From Marc to Market:
....MUCH MOREOverview: A couple of hours before the US announced a postponement in the reciprocal tariffs on everyone but China, President Trump sent social media message encouraging people to buy stocks. And the postponement sent US equities soaring, but it does not set right with many observers. In fact, the US hiked the tariff on China further, and the next result is that the average effective tariff in the US is now 24% rather than 27% as it would have been with the reciprocal tariffs. It is still a threat to growth and price stability. The dollar is sharply lower today. The euro, Swiss franc and Japanese yen are up over 1%. The euro is probing the $1.1050 area, around a cent above yesterday's settlement. Sterling is trading above yesterday's high near $1.2865. The PBOC set the dollar's reference rate higher for the sixth consecutive session, but the onshore yuan is a little firmer today.
While Asia Pacific and European stocks rallied strongly today, US index futures are lower. The S&P 500 and Nasdaq futures are around 2% lower, to pare yesterday's heady gains. European bond benchmark 10-year yields are broadly mixed. The yield on the 10-year Gilt is off 12 bp (to 4.65%), while the 10-year Bund yield is up 4 bp (to 2.63%). The peripheral premiums are narrower. The 10-year US Treasury yield is almost six basis points lower ~4.27%). Gold is extending yesterday's nearly $100 an ounce rally. It is up another $30 today, trading near $3113 late in the European morning. May WTI took out yesterday's highs to reach about $63.35 but is now back below $61........CNY: Between last Friday's low (~CNH7.24) to Tuesday's high (~CNH7.43), the dollar rallied about 2.6%. Since March 20, we have been tracking what appeared to greater flexibility in the PBOC's setting of the dollar's reference rate. We suspected something was up even before the US reciprocal tariffs were announced. Many argue that China is engineering a large devaluation of the yuan to offset or at least blunt US tariffs. Those that tie the PBOC moves to the US tariffs see that as the trigger. But our observation of the fix suggests that a large devaluation may not be in the works. After all, with US tariffs now above 100%, how much devaluation is needed? The 5%-10% some speak of will do little in this respect....
