By Jamie McGeever
Orlando, Florida (Reuters) – Negotiation day
Give meaning to the forces that stimulate global markets
By Jamie McGeever, market columnist
The highest American rates in more than 100 years
On March 7, the American Treasury Scott Bessent said that the American economy could be in a “detoxification period” because it adapted to the agenda of the transformative policy of President Donald Trump. Girations at Wall Street and beyond April 3 after Trump’s world prices the day before suggests that it could be a huge and eupheism.
US shares, dollar and oil cropped on Thursday, bond yields plunged and that volatility has skyrocketed, while Trump prices during a brain stroke darkened short -term prospects for spending, investment, business benefits, economic activity and growth.
Trump’s prices on China are among the highest. Will Beijing risk devaluing the Yuan? See below to find out more, but first of all, a gathering of the remarkable movements today in the world markets.
I would love to hear from you, so please contact me with comments to jamie.mcgeever@thomsonreuters.com. You can also follow me at @RETERSJAMIE and @ reutersjamie.bsky.social.
The main movements of the current market
* S&P 500 plummets 4.8%, DOW 4%, NASDAQ 6%and the Small Cap Russell 2000 6.6%index. * This is the worst day for S&P 500, Dow and Russell 2000 in June 2020 and the steepest fall in Nasdaq since March2020. * The group “Magnifiment Seven” large tech actions is back on a lower market. The Roundhill “Mag 7” FNB reaches a record of 6.9%, dropping from the December peak at 25%. * The 10 S&P 500 sectors close in the red sector, the powerful sector being energy, down 7.5%. OPEP OUTPUTBOOST adds to pricing fears, the oil tumbles 7%. * Apple shares dropped by 9.1%, the largest decreased since the pandemic, while Dell tumbles 19%and Nike shares fell 14.4%. * The global MSCI index drops by 3.4% for its highest loss of three years. * The dollar index displays its greatest decrease in more than two years, sliding 1.6%. * The yields of the American treasury fall at all levels, led by an ancient of more than 20 bps at the short end, bull-taureau of the curve.
Trump is on fire, the world markets tariff
You should never read too much in a single day of negotiations in the financial markets, but some days are so dramatic that it is difficult not to do it. Thursday is one of them.
Lases of more than 4% on Wall Street and oscillations of almost 2% in the dollar do not present themselves too often, and apart from major crises such as the global financial crisis or the pandemic, they are even more rare.
It is therefore a measure of the shock of investors in the face of the severity of Trump’s prices, an apprehension on the damage they will inflict – and, not little disbelief in the way they were calculated – that the markets were gyrared as much as they did on Thursday.
The economist David Beckworth posted on the X social media platform that Trump’s last salvo in his world trade war could be “one of the biggest errors in unrefined economic policy in American history”-a daring, perhaps, but which seems to resonate.
Analysts travel their American growth forecasts, and the expansion of less than 1% this year is now in sight, while the risks of recession have increased sharply. Rate traders are now prices in nearly 100 Fed reduction base points this year and 150 HPE base points in the middle of next year.
As the economist Rebecca Harding indicates, “no one is gaining from the trade war”. It is a simple but important point – the economic and market prospects everywhere are suddenly darker, especially in some of the Asian countries which have been struck by the heaviest duties.
In addition, political decision -makers are found in an even tighter place. Will the Bank of Japan be so eager to continue its campaign of pace of pace? Will the European Central Bank or the Bank of England be forced to reduce more than expected rates if the euro and the pound sterling continue to increase? And how does China Powerhouse react?
Part of the problem for everyone – investors, households, businesses and decision -makers – is Trump’s propensity to change course in the blink of an eye. Certain prices can be lowered, exempt or postponed in a few days if the countries arrive at the negotiation table and conclude an agreement with “Tariff man”.
Of course, if they are maintained or if the countries retaliated, economic and market prospects could darken even more, tie volatility and uncertainty – good for gold, obligations and exposed sellers; Not so good for actions, credit and other risky assets.
If investors hope that a feeling of calm could descend on the markets on Friday, think again – the last American wage bill will be published at 8:30 am, and a few hours later, the president of Fed Jerome Powell gives a speech on economic prospects.
The term contracts on actions around the world point to heavy losses at the opening. Close.
What is the following in the World War of Commerce? Watch the yuan
What is the most important exchange rate in the world right now? Probably a dollar / yuan.
How Beijing reacts to breathtaking prices that the Trump administration threw on Chinese exports to the United States will be critical not only for China, but also for its “more” business partners in Asia and the world markets more widely.
The total price of American imported goods in China is now 54%. If it is maintained for a reasonable period, it will be a financial blow to Beijing which will probably hinder its efforts to deal with its persistent real estate crisis, to stimulate consumption, to build its military power and to finance its myriad of investments.
And, unlike Trump’s First Trade War, China cannot count on the funnel of exports and investments through countries “plus one” in Asia to mitigate the price shock because these nations were also affected by punitive samples. In some cases, like Vietnam, the prices are even higher than that of China.
This leaves the devaluation of the currency because perhaps the most powerful weapon that China can match when it seems to respond to the last salvo of Washington. But unfortunately for Beijing, this strategy is heavy with risk.
Room limited to maneuver
A rapid drop in Yuan’s value could trigger a huge capital leak while international and national investors withdraw money from the country, slamming internal asset prices and attach the volatility of the financial markets.
And beyond the Chinese borders, a tumultuant yuan could force other Asian countries to let their currencies fall in order to maintain competitiveness, potentially provoke a “beggar” devaluation war.
In addition, the devaluation of currency is contrary to sweeping reforms and recovery measures that Beijing has announced since September, because it seeks to reflect the economy via interior consumption rather than exports.
And the place of China for more political stimulus has already faded. Other interest rate reductions and liquidity provisions will likely come, but a major budget increase will imply to issue more obligations, which will erase an already enlarged budget deficit.
Indeed, Fitch degraded the China credit rating on Thursday from a notch to “A”, citing a deterioration in public finances while Beijing rushes to consolidate the growth of prices.
“It all depends on China now,” said Robin Brooks, principal researcher at Brookings Institution, warning that a significant devaluation of the Yuan could start a global “risk” spiral that could slam emerging markets and, if he persists, also tank the American economy.
All eyes on China
Beijing previously said that he would not do on the FX damping road, preferring to keep the yuan relatively “stable”. But it was Trump’s “Liberation Day” before Trump.
Beijing’s first response could be to try to negotiate with Washington to reduce prices. But if that fails, the FX devaluation becomes a real option to compensate for the shock.
Goldman Sachs analysts are one of those who believe that China will continue to resist “significant” FX depreciation, but they note that the combined impact of all American prices on China has announced since the inauguration of Trump in January could take a 1.7 growth point bite for China’s growth rate. It’s huge.
What do the FX markets think? You should never read too much in the day’s movements. But it should be noted that Dollar / Yuan has timed its greatest market increase to the point in five months, and the Banque Populaire de China allowed the Yuan to depreciate the most in four months to daily fixation.
In the future, the high level to monitor for Dollar / Yuan spots is 7.35 and 7.25 for the daily fixing of the Central Bank. Praking them would leave the Yuan to its lowest point compared to the US dollar since the depths of the global financial crisis at the end of 2008.
The Yuan is not too far from these levels at the moment. The world looks.
What could move the markets tomorrow?
* US Nonfarm Payrolls (March) * The president of the federal reserve Jerome Powell talks about the unemployment report of the economy of the economy * Canada (March)
If you have more time to read today, here are some articles that I recommend that I help you understand what happened on the markets today.
1. Trump’s pricing formula confuses the world, punishes Thepoor 2.. The real price uncertainty begins now: Mike Dolan 3.
The opinions expressed are those of the author. They do not reflect the points of view of Reuters News, which, by virtue of the principles of confidence, is committed to integrity, independence and freedom of biases.
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(By Jamie McGeever, edition by Nia Williams)
