Stocks closed higher after a choppy trading session, falling early and then rebounding as investors made last- minute bets to position themselves ahead of U.S. President Donald Trump's sweeping tariff announcements due later in the day.
Stocks ended higher ahead of President Donald Trump’s sweeping tariff announcement. Treasury yields rose following the private payrolls and manufacturing data. The dollar fell against major currencies, while gold climbed on safe-haven demand. Oil prices edged higher.
Markets are pricing in risks of tariffs with diverging movements across regions and asset classes.
Tariffs risks saw US and Asian equities retreat while European equities outperformed.
However, most G10 currencies outperformed the USD. Commodity- linked currencies like the CAD, AUD and NOK performed best.
At 0.76 (vs 0.25 last week) our Risk Index has jumped decisively back into risk-averse territory. The Index bounced off its 100-day moving average suggesting a sustained reduction in investor risk appetite.
We are one week out from Japan’s financial year-end. An often-asked question is whether there is any seasonality in USD/JPY running into FY-end. The theory goes that Japanese companies may repatriate foreign earnings to dress up their balance sheets for the FY.
The other main development over the weekend was the formal arrest of Istanbul Mayor Ekrem Imamoglu who has been jailed on corruption charges on Sunday. The case has the potential to keep Imamoglu, who denies the charges, behind bars for years and prevent hm running from running against President Erdogan in the next election.
The pound has outperformed alongside other European currencies this month benefitting from the significant improvement in investor sentiment towards the region. It has helped to lift cable back up above the 1.3000-level for the first time since last year’s US election.
Three quick highlights from China.
A strong finish to last week by US equities helped buoy investor sentiment at the start of this week in Asia. Upside surprises in China’s cyclical data also helped boost investor sentiment. Holding back sentiment, however, were US Treasury Scott Bessent suggesting the recent US equity market rout was a healthy correction and weak Chinese house prices data showing the sector was still in a slump.
US inflation print failed to provide a sustained improvement in investor sentiment in Asia. Investors potentially view the inflation data as not being weak enough to immediately change the outlook for the Fed. US President Donald Trump’s threats of retaliatory tariffs against the EU’s counter tariffs to the US steel and aluminium tariffs are also weighing on sentiment.
