What happened before the market's "180-degree turnaround"?

Optimistic expectations for trade prospects have risen, leading to a significant rebound in U.S. stocks last night.

Overnight, the U.S. stock market experienced a dramatic reversal, recording its largest single-day gain since April 9, with all three major indices closing higher, while gold prices plummeted over 3% from historical highs.

According to media reports, the White House is finalizing a "framework agreement" with Japan and India to avoid the implementation of large-scale tariffs. However, the reports also cite informed sources indicating that these agreements are likely just broad "frameworks" or "memos" for future agreements, and reaching a final trade agreement may still take months.

The source commented:

"I wouldn't even call it an agreement. Basically, it's just an agreement to negotiate an agreement."

"They will start rolling out a series of things, you know, signing some documents to indicate that we will begin negotiations."

In the context of the current trade negotiations lacking substantial progress, will this "framework agreement" turn out to be just another "pie in the sky"?

Yellen's "significant progress" promise 10 days ago left market expectations unmet

This is not the first time optimistic news about trade agreements has surfaced.

According to media reports, about 10 days ago (shortly after the April 9 announcement of tariff policies), U.S. Treasury Secretary Janet Yellen told Wall Street executives that there had been "significant progress" in trade agreement negotiations with major trading partners such as India, Japan, South Korea, and Australia.

These optimistic remarks gave investors hope, but until this Monday, there had been no news of progress regarding the agreements mentioned by Yellen, leading to unmet market expectations and diminishing confidence in dollar assets, resulting in a "free-fall" decline in U.S. stocks, with the Dow Jones Industrial Average plunging by as much as 1,200 points.

According to sources, Japan seemed to be close to reaching an agreement previously, but ultimately there was no substantial progress. An investor told the media that he learned from Japanese trade officials that the White House had been revising the exact terms.

The "repeated uncertainty" of tariff policies seems to have eroded Wall Street's confidence, and concerningly, ambiguity and indirectness have always been part of Trump's negotiation style. As long as trade negotiations remain unclear, investors will continue to face significant uncertainty.

Some analysts point out that the signals of a "framework agreement" being drafted may be a means for the White House to stabilize the market and alleviate market concerns, indicating that the White House recognizes the need to take more measures to assure businesses and financial markets that this trade war, which is shaking the global economy and could cause greater shocks in the coming months, is nearing its end.

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