Euro zone bonds rise as fears over tariffs on Chinese electronics ease

Shares in Asian tech companies that supply Apple rise 

Euro area government bond yields rose on Monday, after falling on Friday. Earlier on Monday, shares in Asian tech companies that are major suppliers to companies like Apple rose. (AP Photo/Seth Wenig)

Euro area government bond yields rose on Monday, after falling on Friday, as possible exclusion for Chinese electronics from steep US import tariffs eased fear about the adverse impact of US trade action on the global economy.

The US exempted smartphones and computers from what it called "reciprocal" tariffs, providing a potential reprieve for major technology firms. However, US president Donald Trump said levies would be likely at some point.

Germany's 10-year yield  - the euro area's benchmark - rose 4.5 basis points to 2.57% after dropping 5.5 bps on Friday.

Earlier on Monday, shares in Asian tech companies that are major suppliers to companies like Apple rose after the US government granted temporary exclusions from steep tariffs on smartphones, computers and some other electronics imported largely from China.

Shares in Foxconn, Apple's  largest iPhone assembler, rose as much as 7.8% before trimming gains to close 3% higher. Contract laptop maker Quanta   closed up 5.8% and Inventec   - which also makes artificial intelligence servers - rose 4.1%.

China's Goertek  and Lens Tech  both rose by more than 7% before also trimming gains. Both firms are Apple suppliers.

Shares in South Korea's Samsung Electronics, which supplies Apple and is also the second-ranked smartphone vendor in the US market, were up 1.5%.

"We view the dizzying weekend tariff news as a step forward net positive for Apple as well as other tech names as it gives some flexibility and allows for China negotiations to hopefully take place in the coming months," Wedbush Securities analyst Dan Ives said in a note.

Analysts have warned that US prices of iPhones could surge, given Apple's high reliance on imports from China. Apple chartered cargo flights to ferry 600 tons of iPhones, or as many as 1.5 million, to the US from India, Reuters reported last week.

US president Donald Trump said on social media on Sunday the electronics products excluded from his reciprocal tariffs "are just moving to a different Tariff 'bucket," and would be reviewed along with semiconductors in a national security trade investigation into the sector.

Executives in the electronics sector lamented the Trump administration's regular policy shifts.

Renaud Anjoran, a partner of Agilian, a contract manufacturer of electronics in the southern Chinese manufacturing hub of Dongguan, said keeping up with the changes was "exhausting".

"All the customers are basically in panic mode and everybody's busy just following up and reading the news, and contacting and talking to people but no decisions, a lot of things are on hold, that's the situation now," he said.

Shares of some chipmakers bucked the trend, after Mr Trump said on Air Force One that he would announce a tariff rate on imported semiconductors over the next week, though he added there would be flexibility on some companies in the sector.

Shares in TSMC, the world's largest contract chipmaker, closed 2.7% lower despite having opened higher, while memory chipmaker SK Hynix fell 0.5%.

Alex Huang, vice president of Mega International Investment Services, said the market on Monday morning was reacting to Mr Trump's exemption announcement, but the reaction may be too early as details are still to come out.

"It's impossible that semiconductors will be exempt from the tariffs, as that would eliminate the need for any bargaining chips in talks with the United States," he added.

TSMC is due to report first-quarter earnings on Thursday. 

Reuters