Wall Street’s main indexes opened sharply higher on Tuesday after a bruising sell-off that has wiped out trillions of dollars since last week, as investors await any sign of the U.S. opening up for negotiations over some of its aggressive tariffs.
The Dow Jones Industrial Average rose 861.5 points, or 2.27 per cent, at the open to 38827.1. The S&P 500 rose 131.3 points, or 2.59 per cent, at the open to 5193.57, while the Nasdaq Composite rose 577.8 points, or 3.7 per cent, to 16181.041 at the opening bell.
The S&P/TSX composite index was also up more than 400 points and just over two per cent just after the open.
But less than a week since U.S. President Donald Trump unleashed sweeping reciprocal tariffs that sent world markets into a tailspin, the mood remained fragile.
The VIX stocks volatility index, often referred to as Wall Street’s fear gauge, remained elevated at around 44 points at open — albeit off Monday’s peak just above 60.
U.S. 10-year Treasury yields were steady after posting their biggest one-day jump in a year on Monday. Analysts said a number of reasons may have explained the sharp rise in U.S. bond yields on Monday including investors selling their most liquid assets to make up for falls elsewhere.
Investors around the world are raising alarm bells after a third day of tariff-related market chaos, with one billionaire Trump ally even warning that not pulling back on tariffs could unleash a ‘self-induced, economic nuclear winter.’
The U.S. dollar, which has taken a beating from the tariff turmoil, remained weak against other major currencies. Safe haven currencies, including the yen and the Swiss franc, held near six-month highs to start Tuesday.
World markets get some reprieve
While fragility remains, world markets saw some reprieve on Tuesday after three days of heavy selling.
In Europe, shares rose from 14-month lows and markets in London, Paris and Frankfurt were up more than one per cent each, while oil was a touch firmer but kept Monday’s four-year lows in sight.
The European Commission, set to begin facing 20 per cent tariffs from the U.S. as of tomorrow, said on Monday it had offered a “zero-for-zero” tariff deal to avert a trade war with the United States. The commission proposed counter-tariffs of 25 per cent on a range of U.S. goods including soybeans, nuts and sausages, though other potential items like bourbon whiskey were left off the list, a document seen by Reuters showed.
Japan’s blue-chip Nikkei stock index closed six per cent higher, with U.S. Treasury Secretary Scott Bessent tasked with leading trade negotiations with Tokyo, viewed as a positive sign.
Thai stocks dropped nearly five per cent in catch-up selling from a holiday on Monday, while Indonesia returned from a week-long holiday to eight per cent losses.
“Sentiment is rebounding, perhaps on the view that Trump may focus protectionism on China and speed up trade deals elsewhere,” said Francesco Pesole, currency strategist at ING. “Markets may be erring on the optimistic side though.”
‘Battle of wills’ shaping up: analyst
China’s markets rose only modestly after the country’s sovereign wealth funds stepped in to buy shares. Chip-export-dependent Taiwan’s benchmark tumbled five per cent, a day after suffering its worst fall on record.
China is hitting the U.S. where it hurts by imposing a 34 per cent reciprocal tariff on imports and restrictions on key rare-earth minerals. In response, U.S. President Donald Trump is threatening an additional 50 per cent tariff if China fails to withdraw its measures. Andrew Chang explains the escalation of the trade war between the world’s two largest economies and the potential impact of China’s retaliation.
The Chinese yuan fell to 7.3677 per dollar in the offshore market, the weakest in two months, before rebounding to be slightly stronger than Monday’s close at 7.3393.
Trump dug in his heels over China, vowing additional 50 per cent levies if Beijing does not withdraw the retaliatory tariffs of 34 per cent it announced last week for the United States. If Trump sticks to his plan, total new U.S. duties on Chinese goods this year could rise to 104 per cent by Wednesday.
Trump imposed less expansive tariffs on China in his first term as president, some of which successor Joe Biden maintained.
But with global supply chains in jeopardy, Beijing is under pressure to respond.
“The U.S. side’s threat to escalate tariffs against China is a mistake on top of a mistake, once again exposing the American side’s blackmailing nature,” China’s commerce ministry said in a statement.
“If the United States insists on having its way, China will fight to the end.”
Trump’s affinity for tariffs risks derailing China’s largely export-led economic recovery given that no other country comes close to the consumption power of the U.S., where Chinese producers sell more than $400 billion worth of goods annually.
“If the tariffs keep going up and up, it becomes a battle of wills and principles rather than economics,” said Xu Tianchen, senior economist for China at the Economist Intelligence Unit.
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Trump’s tariffs will be felt particularly keenly as they target the two main strategies Chinese exporters have used to blunt the impact of the trade war: shifting some production abroad and boosting sales to non-U.S. markets.
Chinese President Xi Jinping this month is scheduled to visit Malaysia, Vietnam and Cambodia, three economies that gained from relocation by Chinese manufacturers to avoid U.S. sanctions during Trump’s first term, but which now face steep levies of their own.
Trump has remained defiant that tariffs are needed as “medicine” to alleviate American trade deficits — something most economists don’t believe is an indicator on its own of economic health.
There have been some signs of disquiet expressed by a small number of Republican lawmakers on Capitol hill, as well as influential Wall Street figures Bill Ackman and Jamie Dimon and Trump’s own billionaire adviser Elon Musk.