From Marc to Market:
Overview: The dramatic price action in throughout the capital markets after last week's US tariff announcements, China's retaliation, and yesterday's US threat of another 50% tariff on China has calmed today, in a nervous way. Indeed, the calm could be shattered by one comment or social media post by the US President. Japan pushed back against some of "facts" the US cited, like the tariff Japan puts on US autos, and unlike the several countries that either eliminated tariffs on US goods or offered to do so, Japan reportedly has moved to the front of the line in trade talks. This encourages the view that the US tariffs are indeed a negotiating tactic, and the administration is willing to see its other goals pared (revenue and onshoring) to secure a "beautiful deal." This has eased market anxiety, but the impulsive nature of the administration means that market participants may still lack much conviction.
The US dollar is consolidating but with a soft bias against the G10 currencies, with the beaten up Australian and New Zealand dollars leading the way. Emerging market currencies are mixed. Of note, the PBOC set the dollar's fix above CNY7.20 for the first time since September 2023 amid speculation that Beijing will seek a weaker yuan to blunt the impact of the tariffs. The large Asia Pacific equities rallied. The Topix jumped 6.25% and the index of mainland shares that trade in HK and Australia's composite rose more than 2%. Europe's Stoxx 600 is snapping a four-day, roughly 13% drop, with a modest gain of nearly 1.5%. US index futures are 1.2%-2.0% better. The recovery in US Treasury yields and local equities saw Japan, Australia, and New Zealand's 10-year yields jump 14-17 bp earlier today. European bonds are mixed with peripheral premiums have edged in a little. The 10-year US Treasury yield is little softer near 4.17%. Gold is firm. After reaching almost $2957 yesterday, it has recovered to almost $3016 today and is near $3004 late in the European morning. May WTI traded a little below $59 yesterday but recovered today to around $61.75 but could not sustain the momentum and is trading around a dollar off its highs. US-Iranian negotiations are to start shortly, and the US has bolstered its military presence in the region....
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