last few days could simply be an attempt to “gain negotiating leverage ahead of bilateral talks on the sidelines of the APEC meeting in South Korea late this month” — an interpretation that they leaned towards, most likely leading to an extension of the current tariff pause in some shape or form.
While some of the trade concerns seem to have abated in the last 24 hours, traders are continuing to bet that rare earths stocks will be ongoing beneficiaries of the US-China spat. At the time of writing MP Materials, Critical Metals, USA Rare Earth, and Lithium Americas were all trading higher. MP Materials in particular has seen a substantial amount of volume — some $93 million and change, as of 7:15am ET — more than tech giants like Palantir, Oracle, and Intel.
Last week the president decried what he described as Chinese efforts to control the pipeline of the sought-after minerals.
