Global equities surged today, and a chaotic bond selloff stabilized after US President Donald Trump announced he would temporarily reduce the hefty tariffs recently imposed on numerous countries.
However, the sharp overnight rally in US stocks and the dollar lost momentum as the trade conflict between the US and China heightened, leaving investors confused by the Trump administration’s inconsistent tariff strategy.
After a market rout that wiped out trillions of dollars from global stocks and unsettled US Treasury bonds and the dollar, Trump made a surprising announcement yesterday, declaring a 90-day pause on many of his new tariffs.
European stock markets continued their recovery this morning following Trump’s abrupt halt to steep tariffs affecting most countries.
Dublin’s ISEQ index surged 4.2%, with shares in AIB, Bank of Ireland, Kingspan, and Dalata Hotel Group all experiencing robust gains.
Earlier in Asia, Japan’s Nikkei share average soared 9% as investors took advantage of undervalued stocks following Trump’s declaration of an immediate 90-day tariff pause for many nations.
Nevertheless, Nasdaq futures fell more than 1% while S&P 500 futures were down 0.8%.
Both indexes had recorded their largest daily percentage increases in over ten years during the previous trading session.
The broad-based S&P 500 Index climbed 9.5% to 5,457, and the tech-focused Nasdaq Composite Index rose more than 12% to 17,125, while the Dow Jones jumped 7.9% to close at 40,060.
The dollar dipped 0.8% against the yen and 0.6% against the Swiss franc, unable to maintain its prior gains against these safe-haven currencies.
“I think the initial movement was primarily driven by massive short-covering, which has given the world a moment to breathe, except for China due to increasing worst-case scenario pricing,” stated Khoon Goh, head of Asia research at ANZ.
“However, now that the dust has settled, I think markets will start to determine their next steps,” he added.
Trump’s retreat on country-specific tariffs isn’t absolute.
A blanket 10% duty on nearly all US imports will remain in effect, as confirmed by the White House. Additionally, this announcement does not seem to alter existing tariffs on cars, steel, and aluminum.
He also increased pressure on China, noting that he would raise the tariff on Chinese imports to 125%, up from the 104% level that was enacted yesterday.
In response, China yesterday escalated duties on American products to 84% and imposed restrictions on 18 US companies, primarily in defense-related sectors.
Yet, for now, investors appeared to view the recent escalation of Sino-US trade tensions with a narrow perspective, primarily focusing on the 90-day period Trump has extended to various countries.
China’s CSI300 blue-chip index rose by 1%, while Hong Kong’s Hang Seng Index advanced by 2.4%.
“At least it’s reassuring that global trade won’t completely freeze,” remarked Wong Kok Hoong, head of equity sales trading at Maybank.
BONDS SELLOFF
This week’s steep bond selloff also showed signs of easing today, with the benchmark 10-year Treasury yield dropping to 4.2908%, having reached a high of 4.5150% in the previous session after rising approximately 13 basis points.
A tumultuous US Treasury selloff in earlier sessions, reminiscent of the Covid-era “dash for cash,” had rekindled concerns regarding the fragility of the world’s largest bond market.
“Persistent inflation, a patient Federal Reserve, potential foreign buyer boycotts, hedge fund deleveraging, rebalancing out of bonds into cash, and a less liquid Treasury market are all factors contributing to the rise in Treasury yields,” explained Lawrence Gillum, chief fixed-income strategist at LPL Financial.
Fed policymakers indicated they will not rush to intervene with interest rate cuts, anticipating that increased tariffs would drive up inflation, even as they express concerns that Trump’s trade policies could hinder economic growth, based on minutes from the Fed’s mid-March meeting released last night.
Markets are now factoring in approximately 80 basis points of rate cuts by December, a decrease from over 100 basis points earlier this week.
Additionally, oil prices dipped as investors grew worried about the escalating Sino-US trade war.
Spot gold continued its ascent, last seen up 1.5% at $3,128.92 an ounce.
