Breakfast News: China Trade Tensions Thaw

Breakfast News: China Trade Tensions Thaw

Source: Image Created by Jester AI.

1. Futures Fly as China and U.S. Agree to 90-Day Tariff Cut

Treasury Secretary Scott Bessent has announced a 90-day tariff pause in the U.S.-China trade war. Most reciprocal rates between the two countries would drop to 10%, from the U.S.'s 145% and China's 125%. S&P 500 and Nasdaq futures immediately flew 2.8% and 3.5% respectively in response.

• "We both have an interest in balanced trade": Secretary Bessent said "the U.S. will continue moving toward that," as the tariff battle had threatened a near-halt to $600 billion in trade with China.
• "An important first step": Chinese Vice Premier He Lifeng, who led China's delegation, described the discussion as "in-depth" and "candid," adding the two countries have agreed to set up an economic and trade consultation process.

2. More Talks on Levies Loom

Trade talks progress has boosted market sentiment, but a full deal might be a long way off. Speaking on Fox News yesterday, Commerce Secretary Howard Lutnick said "dozens" of rounds of talks between the U.S. and China could still be needed.

• Aircraft tariffs next?: We learned Friday that Secretary Lutnick has kicked off a probe into imported aircraft components. Using the same law the president used to target steel and aluminum imports – designed to protect potential threats to national security – it could lead to industry-specific tariffs.
• "The same price as the Nation that pays the lowest price anywhere in the World": On Sunday, President Trump took aim at U.S. drug prices. In a move that could set him against the pharmaceuticals sector, he said he'll limit U.S. prescription drug prices, lowering them "almost immediately, by 30 percent to 80 percent."

3. Key Earnings in Focus

CoreWeave (CRWV 5.44%), which counts Microsoft (MSFT 0.44%) as a key customer, will post first-quarter earnings Wednesday – its first report since its IPO in March. It was the first pure-AI public launch, and could set the scene for others planning to come to market later this year.

• Watch for AI-led and international growth: Thursday will bring full-year results from Chinese e-commerce and technology conglomerate Alibaba (BABA -2.76%). In its previous quarter, the company edged above expectations, with revenue from international operations up 32%. Analysts expect 6.4% year-over-year revenue growth for fiscal 2025.
• U.S. retail bellwether: On the same day, we're also due a Q1 update from Walmart (WMT 1.61%), which should give us some idea of how the retail giant is responding to international tariff pressure. An update on how it sees the latest trade talks would be welcome. Thursday will also see the latest Stock Advisor recommendation sent to members!

4. Next Up: Inflation Data Due

The April Consumer Price Index (CPI) print is due Tuesday, with analysts putting the expected year-over-year figure at 2.3%, down slightly from the previous month's 2.4%. It comes a week after the Federal Reserve held interest rates steady as chair Jerome Powell stressed the tariffs "shock hasn't hit yet."

• Factory gate prices: Wholesale inflation comes into view Thursday with the April Producer Price Index (PPI) update. A 0.3% rise, month over month, is on the cards.
• Retail slowing: Thursday also brings retail sales figures, expected to slow to a 0.1% rise over the previous month. The expected dip is mostly down to sluggish auto sales, and analysts expect a 0.3% rise excluding that.

5. Biggest IPO of 2025 So Far

Chinese battery maker CATL looks set for the world's most valuable market launch of the year, with the stock expected to commence trading on its new Hong Kong stock market listing on May 20. The launch price is yet to be decided, but is expected to be a little below the current price on the Shenzhen market of HK$263 ($33.75)

• Super-fast EV charging: In April, CATL launched its second-generation battery technology, claiming it can charge up to 520 km (323 miles) of range in only five minutes.
• U.S. blacklist: The Defense Department put CATL on a list of companies allegedly working with the Chinese military in January. CATL – which licenses its battery technology to American car makers – said the designation only prevents business with "a small number of U.S. governmental authorities."

6. Foolish Fun

Writing recently to Dividend Investor members, Fool analyst Anthony Schiavone noted "With an occupancy rate nearing an all-time high, Simon Property Group (SPG -0.20%) [reporting today] has the latitude to replace underperforming tenants with higher-quality retailers."

At your local shopping center, have you noticed higher-quality tenants (think McDonald's, Wingstop, Chipotle, Cava) replacing lower-quality retailers? Discuss with friends and family, or become a member to hear what your fellow Fools are saying!