Bank Stocks Rise As US–China Tariff Truce Lifts Market Confidence: What's Going On?

Shares of regional banks such as Associated Banc-Corp ASB and BankUnited Inc. BKU are trading higher Monday afternoon following news of a major tariff rollback agreement between the U.S. and China.

What To Know: The gains come as the 90-day trade truce between the two countries is expected to reduce macroeconomic uncertainty, particularly in lending and capital markets.

The tariff rollback deal, reached after talks in Geneva, cuts U.S. tariffs on Chinese goods from 145% to 30% and reduces Chinese tariffs on U.S. goods from 125% to 10%, effective May 14. Both countries signaled that the pause is aimed at stabilizing global trade and preventing further economic disruption caused by the sharp tariff hikes imposed in April. For banks, this clarity is key to improving the outlook for credit markets, deal-making and borrower confidence.

With tariffs no longer clouding the near-term economic picture, recession odds have fallen significantly. According to market data from Kalshi, the probability of a U.S. recession this year has dropped to 46%, down from 60% just two weeks ago. Banking stocks, often seen as barometers of economic health, have responded positively as investors bet on improving loan demand and reduced risk exposure.

The broader market rally also added momentum, with the S&P 500 futures gaining over 3%, Nasdaq futures rising more than 4%, and Dow futures climbing above 2.6%. Treasury yields rose and the dollar strengthened, indicating that investors are shifting back into risk assets and pulling away from recession hedges like gold.

For mid-sized banks like Associated Banc-Corp and BankUnited, which are heavily tied to regional lending and business investment activity, a more stable trade environment means stronger deal flow, reduced credit risk and better earnings visibility heading into the second half of the year.

ASB, BKU Price Action: Associated Banc-corp shares closed up 5.19% to $24.41 and BankUnited shares closed up 5.20% to $35.61, on Monday, according to Benzinga Pro.

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