Markets rally on 90-day US-China tariff truce

Good morning. Here's what happened overnight and what you need to know today.

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1.

US-China ‘Reset’: Markets rallied as the US and China agreed to temporarily roll back tariffs in what US President Trump called a “total reset”. The S&P 500 jumped 3.26%, while the Dow gained 2.81% and the Nasdaq climbed 4.35%, as investors welcomed a 90-day truce between the world’s two largest economies. Under the deal, the US will cut tariffs on Chinese goods to 30% from 145%, while China will lower levies on US goods to 10% from 125%. Trump said he may speak with Chinese leader Xi Jinping later this week. Treasury Secretary Scott Bessent noted that talks on a “more fulsome agreement” will begin in the coming weeks, but warned it would be “implausible” for US tariffs on China to fall below 10%. When asked whether tariffs could return to 145% if no deal is reached, Trump said, “No… you know at 145% you’re really de-coupling because nobody is going to buy.” (Capital Brief)(White House)(Trump Presser)(Bloomberg)(WSJ)

2.

Drug crunch: Trump signed an executive order directing drugmakers to cut US prescription drug prices to match those paid in other countries, giving them 30 days to offer new prices or face limits on what the government will pay. In a social media post, Trump called for cuts of “59%, PLUS!”. If companies do not make “significant progress” within six months, the government will use rulemaking to align prices with international levels and may consider drug importation, export restrictions and direct-to-consumer purchasing. The order appeared broader than industry expected, but was seen as less severe once details emerged. Trump said he was prompted by a friend who paid USD88 for a weight loss injection in London versus USD1,300 in the US. Health Secretary Robert F Kennedy Jr will lead price talks, focused on Medicare and Medicaid. Global pharmaceutical stocks initially fell, then rebounded. (Capital Brief)(White House)(Reuters)

3.

Circumvented captive: Hamas released Edan Alexander, the last living American citizen held hostage in Gaza, following direct talks with the United States that, according to media reports, largely circumvented the Israeli government. The 21-year-old dual US-Israeli citizen and IDF soldier was seized during the 7 October, 2023 Hamas-led attack and spent 583 days in captivity. His release came on the eve of President Trump’s Middle East trip and was confirmed by Hamas, the Israel Defense Forces and the International Committee of the Red Cross. Trump called it “the first of those final steps necessary to end this brutal conflict.” Israel said Alexander was freed “without anything in return,” crediting IDF military pressure and Trump’s diplomacy. The US has not disclosed what was promised in return. Israel has blocked aid to Gaza for over 10 weeks, with international pressure growing to allow it to resume. Fifty-nine hostages remain in Gaza. (Bloomberg)(WaPo)(NYT)

4.

Tech rethink: SEC chair Paul Atkins said he plans to establish guidelines for the distribution of crypto tokens that are securities and consider whether further exemptions are needed. He also said the SEC may tweak its rules to allow registered broker-dealers with an alternative trading system to facilitate trading in non-securities such as bitcoin or ether. Meanwhile, The Wall Street Journal reported Perplexity AI is in advanced talks to raise USD500 million ($784.8 million) in new funding led by Accel Partners, valuing the startup at USD14 billion, up from USD9 billion in December. It now has USD120 million in annual recurring revenue. Perplexity plans to launch a browser called Comet and has held talks with Apple about adding AI search features to Safari. In other tech news, Australia’s Diraq signed a letter of intent with Illinois’s quantum campus to join its “On-Ramp” program during construction. Governor JB Pritzker said the deal “cements Illinois’ position as a global quantum leader.” (WSJ)(Reuters)

5.

Battery bonanza: CATL, the world’s largest EV battery maker, has launched its Hong Kong public offering, set to become the biggest IPO of the year when it lists on 20 May. CATL aims to raise at least USD4 billion ($6.25 billion) by selling 117.9 million shares at a maximum price of HK$263 each. CATL, which is already listed on the Shenzhen stock exchange, has faced scrutiny from Washington and was added to the US’ ‘blacklist’ in January for alleged links to the Chinese military. The company denied any links to military activities and stated that the designation would have no significant impact on its business. The IPO comes as the US and China agreed to substantially reduce tariffs after talks in Geneva. JP Morgan and Bank of America are underwriting the listing despite an April congressional committee calling for the US banks to drop out of the deal. (Capital Brief)(CATL filing)(FT)

6.

Pricey Apple: Apple is considering increasing the price of its iPhone lineup for autumn, coupling the hike with new features and design changes as the company avoids attributing any price increase to US tariffs on goods from China, the WSJ reports. Despite smartphone exemptions and the tariff pause between the US and China announced Monday, Apple has remained under pressure as the trade war threatened the tech giant’s supply chain. Chief Tim Cook shifted some manufacturing for the US market from China to India, however, as Indian factories lack the capabilities to mass produce high-end iPhones, Apple will still rely on Chinese manufacturing. Apple is likely to have trouble making up for the China tariff costs by seeking savings from suppliers, resulting in the price rises. Sources told the WSJ that Apple executives are extremely reluctant to blame the price rises on tariffs as it would be negatively received by the Trump administration. (WSJ)(Capital Brief)

7.

Soft plans: SoftBank’s USD100 billion ($156.9 billion) investment in US AI infrastructure has slowed as economic risks from the tariff war hamper the project, according to Bloomberg. In January, SoftBank and OpenAI co-founder Sam Altman unveiled the Stargate project, promising immediate investment with future plans to raise it to $500 billion, but over three months later SoftBank has yet to develop a financing template, or commence detailed discussions with banks and investors. Preliminary talks with lenders which included Mizuho, JPMorgan, and Apollo Global Management, have stalled due to growing economic volatility and the emergence of cheaper AI models (like that of DeepSeek). Trump’s trade policies that would lead to higher equipment and capital costs, and the possibility of a global recession have added to the delays. Despite the delays, the parts of Stargate set in motion prior to Softbank’s involvement are moving forward, including Oracle’s sprawling AI data centre development in Texas. (Bloomberg)

8.

Era over: The Kurdistan Workers’ Party (PKK) announced it will disband after 40 years, in a historic move with significant regional security implications. Over 40,000 people have been killed since the PKK launched its insurgency in 1984. Pro-Kurdish news agency ANF published the closing statement from the PKK congress in Iraq, which declared the group had “fulfilled its historical mission” and resolved to dissolve and “end the armed struggle.” The PKK said its fight dismantled policies of “denial and annihilation,” bringing the Kurdish issue to a point of democratic resolution. Designated a terrorist group by Turkey and the US, the PKK initially fought for an independent Kurdish state, later advocating for Kurdish rights across Turkey, Syria, Iraq, and Iran. The decision follows a March ceasefire, part of talks between jailed PKK leader Abdullah Öcalan and President Erdoğan’s coalition. If successful, the peace process could boost Erdoğan’s bid for re-election in 2028. (Capital Brief)(ANF)(Reuters)