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By Amanda Cooper
LONDON (Reuters) -A rally in global stocks and the dollar lost some momentum on Tuesday, as initial euphoria over a trade truce between the United States and China gave way to the persistent concern among investors over the impact of the standoff on the global economy.
The world's two largest economies have initiated a 90-day pause in their trade war, bringing down reciprocal tariffs and removing other measures while they negotiate a more permanent arrangement.
The agreement has reignited investor appetite for stocks, cryptocurrencies and commodities, unleashing a 3.3% rally on Wall Street the previous day.
By Tuesday, some of that enthusiasm had ebbed, leaving European stocks up 0.2% in early trading, boosted by upbeat corporate results from the likes of German pharma group Bayer and Danish wind turbine maker Vestas, which both rose 10%.
Futures on the S&P 500 and Nasdaq fell 0.4%, underscoring the caution towards U.S. assets.
"It's the pause that refreshes and makes you feel better. You just hope that there is more to come. It does show you that this administration is not immune to market volatility. It does have a breaking point," IG chief market strategist Chris Beauchamp said.
Following the Geneva talks, the U.S. said it will cut tariffs imposed on Chinese imports to 30% from 145% while China said it would cut duties on U.S. imports to 10% from 125%.
Ratings agency Fitch estimates the U.S. effective tariff rate is now 13.1%, a notable decline from 22.8% prior to the agreement but still at levels unseen since 1941 and above the 2.3% that prevailed at the end of 2024.
The U.S. government went one step further on Tuesday, announcing it will cut the "de minimis" tariff on Chinese shipments of items valued at up to $800.
The broader markets offered little reaction to this latest U.S. concession. Shares in Amazon eased 0.5% in premarket trading, following Monday's 8% rally.
FAREWELL 'CRAZY US EXCEPTIONALISM'?
Trump's unpredictable approach to the economy, trade and international diplomacy have fanned concern about the outlook for U.S. growth. Together with a lack of progress in hashing out deals with trade partners, these factors have driven investors out of U.S. assets for weeks, to the benefit of safe-havens like gold, the Japanese yen and Swiss franc.
Economists, fund managers and analysts have said that while the 90-day pause is welcome, it has not changed the bigger picture.
"When all is said and done, tariffs will still be dramatically higher and will weigh on U.S. growth," Christopher Hodge, chief U.S. economist at Natixis, said.