Trump's China Deal Boosts Markets, But What's Next for Baba and Tencent?

Markets welcomed the newly announced trade agreement between the US and China, but upcoming reports from major Chinese firms like Alibaba and Tencent might offer additional insights into the impact of the ongoing trade tensions.

The Beginning of Positive News

Markets surged on Monday following the weekend announcement of a , with high-level representatives from both countries meeting in Switzerland agreeing to a 90-day moratorium on the imposition of extreme tariffs. However, levies will still be applied, with the US taxing Chinese imports at 30% and China taxing US goods at 10%. The agreement also maintained the de minimis rule, which exempted shipments under $800 from customs duties, and is likely to have impacted companies like Temu and Alibaba. Furthermore, the deal did not address sector-specific tariffs, such as the 25% tariff on steel and aluminium imports.

The deal cut tariffs more than expected, and market optimism was supported by the conciliatory when announcing the plan's details. Both sides hailed "substantial progress" and committed to further negotiations to resolve remaining differences. Traders clearly interpreted the agreement as a sign of de-escalation from the Trump Administration and a potential precursor to additional deals to reduce tariffs, especially following the recent framework agreement with the UK. During media appearances, Bessent also said that 10% was a "floor" for tariffs and suggested that the 90-day period could be extended if necessary to complete negotiations.

Chinese Earnings in Focus

Investors will closely scrutinise in light of the deal to assess the impact of the tariffs on their outlook. While the massive tariffs were announced after the end of the last quarter, "front-loading" orders could have affected earnings. CEOs might also provide additional insights into the outlook, though they are likely revising their earnings statements in light of the recent deal.

of CNY 6.34 per share, up from CNY 5.26 per share a year ago. Revenue is expected to have increased by 10% to CNY 175.5 billion. Gaming activity is expected to remain relatively stable despite economic challenges, with both domestic and international gaming income growth anticipated to be similar.

to CNY 12.81 per share from CNY 10.14 per share in the same quarter of the previous year. Revenue is expected to see a more modest increase of 8.2% to CNY 240 billion. With over 60% of its sales coming from the domestic market, traders will closely monitor the company's earnings to assess the impact of the economic situation in China, while investors will be looking for updates on the company's diversification efforts.

Baba Broadening Ascending Wedge Complete?

With the potential completion of a broadening ascending wedge pattern at $95, the door has opened for Alibaba's stock to potentially reach the 2025 peak of $150 and extend to a 2021 high of $182. However, if the bulls fail to reclaim the nearby peak, prices might revert to the $120 support and even break lower to the $100 handle. At that level, the pattern's failure might determine whether the correction phase is over and the bottom is in at $58, or if an attempt under the lower ascending trendline brings the bottom into focus.

Source: SpreadEX / BABA

Key Takeaways

Markets welcomed the announcement over the weekend of a US-China trade deal, but the upcoming earnings reports from major Chinese firms like Alibaba and Tencent will provide more insights into the actual impact of the ongoing trade tensions. Still, the conciliatory tone adopted by both the US and China suggests potential for further negotiations and reduced tariffs, which may boost market optimism should the two Chinese giants report strong earnings.