Yesterday’s decision by President Trump to postpone reciprocal tariffs on countries who agree to not fight back and come to the bargaining table continues to send shockwaves through world markets. Following on from one of the strongest single days in US history where the S&P 500 gained 9.5% and the NASDAQ soared 12.1%, the Nikkei gained 9.1% and Sydney moved up 4.5%.
In Europe this morning, the Dax is up 5.5% and the FTSE is up 4.2% on reports that the EU is looking to postpone retaliatory tariffs for 90 days as well. The Euro is up 1.3% while the Pound is up 0.9% on the news.
There is an old saying that goes something like bull markets up like an escalator and down like an elevator and bear markets go down like an escalator and up like an elevator. In less than a week we have seen both. This remains a time of high volatility and uncertainty. Trump paused but did not cancel the reciprocal tariffs, negotiations with several countries are yet to take place, and he remained belligerent toward China.
This morning finds US upward momentum fading with index futures falling 1.5% to 2.3%, the NASDAQ declining the most. Capital continues to flow into defensive havens with Gold adding another 2.1% to yesterday’s gain, Silver climbing 1.7% and the Japanese Yen gaining 1.6%. Bonds continue to bounce back. The US 10-year treasury note yield has slipped back under 4.35% but remains in the upper half of the 3.90% to 4.50% range of the last few days. Commodity action is mixed, with Crude Oil down 2.5% and Copper up 4.3%.
Although they remain likely to be overshadowed by tariff and trade news, inflation numbers have been coming out showing upward pressure on prices weakening and downward pressure increasing. US Consumer Prices (2.4% vs street 2.6% and previous 2.8%) landed better than expected. Last night, China announced weaker than expected Consumer Prices (-0.1% vs street +0.1%) and Producer Prices (-2.5% vs street -2.3%) Investors may note that while weakening inflation gives central banks room to cut interest rates, falling prices may also be seen as a sign of weakening demand.
Starting tomorrow, corporations have their chance to weigh in on the current business environment as several big US Banks and Asset Managers including JPMorgan Chase, Wells Fargo, Morgan Stanley and Blackrock, kick off earnings season. Lost in the shuffle yesterday, Delta Air Lines and Walmart dropped their guidance for the coming quarter, essentially saying the current environment is too unpredictable to commit to anything.