President Trump returns from the weekend insisting there will no change of course on his tariffs, sending global stock markets plummeting.
US President Trump started the week answering questions about his new tariffs which were announced last week. Despite the sharp falls in global stock markets which greeted his policy announcement last week, he made it clear there would be no change of course, stating that his tariffs are medicine for the US economy that will eventually make the country richer. Markets greeted his statement with further sharp falls, with the Japanese Nikkei 225 Index closing 7.8% lower and ending the day in bear market territory. The MSCI Asia Index has just completed its worst day since the financial crisis of 2008. The major US equity index, the S&P 500, is also trading in bear market territory, down by more than 20% from its record high made in December 2024. Here are the total declines in some major equity indices or their futures off-hours at the time of writing since the highs of late 2024 / early 2025:
Canada - TSX: -10.38%
Korea - KOSPI: -13.07%
It is clear that President Trump is hoping that at least the major trading partners of the USA will come to the table and propose lowering their own tariffs on US imports in return for the US reducing or completely removing its new tariffs. However, there is little sign of that happening yet. If it does happen, there will be gains for US companies and the US economy, but if major global economies hold firm, it will be very negative for everyone. President Trump is making a big political gamble which might wreck his Presidency.
Treasuries are rising as capital markets move away from risk and into fixed income, with Treasury Yields declining very strongly. The US 2-Year Treasury Yield has fallen from 3.90% to 3.48% since the tariffs were announced, which is an enormous drop. Trend traders will enjoy this short position today, with US 2YR micro futures very affordable. Even the 10-Year Treasury has fallen from 4.16% to 3.90% over the same period.
Most commodities are also lower:
- WTI Crude Oil
has reached prices not seen since the Coronavirus crash 4 years ago, below $60 per barrel.
- Gold
is holding up quite well, only about $150 off the record high made less than two weeks ago.
Softs are generally in decline, but few are reaching long-term low prices.
In the Forex market, price movements are less dramatic, but there continues to be plenty of activity in the market, with the Japanese Yen and Swiss Franc continuing to strengthen as safe havens, while the commodity currencies decline. The strongest major currency since today's Tokyo open is the Swiss Franc, while the Australian Dollar is the weakest major currency, putting
the AUD/CHF currency crossin focus and following the same pattern as the end of last week.
Traders are best advised to be looking for short trades in US equity indices and treasury yields, and in the Australian Dollar against safe havens like the Swiss Franc in the Forex market, but with very small positions. A sudden news announcement of tariff talks could cause a move of 2% / 3% and shoot right through your hard stop loss. So, it is best to trade very small, if at all.