(Oct 13): US futures jumped in early Asia trading as President Donald Trump signalled openness to a deal with China after a sharp escalation in trade tensions hammered stocks on Friday.
S&P 500 contracts climbed more than 1%. The benchmark slumped 2.7% on Friday, its biggest loss in six months, as Trump threatened further tariffs in response to Chinese export controls. Equity futures for Australia and Hong Kong fell, while Japan’s markets are closed for a holiday. Oil jumped more than 1% following two days of losses.
Global equities took a hit in US hours on Friday after Trump warned of a “massive” hike in levies on Chinese goods, later specifying an additional 100% tariff starting Nov 1 alongside export controls on critical software. He spoke out after Beijing earlier unveiled curbs on the export of rare earths.
Any response in Asia trading may be tempered by weekend signals from the White House that it’s open to a deal. Risk sensitive currencies including the Australian dollar edged higher in early trading Monday.
“Even though we’re logically assuming that this is another TACO moment, there is obviously now a huge chunk more trade/tariff risk and uncertainty that markets need to discount compared to where we were last week,” said Michael Brown, a strategist at Pepperstone Group. “For the time being I’d expect things to be risk-on, but cautiously so.”
The term TACO has become trader shorthand for “Trump always chickens out,” as investors attempt to look beyond the president’s bluster.
Big downward moves in risky assets have been a rarity of late, which may itself be a factor in the jarring reaction to trade tensions. Since the tariff-fueled meltdown in April, the S&P 500 has surged on optimism about AI and hopes for Federal Reserve rate cuts. The gauge is trading near one of its highest valuations in 25 years — leaving a thin cushion for bad news.
Chinese equities meanwhile have been one of the world’s best performers. Hong Kong’s Hang Seng Index has climbed 31% in 2025 as it benefited from the trade truce with the US in addition to optimism over the country’s growing heft in AI. Alibaba Group Holding Ltd has surged more than 100%, with Tencent Holdings Ltd up almost 60%. The rally comes after the Hang Seng fell for four straight years through 2023.
Whether the truce holds or collapses remains unknown, with Trump signalling Friday he could retreat from the tariff escalation if Beijing backed down from its plan to limit rare earth exports. China urged further negotiations to resolve outstanding trade issues, though said it won’t hesitate to retaliate should Washington persist in its measures. Trump and Xi are also due to meet later this month.
The uncertainty may limit the impact on Chinese equities, according to Hao Zhou, chief economist at Guotai Junan Hong Kong Ltd.
“I expect China’s markets to fall initially and then rebound with caution,” he said. “There are lot of questions left unanswered.”
Attention in Asia will also be focused on Chinese trade data later Monday. Export growth is anticipated to have picked up as non-US markets offset a slide in shipments to the US, reflecting increased transshipping and China’s push to cultivate trade with other partners, according to Bloomberg Economics.
Uploaded by Isabelle Francis