Global stocks rallied, the dollar found footing and a manic bond selloff stabilised on Thursday after US President Donald Trump said he would temporarily lower the hefty duties he had just imposed on dozens of countries.
Following a days-long market rout that erased trillions of dollars from global stocks and pressured US Treasury bonds and the dollar, Trump on Wednesday announced a 90-day pause on many of his new tariffs in a shock reversal.
The move sent Wall Street’s “Magnificent Seven” stocks tacking on more than $US1.5 trillion ($A2.4 trillion) in market value overnight and the S&P 500 and Nasdaq Composite Index clocked their biggest daily percentage gains in more than a decade.
But US futures turned lower on Thursday, with Nasdaq futures falling 0.67 per cent and S&P 500 futures down 0.17 per cent.
The dollar logged its largest one-day jump against the yen in two months and in five against the Swiss franc in the previous session, and held to most of those gains in Asia on Thursday.
Japan’s Nikkei surged 8.0 per cent, while European futures shot up.
EUROSTOXX 50 futures and DAX futures climbed roughly 9.0 per cent each. FTSE futures jumped 6.0 per cent.
“This is a piece of news that surprised market participants, given the magnitude of the move … Obviously this is a pretty strong risk-on environment we’re seeing in the aftermath of the announcement,” said Jeff Schulze, head of economic and market strategy at ClearBridge Investments.
“However, given the tariffs that have been announced and that are staying in place … that is still going to dramatically increase the average effective tariff rate in the US to close to 20 per cent.”
Trump’s reversal on the country-specific tariffs is not absolute. A 10 per cent blanket duty on almost all US imports will remain in effect, the White House said. The announcement also does not appear to affect duties on autos, steel and aluminium that are already in place.
He also heaped pressure on China, saying he would raise the tariff on Chinese imports to 125 per cent from the 104 per cent level that came into effect on Wednesday.
China on Wednesday raised additional duties on American products to 84 per cent and imposed restrictions on 18 US companies, mostly in defence-related industries.
“It is difficult to see either side backing down in the next few days. But we suspect that talks will eventually happen, although a full rollback of all the additional tariffs applied since Inauguration Day appear unlikely,” said Paul Ashworth, chief North America economist at Capital Economics.
“Our long-standing assumption that the effective tariff rate on China would settle around 60 per cent still seems like the best bet.”
Ahead of the onshore open of Chinese markets, the offshore yuan was last 0.15 per cent weaker at 7.3570 per dollar, having struck a record low earlier in the week.
A steep selloff in bonds this week also showed some signs of easing on Thursday.
The benchmark 10-year Treasury yield was last at 4.3160 per cent, having touched a high of 4.5150 per cent in the previous session and rising some 13 basis points.
A violent US Treasury selloff in the previous sessions, evoking the COVID-era “dash for cash”, had reignited fears of fragility in the world’s biggest bond market.
“Sticky inflation, a patient (Federal Reserve), potential foreign buyer boycotts, hedge fund deleveraging, rebalancing out of bonds into cash, and an illiquid Treasury market are all reasons why Treasury yields continue to move higher,” said Lawrence Gillum, chief fixed income strategist at LPL Financial.
Fed policymakers signalled they will not be quick to ride to the rescue with interest rate cuts because they expect higher tariffs to boost inflation, even as they worry Trump’s trade policy could deal a blow to economic growth, minutes of the central bank’s mid-March meeting out on Wednesday showed.
Markets are now pricing in just about 80 basis points of rate cuts by December, down from more than 100 bps earlier in the week.
Elsewhere, oil prices rose on optimism over the pause on tariffs.
Spot gold extended its climb and was last up 0.5 per cent at $US3,097.52 ($A5,031.71) an ounce.
Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national newswire and has been delivering accurate, reliable and fast news content to the media industry, government and corporate sector for 85 years. We keep Australia informed.
