Trump's tariff reversals leads equity markets to record gains

Good morning

Another day, another load of turmoil in the markets.  European equities were down again yesterday roughly reaching the -3% area, US markets were faring slightly better with Dow Jones and Nasdaq actually making small gains.   Then Trump hit us with a 90 day suspension of tariffs over 10% which sent stocks soaring, Dow Jones finished up nearly 8%, S&P 500 almost 10% and Nasdaq closed over 12% higher.  Futures are pointing to large gains in European markets this morning.

Asian equities followed suit overnight, Nikkei was up 9% although Hang Seng could only muster a 3% rise and China’s CSI 300 was up just 1.4%.  The lacklustre performance followed Trump’s decision to increase China tariffs to 125%, after China raised its own tariffs on US goods to 84%.  Trump says he is open to talks with China but neither side look like they are going to back down.  Trump is trying to encourage firms to manufacture in America but there is no way I see that they could replicate the vast factories with millions of workers that China has perfected. 

Currency markets are rightly unsettled.  After GBPUSD hit a high of 1.2860 yesterday morning it had dropped to mid-1.27’s through the day, only to revert back to 1.2865 or so after Trump.  Different fortunes for EURUSD, it hit highs yesterday just short of 1.1100 but actually fell on Trumps announcement, now 1.0970.  GBPEUR which had tested as low as 1.1550 yesterday is now just above 1.1700.   USDCNY traded up to almost 7.3500, its weakest level since 2007, with some talk China were selling decent clips of their vast US bond holdings.

USDJPY slipped to 144.00 yesterday afternoon, now trading up at 147.00.  CHF also weakened, USDCHF moving up to 0.8580 from a low yesterday around 0.8360.  AUD and NZD also pushed higher, GBPAUD down to 2.0760 and GBPNZD to 2.2575, still fairly elevated levels for those pairs but well off the recent highs. 

While the latest Trump announcement is helping general risk sentiment, these ‘on or off’ tariff decisions are helpful to no one.  They also raise questions of whether the tariff introductions were successful or not.  The White House says over 75 countries have come forward to negotiate on trade which should be good, but I cannot help thinking that the reversal was more down to the collapsing financial markets and rising US bond yields.  I don’t think that was the outcome Trump and his gang anticipated. 

Likewise, I’m not sure Musk foresaw his Tesla stock price falling from its Dec highs around $480 to the $220 area since he got involved with politics.  Those shares are off their lows now after a 20%+ rally yesterday but still only as high as $272, well off the $480 mark.  Musk may be a genius but he is not a politician, as evidenced by his response to Tump’s trade guru Peter Navarro when he made some disparaging remarks about Tesla.  Musk responded by saying Navarro was a ‘moron’ and ‘dumber than a sack of bricks’. 

Anyway, Trump’s ninety day suspension on these tariffs takes us to the beginning of July, which hopefully gives time for all these new trade deals to be agreed.  Otherwise, the summer holidays are likely to be somewhat ruined. 

Somewhat overshadowed by the recent tariff debacle, let us not forget that Ukraine is still very much under attack by Russia.  No sign of a peace deal yet, no sign either of a US/Ukraine minerals deal, although I’d imagine work is going on behind the scenes in this regard.  Meanwhile, Ukraine are reported to be trying to break through lines into Russia again after their Kursk offensive.  I also note that Chinese troops have been reported to have been seen in action against Ukraine, a development that no one really wants to see.  Peace is a long way off.

In football, Villa lost to a very strong, fast and organised PSG team yesterday, while Barcelona showed why they are tournament favourites with a 4-0 win over Borussia Dortmund. 

Still, enough of the Champions League.  The big match is this evening as Spurs take on Eintracht Frankfurt in the quarter finals of the Europa League.  This is Spurs only hope of getting anything this season other than a league finish below mid-table.  Fingers crossed.  Man Utd also in action, away to Olympique Lyonnais.  Ah and Chelsea, odds on favourites for the Europa Conference title, travel to Leiga Warszawa in their quarter final. 

In golf, the US Masters begins today at Augusta, the first players tee off at 12:40 UK time.   I always look at golfing odds and then decide there is no way I can pick a winner out of such a large field.  You can bet each way (top ten places), or on a player finishing in the top six, which could be a better if overall less profitable method.

I’ll be interested to hear what RBA’s Bullock has to say this morning.  This afternoon brings US CPI inflation which under normal circumstances would be pretty key but at the moment may take a back seat unless it is far away from expectations. Several Fed officials speaking this afternoon, we’ll perhaps see what their take is on the recent tariff reversals.  UK GDP is out early tomorrow morning.

It is eldest son’s 21st birthday today so I’ll possibly be knocking off early if he’s back from work to celebrate.  Incredible how time flies and how humans grow. He was born eight weeks early, weighing just over 4lb, but now towers over me at 6’3” in his socks.  I like to think he still looks up to me though.  

Have a great day…

-  11.00 RBAs Bullock speaks

-  13.30 US CPI, initial jobless claims

-  14.00 BoEs Breeden speaks

-  14.30 Feds Logan speaks

-  15.00 Feds Bowman speaks

-  17.00 Feds Goolsbee speaks

-  17.30 Feds Harker speaks

-  19.00 US monthly budget statement

-  23.30 NZ business PMI

-  07.00 UK GDP, industrial production