Morning Note: A Round-Up of Market News
Market News
Markets continue to exhibit heightened volatility as China vowed to “fight to the end” if the US insists on new tariffs. Earlier, Trump threatened to slap additional 50% import taxes on Beijing, while readying negotiations with Japan and Israel. The EU proposed counter-levies of 25% on a range of US goods, but spared whiskey. Scott Bessent says everything is on negotiating table and stated that up to 70 nations want to negotiate over tariffs. Meanwhile, the Trump team is considering a new exporter tax credit to offset the effects of retaliatory measures.
The US 10-year Treasury yield jumped nearly 20 basis points to around 4.2% yesterday, rebounding from a 6-month low as investors fear China may begin to reduce its holdings. The rise in the yield comes despite traders increasing their bets on rate cuts by the Federal Reserve, driven by expectations of a weakening economy. Fed funds futures now suggest roughly a 50% probability of a quarter-point rate cut at the Fed’s May meeting and are pricing in at least five rate cuts over the course of 2025. Fed member Austan Goolsbee told CNN there’s a lot of anxiety among business leaders that tariffs may send inflation back to 2021-2022 conditions.
US equities ended a volatile session little changed last night – S&P 500 (-0.2%); Nasdaq (+0.1%). Rumours that Trump was pausing tariffs sparked a sharp rally, only for gains to evaporate after the White House’s denial. But investors didn’t go back to selling at the same unbridled pace as last week, keeping benchmark US indexes seesawing between gains and losses.
In Asia this morning, the Nikkei 225 bounced by 6% on news that Japan is to get priority in trade talks after Trump-Ishiba call. Smaller increases were seen elsewhere in Asia: Hang Seng (+0.5%); Shanghai Composite (+0.7%). The PBOC weakened the yuan’s daily fixing.
Equities have also rebounded in Europe – the FTSE 100 is currently 1.2% higher. The UK 10-year gilt yield has risen back towards 4.6%, tracking gains in US Treasuries. Sterling trades at $1.2780 and €1.1645. Gold has moved back above $3,000 an ounce, rebounding from a near four-week low hit in yesterday’s session, while Brent Crude has risen to $64.50 a barrel.
Source: Bloomberg