After three days of falls following the announcement of US president Donald Trump’s tariffs, Tuesday saw currencies and share prices rise at last. The euro came out strongest, up 0.8% on the dollar and 0.4% on the pound.
The rally was caused by the news that the US government was working on “tailored deals” with trading partners, such as Japan and South Korea. For the UK, news of possible trade agreements sent the FTSE 100 to its best single day of gains since February 2022, rising by more than 3.5%. And in Europe, the Stoxx 600 saw similar, with its best day since March 2022.
Word of trade deals also saw the US markets rally yesterday, with the S&P 500 index up 3.8% and the tech-focused Nasdaq Composite up 4.3 per cent. However, overnight Trump said the US didn’t need any agreements, saying “I know what the hell I’m doing”, suggesting the rally may be short-lived.
Asian market traders continued to sell through the night and early indicators suggest the European markets will do the same today.
Compounding the situation are today’s new tariffs. So far, only Trump’s 10% baseline tariff was in effect. However, this morning, the US president activated his full suite of “reciprocal” levies. For Europe, that means an additional 10% on its exports, bringing it to a combined total of 20%, but for China, which has threatened tariffs on US imports, it means a 104% levy on its goods entering America.
With no major data releases until the US inflation figures on Thursday, there’s little in the calendar that may interrupt the markets’ reaction to the new tariffs.
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