Dollar, US Futures Decline on Tariff Uncertainty: Markets Wrap
(Bloomberg) — The dollar and futures on the S&P 500 slid on Monday as uncertainty over trade policy damped sentiment toward US assets and raised the prospect of heightened volatility across global markets.
Contracts on the US benchmark were down 0.7% while Nasdaq 100 futures slipped 0.9%. The Japanese yen, Swiss franc and the euro led gains against the dollar as a broader gauge of the greenback declined after gaining last week. Bitcoin tumbled nearly 5% to fall below $65,000 while gold and silver climbed.
The moves indicated investors were beginning to price in a higher risk premium for US assets. Hours after the Supreme Court struck down his sweeping reciprocal tariffs on Friday, President Donald Trump imposed a new 10% global levy and vowed to use other powers to maintain his signature tariff policies. On Saturday, he said he would raise that new tariff to 15%, stoking fresh economic turbulence.
A gauge of Asian equities climbed as much as 1% on Monday amid expectations the court ruling will be particularly beneficial for two of the region’s biggest economies — China and India — which had been hit the hardest by Trump’s tariffs onslaught. Morgan Stanley economists say the weighted average tariff rate for Asia will fall to 17% from 20%.
“The broad dollar decline likely reflects the fresh injection of policy uncertainty the ruling entails,” Goldman Sachs Group Inc. strategists including Kamakshya Trivedi wrote in a note. “Policy uncertainty is a particularly important channel for the dollar as it can negatively influence investor and business activity. The dollar has depreciated in response to large tariff changes in both directions.”
Investors remained eager to learn more about Trump’s new game plan given the consequences it will likely have not just for the US and the Federal Reserve’s monetary policy, but also for global economies and corporates. Though there are other ways in which he can introduce import taxes, the court ruling invalidates a large portion of the tariffs that he has rolled out in his second term.
A gauge of Hong Kong-listed Chinese stocks was the top gainer among key Asian indexes on Monday as mainland equity markets shut for holidays. The US court ruling comes just weeks before Trump’s planned visit to China. He lands in Beijing on March 31, the first trip by an American president since his last visit in 2017.
“Asia and emerging markets are probably the biggest beneficiary of this temporary pullback in terms of tariffs,” Helen Zhu, chief investment officer at Nan Fung Trinity HK Ltd., said on Bloomberg Television.
Elsewhere in markets, oil fell as investors weighed the odds of a nuclear deal between the US and Iran. Equities also jumped in Taiwan as trading resumed after a weeklong holiday.
What Bloomberg’s Strategists Say…
“Global trade uncertainty is back as an issue for investors and that’s bad news for US assets. The dollar’s slide this morning has the potential to extend, and the S&P 500’s underperformance relative to peers will become more entrenched as investors price in the impact.”
—Garfield Reynolds, MLIV Asia Team Leader. Click here for the full analysis.
The S&P 500 added 0.7% Friday, notching its best week since Jan. 9, with optimism over the Supreme Court’s tariff ruling offsetting worries over heightened tensions between the US and Iran. An ETF tracking emerging markets hit all-time highs. The dollar slipped 0.2%, trimming its weekly advance to 0.6%.
The yield on 10-year Treasuries rose two basis points to 4.08% in a volatile session Friday following mixed growth and inflation data before the tariff ruling added uncertainties over any potential budget shortfall. Cash trading of Treasuries in Asia was closed on Monday due to a holiday in Japan.
The friction over tariffs spilled out Sunday as Europe’s trade chief said he’ll propose halting ratification of a deal struck with the US, while India postponed talks to finalize an interim trade deal. Senior US officials said Trump’s tariff defeat at the Supreme Court won’t unravel deals negotiated with US partners.
Those deals — which the administration made with partners including China, the European Union, Japan and South Korea — remain in place, US Trade Representative Jamieson Greer said Sunday on CBS’s Face the Nation.
“We’ve got so much experience of Trump now that we don’t think he’ll take this lying down,” said Nick Twidale, chief market analyst at AT Global Markets. “The increased uncertainty and question marks around what Trump will do next outweigh any potential positives from lower tariffs and potential paybacks.”
Stocks
S&P 500 futures fell 0.7% as of 12:56 p.m. Tokyo time Australia’s S&P/ASX 200 fell 0.7% Hong Kong’s Hang Seng rose 2.3% Euro Stoxx 50 futures fell 0.4% Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.3% to $1.1821 The Japanese yen rose 0.5% to 154.30 per dollar The offshore yuan rose 0.1% to 6.8892 per dollar Cryptocurrencies
Bitcoin fell 3.9% to $64,980.19 Ether fell 4.4% to $1,864.74 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.08% Friday Australia’s 10-year yield declined one basis point to 4.71% Commodities
West Texas Intermediate crude fell 1.1% to $65.73 a barrel Spot gold rose 1.2% to $5,167.81 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael G. Wilson, Ruth Carson, Matthew Burgess, Gabrielle Ng and Joanne Wong.
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