Morning Note: A Round-Up of Market News.
Market News
A flight from risk assets has accelerated this morning with investors moving into safe haven assets as the fallout from President Trump’s tariffs deepened after China announced retaliatory measures.
China’s policymakers discussed measures to stabilise the economy and markets in the face of the tariff onslaught, including frontloading stimulus plans. Vietnam offered to remove all levies on American imports. Both Japan and India signalled no retaliatory action, while seeking trade talks with the US.
Scott Bessent rejected the idea that tariffs will cause a US recession. He told NBC that more than 50 countries had called the administration, but any talks are going to take time. However, Bill Ackman, an ally of the president, said the tariffs are a “mistake” and urged Trump to call a 90-day time out, and he was joined in his criticism by Stanley Druckenmiller.
Analysts and economists have raised their recession probability and brought forward calls for a rate cut. Trump also called on the Fed to ease interest rates and “stop playing politics.” Fed Chair Jerome Powell said the economic impact of tariffs will probably be significantly larger than expected, and that the Fed can wait for more clarity before adjusting. However, expectations for rate cuts have increased – the yield on two-year Treasuries, the most policy sensitive bonds, are down 20 basis points this morning to 3.45%. The 10-year Treasury is trading at 3.9%; this compares to a high of 4.8% back in January.
Volatility has increased – the VIX is now at its highest level since March 2020 – and is expected to remain so.
Equity markets continued to tumble this morning. A gauge of Asian shares fell by almost 8%, the worst intraday drop in more than 16 years: Nikkei 225 (-7.8%); Hang Seng (-12.5%); Shanghai Composite (-7.3%). Markets in Europe have also opened sharply lower – the FTSE 100 is currently 5% lower at 7,629 – while the S&P 500 futures are currently predicting another 5% drop at the open this afternoon.
The dollar was mixed against major peers, with traditional haven currencies like the yen and Swiss franc outperforming.
After Friday’s fall, the gold price has steadied at $3,020 an ounce. Its safe haven status continues to be supported by central bank buying. The PBOC – China’s central bank – added gold for a fifth month in March.
The oil price continued to slide – Brent Crude is currently $63 a barrel – as OPEC+ increases production and the tariffs stoke recession fears. Key OPEC+ nations reiterated the need for members to adhere to oil output quotas, calling on non-compliant countries to submit compensation plans by 15 April.
Keir Starmer will announce measures this week to support UK businesses in light of US tariffs, he wrote in the Telegraph. Sterling trades at $1.2910 and €1.1710.
Source: Bloomberg