US Stocks Surge as Trump Hits the Pause Button – Nasdaq up 12%
US stocks surged higher in trading yesterday after President Trump agreed to pause the majority of his tariffs for 90 days, although notably, China is left out of the reprieve. The major US indices all rallied strongly to notch up their best one-day gains in years, with the Dow closing up 7.87%, the S&P up 9.52%, and the tech-heavy Nasdaq surging 12.16%. US Treasury yields jumped higher as traders dialled back Fed rate cut expectations, particularly on the short end, with the 2-year up 18.2 basis points to 3.908% and the 10-year up 3.9 basis points to 4.331%. Oil prices gained for the first time in five days, Brent up 4.58% to $65.70 and WTI up 4.65% to $62.35, whilst gold also jumped back into recent ranges, up 3.30% to $3,082.16 by the close.
Markets Rejoice at this Trump Backflip
Traders had been waiting a long four trading days for it, but we at last got the backflip from Donald Trump that many of us had been waiting for last night. His about-turn on tariff implementation has led to a surge higher in risk products after a turbulent few days, but now adds more uncertainty to markets going forward. Trump’s decision was probably driven, at least partially, by the chaos that we have seen in markets over the last few days. White House officials are claiming that it is all part of the plan, as it forced other countries to the negotiating table, but not many in the market are buying that particular ‘asset’ at the moment, as Trump had continually advised that tariffs were here to stay. The issue moving forward is how much traders can rely on updates from the administration for long-term trading decisions, or whether they can afford to ignore them in the short term. It can only lead to more volatility as we move forward and more cross-jurisdiction trading opportunities as different deals are made.
Inflation Data in Focus on the Calendar Today
Asian markets are set to open on a much more positive note today after President Trump’s tariff delay. The reaction to those updates from the US session is expected to dominate the coming trading day, although there are some key fundamental data releases that will also have an effect. The Asian session will have a heavy focus on Chinese markets, not only as they were left out of any tariff reprieve, but also as key inflation numbers are due out in the form of CPI (exp 0.0% y/y) and PPI (exp -2.3% y/y) midway through the session. Later in the day in the European session, we hear from RBA Governor Michele Bullock when she speaks in the Melbourne evening, before we then hit the US session and the main data event of the week, the US CPI update. Expectations are for the CPI to show a 0.1% m/m increase, the Core CPI a 0.3% m/m increase, and the year-on-year data to come in at +2.6%. The weekly unemployment claims are also out at the same time, but in the current environment, expect the impact to be relatively short-term as the market continues to react to tariff updates.
