Markets:
Gold down $2 to $2981S&P 500 down 1.6%US 10-year yields up 14 bps to 4.29%WTI crude down $2.31 to $58.39CHF leads, AUD lagsThere was a singular theme in trading today and it was optimism that Trump could delay planned tariffs both due at midnight New York time, both the reciprocal ones on the broader world and the extra 50% on China. US equities opened strongly and that was followed by commodity currencies and some moderate yen selling.
But skepticism started to creep in, perhaps as some fearful equity holders began to use a 4% rally to sell into. The mood wasn't helped when Trump and the White House spokeswoman appeared to plead for China to call and make a deal. At the same time, the yuan weakened to a record low in something the market interpreted as a threat/response.
At the same time, there were no indications of a pause on broader reciprocal tariffs despite Trump and other officials talking about negotiations. The gameplan appears to negotiate trade deals with those tariff rates in place, based on the comments from various officials. That could obviously change but we now perilously close to the deadline.
It turned ugly in US equity markets with a 6% drop in the S&P 500 from the intraday highs and nearly 7% in the Nasdaq. AUD/USD fell to 0.5955 from a high of 0.6095 and USD/CAD rose 115 pips.
The euro and pound were better-behaved as they chopped sideways in 50-75 pip ranges while the yen held a broad bid.
A troubling development continues in the bond market as US yields -- particularly at the long end -- continued to rise. US 30s rose an additional 17 bps today and are now up 40 bps from yesterday's low and at the highest since February 20. There is fear that basis trades are blowing up or something has gone wrong in high yield or simply that a recession is coming that will blow up deficits further.
Overall, the game right now is to wait until midnight and go from there. If there is no help, we could have an ugly day on Wednesday.
This article was written by Adam Button at www.forexlive.com. Read More Details
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