Futures Slide As Traders Lock In Gains After Wednesday's Record Surge

The record (notional) bounce-back in global equity markets, which pushed the S&P higher by nearly $5 trilllion in market cap after Trump delayed plans to implement higher reciprocal tariffs on dozens of trade partners, has started to fizzle a bit. S&P 500 futures are down 1.6% after Wall Street logged its best day since 2008 on Wednesday, while Nasdaq 100 contracts drop 1.9% as the market takes some profits and moves to assess Trump’s updates, following a global relief rally. Premarket Mag7 names are under pressure with much of the group down ~2%. Financials, Healthcare and Semis other notable sectors moving lower. Global markets soared in sympathy with the US rally yesterday: Asian equities posted their biggest jump in more than two years and European stocks staging their strongest rally since March 2020, however while the Stoxx 600 surged over 7% at the open it has since pared its advance to less than 5%, as banks and financial services, this session’s outperformers, trim gains. Treasuries reversed an earlier gain, with US 10-year yields first falling 5 bps to 4.28% before reversing and trading unchanged at 4.33%; there is a 30-year bond auction later today which will be closely watched. The mood shift is also evident in currency markets where haven demand has returned, pushing the Japanese yen and Swiss franc to the top of the G-10 leader board. Spot gold climbs $25 to $3,108/oz. The Bloomberg Dollar Index falls 0.6%. Oil prices decline, with WTI falling nearly 3% to $60.70 a barrel. Bitcoin gains fade as it trades lower around $81,000. The main event on today's calendar is the March CPI which may or may not move markets.

In premarket trading, Tesla and Nvidia led losses across the Mag 7 (Tesla -3.5%, Nvidia -3.2%, Meta -1.4%, Apple -2.8%, Amazon -2.3%, Alphabet -1.5%, Microsoft -1.2%). Consumer and financial firms are declining (Walmart -1.1%, Nike -2%, Lululemon -1.5%; Major US banks: JPMorgan -1.6%, Goldman Sachs -1.7%, Bank of America -1.6%). Chinese e-commerce-linked stocks gain after Trump said he “can’t imagine” increasing tariffs on China any further. Here are some other notable premarket movers:

• Constellation Brands Inc. (STZ) declines 2.4% after issuing downbeat guidance for the year as new US tariffs and muted demand weigh on the beer, wine and spirits maker.
• Danaher (DHR) rises 1.3% after Barclays turned bullish on the stock, citing defensive positioning in bioprocessing, a market that’s in recovery mode.
• Lovesac (LOVE) climbs 16% after the direct-to-consumer furniture retailer posted quarterly results and provided a year outlook.
• US Steel (X) drops 9.9% after Trump said that while he loves Japan, he didn’t want a Japanese company to buy the steel manufacturer.

Yesterday saw the 3rd biggest S&P surge since 1990, as a Trump pivot on trade sparked a historic relief rally; however the rebound may be capped by still-elevated US tariff rates lingering amid damage to investor confidence. With duties on Chinese imports still at 125%, markets will also be watching for signs of whether Beijing plans to raise tariffs further or is signaling a willingness to negotiate.

“The damage has been done. They’ve opened Pandora’s box and they can’t undo what’s been done in one statement,” said Colin Graham, head of multi-asset strategies at Robeco Groep. “We would definitely be a bit more of a seller at this point.”

Other strategists echoed that view. Citigroup advisers are saying “don’t chase this, don’t buy the dip,” the bank’s global wealth head Andy Sieg said in a interview on Bloomberg Television, which however with HF nets are 9 year lows means that as stocks rise, everyone will lag. 

Jefferies strategist Mohit Kumar advised allocating away from US markets, and Tiffany Wilding, an economist at PIMCO put the odds of a recession at 50-50, even if the tariff reprieve is extended. 

That said, Goldman economists withdrew their US recession forecast (just 77 minutes after making it their base case) following the tariff pause, though analysts still expect policy uncertainty to trigger a sharp economic slowdown later this year. JPMorgan noted that Wednesday’s rally was exacerbated by technical factors and short covering, warning that visibility remained low for investors. Roughly 30 billion shares traded on US exchanges on Wednesday, the most ever.

Meanwhile as Trump escalates his trade war with China, worry is growing that the world’s two largest economies are starting to decouple, as their respective exports to each other face prohibitive duties. “We could again be seeing escalation and de-escalation at the same time, pulling markets in different directions,” wrote Philip Marey, senior US strategist at Rabobank. “Policy uncertainty is likely to remain a drag on business investment, while investors may be seeing US Treasuries in a different light now.”

Companies around the world have already started hitting their own pause button on orders, and the upcoming earnings season is expected to show many firms slashing their guidance for the year. JPMorgan, Morgan Stanley and BlackRock Inc. kick off the run of first-quarter reports on Friday. 

Consumer inflation data is due later today, and a Treasury auction of 30-year bonds will be a closely watched for any signs of nervousness around owning US debt.

China’s top leaders have planned to meet on Thursday to discuss additional stimulus, and Beijing is also letting its currency weaken to offset the pressure on the economy. The onshore yuan dropped to levels last seen in 2007 against the dollar on Thursday, before paring the move. 

Elsewhere, European and Asian markets rallied as investors caught up to the previous day’s rally on Wall Street. The Stoxx 600 Index was up almost 5%, the biggest gain since 2020, fading an earlier gain of 7%. Banking and mining shares gained the most, while personal care and food beverage stocks were the biggest laggards. Here are the biggest movers on Thursday:

• Banks, miners and industrials are the best performers in Europe on Thursday after US President Donald Trump announced a 90-day pause on higher tariffs that hit dozens of trade partners, with the Stoxx Europe 600 up 5.9% to mark its best day in over five years
• Volkswagen shares surge as much as 9.6% after US President Donald Trump paused most of his sweeping reciprocal tariffs, yet the German carmaker underperformed peers slightly after the company reported a drop in 1Q profit
• Nordex shares gain over 11%. The German wind turbine producer’s order intake for the first quarter represents a solid start to the year, according to Citi
• Tesco shares drop as much as 7.4% after the UK’s largest supermarket chain warned profits will slip this year due to rising costs and more competitive pricing from rivals
• Barry Callebaut shares plunge over 25%, the most since on record, after the bulk chocolate maker announced a cut to FY volume guidance on the back of significant cocoa price increases
• Treatt shares plunge as much as 24%, sinking to their lowest level since 2017, after the fragrances and flavorings company warned softer consumer confidence in North America and high citrus prices are weighing on the outlook

Asia’s stock benchmark jumped the most since November 2022 as US President Donald Trump’s decision to pause higher tariffs on most trading partners sparked a risk-on rally across the region. The MSCI Asia Pacific Index surged as much as 5.6%, following the S&P 500 Index’s best rally since 2008. Taiwanese stocks climbed by a record, leading gains in Asia. Equity gauges in Japan, South Korea and Vietnam were among the other big gainers, while technology and financials were among the top-performing sectors.  Stocks in China and Hong Kong still rose, suggesting that investors are counting on more stimulus support from Beijing to shield the economy from tariffs. China’s top leaders are poised to meet Thursday to discuss additional economic stimulus, according to people familiar with the matter. Some investors are also pinning hopes on a possible trade deal with the US after Trump predicted that Chinese authorities would come to the table for negotiations.

The Bloomberg Dollar Spot Index fell 0.8% as US CPI is seen rising 0.1% from February, the smallest monthly gain in eight months, according to the median forecast in a Bloomberg survey of economists. Swiss franc and Japanese yen outperform G-10 peers, as concerns grow that the damage from trade tensions may be more lasting than markets had hoped, fueling fresh anxiety around unpredictability of US policy.

Treasuries gain, with US 10-year yields falling 5 bps to 4.28% ahead of US inflation data and a 30-year bond auction.
Gilts are on a mixed footing with outperformance in the long-end pushing UK 30-year borrowing costs down 15 bps to 5.43% while the front-end trades little changed just below 4%. Bunds yields rise across the curve.

In commodities, oil prices decline, with WTI falling nearly 3% to $60.70 a barrel. Bitcoin gains fade as it trades lower around $81,000.

Looking at today's economic calendar, we get March CPI and weekly jobless claims (8:30am) and federal budget balance (2pm). Fed speaker slate includes Logan (9:30am), Bowman (10am), Schmid (10am), Goolsbee (12pm) and Harker (12pm).

Market Snapshot

• S&P 500 mini -2% 
• Nasdaq 100 mini -2.3%
• Russell 2000 mini -2.9%
• Stoxx Europe 600 +4.9%
• DAX +5.3%
• CAC 40 +5%
• 10-year Treasury yield -5 basis points at 4.28%
• VIX +3.9 points at 37.47
• Bloomberg Dollar Index -0.6% at 1257.43
• euro +0.9% at $1.1044
• WTI crude -3.1% at $60.4/barrel

Top Overnight news

• House Speaker Johnson scrapped the vote on the Trump budget blueprint amid conservative opposition: ABC
• Fed officials are leaning away from rate cuts that would protect against any tariff-induced slowdown, instead focusing on keeping inflation in check. This wait-and-see stance will probably keep the bank on hold absent a significant rise in unemployment. BBG
• Trump signed an executive order requiring the automatic rescission of outdated regulations to unleash American innovation and energy production. Trump also signed orders on restoring maritime dominance and modernising defence acquisitions which will scrutinise programs 15% over costs or 15% behind schedule and directs DHS to enforce collection of harbour maintenance fee and other charges on foreign cargo. The maritime order establishes a maritime security trust fund and shipbuilding financial incentives program, as well as directs an increase in the fleet of US-flagged commercial vessels: RTRS
• Apple airlifted 600 tons of iPhones (about 1.5M units) out of India to beat Trump's tariffs. RTRS
• Multiple US Republicans told Punchbowl they were closely watching bond markets on Wednesday and were aware of the fears about what rising yields may have been saying about US governance: Punchbowl.
• Senate confirmed Paul Atkins for the Securities and Exchange Commission chair role.
• Fed's Hammack (2026 voter) said their desk stands ready to engage in money markets if needed but have been seeing markets work themselves out, while she added that markets are strained but functioning.
• Supreme Court allows Trump to proceed w/ plans to fire two Democratic members of the FTC as it takes more time to deliberate over the issue. RTRS
• Chinese sellers on the Amazon platform plan to significantly increase prices or exit the US market all together given Trump’s tariffs. RTRS
• The EU is weighing delaying counter tariffs against the US over the 25% duties Trump imposed on the bloc’s steel and aluminum exports, people familiar said. BBG
• Panama hopes the visit this week from Def. Sec. Hegseth and the concessions made to the US will be enough to placate Trump and get the White House off its back. WSJ
• With the latest sharp escalation in tariffs on China, U.S. orders for Chinese factories are getting canceled and Chinese manufacturers say they can’t lower prices further for U.S. customers. WSJ
• Chinese inflation numbers undershoot the Street in Mar, including the PPI (-2.5% vs. the Street -2.3% and vs. -2.2% in Feb) and CPI (-0.1% vs. the Street 0.00% and vs. -0.7% in Feb). RTRS

Trade/Tariffs

• US President Trump said he was thinking about pausing tariffs for the past few days and the decision to pause tariffs came together on Wednesday morning, while he added they don't want to hurt countries that don't need to be hurt and that sectoral tariffs are still coming. President Trump also said he thinks they will end up making a very good deal with China, as well as stated he is not concerned about escalation with China outside of the trade war and 'can't imagine' a further increase of tariffs on China.
• White House said there is no 10% baseline tariff on Canada and an official confirmed there was no change to autos, steel and aluminium tariffs, as well as no change to Canada and Mexico tariffs. Furthermore, a White House official commented that the 90-day 'pause' on tariffs does not apply to tariffs on Canada and Mexico, with the 25% tariff on non-USMCA trade with Canada and Mexico to remain in effect, except for the 10% tariff on energy and potash.
• US Commerce Secretary Lutnick expects the EU will delay its planned tariff retaliation after Trump's announcement. It was separately reported that the EU weighs buying more US gas due to Trump tariff pressure, according to FT.
• China's Foreign Ministry, on US tariffs, says taking further measures to oppose US moves it not only aimed at protecting own sovereignty, security and development interests. China does not want to fight, "but will not fear when they come our way".
• China's MOFCOM says the challenges facing foreign trade have significantly increased. Resilience of foreign trade has not diminished. "Door is open", but pressure threats & blackmail are not the correct approach China's foreign trade has the confidence to deal with various risks and challenges. Position is clear and consistent. If US insists on its own way, China will follow it to the end. China has taken and will continue to take resolute countermeasures to safeguard its sovereignty, security, and development interests.
• China's Commerce Minister said China is willing to resolve differences through consultation and negotiation, but reiterated if the US side is bent on having its own way, China will fight it to the end and noted the so-called ‘reciprocal tariffs’ of the United States are a serious infringement of the legitimate interests of all countries. China's Commerce Minister also held talks with EU trade chief Sefcovic and said that China is willing to deepen China-EU trade, investment and industrial cooperation, while he added the two sides will discuss trade transfer issues, and handle trade frictions properly.
• Shenzhen E-commerce Association representing over 3,000 Amazon (AMZN) sellers said tariffs make it very hard to survive in the US market and some sellers are still proceeding to ship goods to the US, while others are trying to find new markets. Furthermore, it stated that US tariffs are an unprecedented blow and will lead to the collapse of more small and medium-sized businesses and rapidly accelerate China’s unemployment rate.
• Japanese Economy Minister Akazawa is to visit US as early as next week to meet with US Treasury Secretary Bessent, according to NHK.
• Canada's PM Carney said the pause on reciprocal tariffs announced by US President Trump is a welcome reprieve for the global economy, while he added that Trump's signal that the US will engage in bilateral negotiations, would likely result in a fundamental restructuring of the global trading system.
• UK and India have agreed 90% of their free trade agreement, according to sources cited by The Guardian.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks surged following the historic rally on Wall St where the S&P 500 posted its biggest gain since 2008 after US President Trump announced a 90-day pause on reciprocal tariffs to countries aside from China. ASX 200 rallied with the broad-based gains led by outperformance in the tech and energy sectors, while National Australia Bank revised its RBA forecast in which it now sees an oversized 50bps cut in May and the OCR to decline to 2.6% by February next year. Nikkei 225 rocketed to back above the 34,000 level as Japanese exporters cheered the tariff-related relief. Hang Seng and Shanghai Comp joined in on the global rally but with the advances somewhat moderated in the mainland after US President Trump upped the total tariffs on China to 125% from 104% due to China's recent retaliation, while reports also reported that Chinese leaders are to meet on stimulus following the tariff shock.

Top Asian News

• China's MOFCOM holds Export Control Work Conference between April 9-10th, according to a statement; set to further improve China's export control system.
• Chinese leaders are to meet on stimulus following President Trump's tariff shock, according to Bloomberg.
• President Trump commented have to wait and see what happens with China on the TikTok deal and that it is still on the table.
• Japan nominated former Mitsubishi Corp. executive Kazuyuki Masu as the new BoJ board member.
• Taiwan's central bank said it will continue to hold US treasuries and sees it as ideal to have US treasuries as more than 80% of its forex reserves, while it will assess whether or not to increase this.
• Fast Retailing (9983 JT) 6mnth net profit JPY 233.57bln (+19.2%); operating profit JPY 304.22bln (18.3%), pretax profit JPY 363.7bln (+21.5%); raises FY profit guidance; NA segment expected to report a decline in business profit in H2 amid tariffs

European bourses (STOXX 600 +5.4%) opened on a very strong footing, as the region reacted to the latest Trump tariff updates. In terms of price action, indices have been gradually edging off best levels since the European cash open – there is no specific driver for the pressure, but potentially some profit-taking, given the hefty advances. European sectors are entirely in the green, benefiting from the risk tone. Banks outperform today; the sector has been hit in the past few weeks given the yield uncertainty that entered the markets due to the latest Trump tariffs. Basic Resources and Tech are both benefiting from the positive risk tone.

Top European News

• German Economic Institutes cut 2025 GDP growth forecast to 0.1% (prev. 0.8%); 2026 GDP growth seen at 1.3% (prev. 1.3%)
• ECB's Villeroy says US President Trump's pause decision is less bad new but still bad news elements out there in America; protectionism remains a bad element for the American economy
• UK's ONS says it aims to publish the transformed labour survey in November 2026; could come in 2027

FX

• USD is softer vs. most peers after a bit of a bounce in the Greenback yesterday after US President Trump announced a 90-day pause in tariff actions and cut reciprocals to 10% for nations that asked for talks. On net, the decision by Trump has enhanced the outlook for global trade and underpinned risk sentiment in the market. However, tensions remain and reprieve for the market will likely not be granted until the pause becomes a permanent state of affairs. Furthermore, Trump has also opted to lift the tariff on China to 125%. Attention today will temporarily return to the data slate with CPI metrics. DXY is currently within Wednesday's 101.83-103.33 range.
• EUR is one of the better performers vs. the USD after a particularly choppy session yesterday. The initial reaction to the Trump tariff walk back saw the surge in the USD outweigh the potential upside for EUR with EUR having benefitted in recent sessions after being viewed as a liquid alternative to the Greenback. Since then, EUR has recouped some lost ground vs. the USD with EUR/USD back on a 1.10 handle but still south of Monday's best at 1.1094.
• USD/JPY has faded some of the prior day's gains after briefly surging above the 148.00 level owing to President Trump's 90-day reciprocal tariff pause. Hopes remain high that Japan can strike a deal with the US for a more permanent level of reprieve amid recent comments from Treasury Secretary Bessent that Japan would be top of the list when it comes to negotiations after approaching the US quickly. Elsewhere, the latest Japanese PPI data printed firmer than expected. USD/JPY is holding above the 146 mark and within Wednesday's 143.98-148.28 range.
• GBP is firmer vs. the USD but weaker vs. the EUR. Whilst GBP has benefitted from the risk-on price action triggered by President Trump's tariff walk back, ultimately the move is of little direct benefit to the UK given that it was only subject to the 10% baseline tariff and did not have reciprocal tariffs imposed on it in the first place. Cable is now back above its 200DMA at 1.2813 with a current session peak at 1.2881. The next target comes via the 1.29 mark.
• Antipodeans are both stronger vs. the USD but less so for AUD. Whilst China is a big export market for both, price action for AUD has been tempered to a greater extent. Whilst markets are celebrating some of the tariff relief yesterday, concern still lingers over the tensions between US and China as Trump further increased tariffs on the nation to 125% with immediate effect.
• PBoC set USD/CNY mid-point at 7.2092 vs exp. 7.3484 (Prev. 7.2066).

Fixed Income

• USTs are back above the 111-00 mark after slumping to a 110-01 low on Wednesday. The trough was hit in the choppy trade that occurred in the hour after Trump’s 90-day & China update, during this period USTs moved by over a full point. The low coincided with the FOMC Minutes, however the account was largely ignored. Since, USTs have been grinding higher and holding just off a 111-08 peak and back within reach of Wednesday’s 111-20 high. Strength comes as US equity futures find themselves under modest pressure, pulling back a touch from Wednesday’s record moves and as the pause alleviates some immediate concern around the bond market. Ahead, US CPI and a 30yr auction.
• In contrast to USTs, Bunds have been lower by over 150 ticks this morning. Seemingly trading as you would expect a haven to in the context of European bourses catching up to the c. 10% gains seen stateside on Wednesday. European specifics are a little light with some confusion over whether Trump’s reciprocal cut to 10% applies to the bloc, given the EU has outlined its initial retaliation. Bunds hit a 129.02 base but have since lifted markedly off lows to a 129.84 peak. However, this still leaves them significantly lower on the session and shy of 130.75 and 130.58 from the last two sessions.
• Gilts gapped higher by just five ticks at the open given the two-way lead from the above before slipping by 10 ticks to a 90.65 trough, following the risk tone and Bunds. However, this was almost immediately retraced as Gilts spiked above 91.00 and continued to climb to a 91.51 peak. While the strength in Gilts is pronounced, the benchmark failed to breach yesterday’s 91.74 peak and has already begun to pullback from best levels despite the continued gains seen in USTs. With Gilts currently on track to end the week with losses of 300 ticks. Action underscores that the UK’s fiscal position remains precarious in the eyes of the market.
• Spain sells EUR 6.5bln vs. Exp. EUR 5.5-6.5bln 3.50% 2029, 2.55% 2032 & 3.15% 2035 Bono

Commodities

• Crude is on the backfoot as the complex gives back some of the significant, Trump-induced, upside seen in the prior session. Overnight, the complex was relatively rangebound near best levels - though the European morning has seen continued downward pressure. As it stands, Brent Jun'25 resides near the lower end of a USD 63.35-66.08/bbl range.
• Precious metals are mixed, with spot gold continuing recent strength whilst spot silver is a little lower. The yellow-metal is currently higher by around USD 30/oz and sits towards the midpoint of a USD 3,071.59-3,132.59/oz range.
• Base metals have been boosted by the positive risk tone. 3M LME Copper currently higher by around 3.5% and trades within a USD 8,842.57-9,061/t range.
• Peru Mining Chamber said Peru's 2025 copper production is expected to increase by 2-4%.

Geopolitics

• US President Trump reiterated Iran cannot have a nuclear weapon and said that if it requires military, "we're going to have military" with Israel to be involved with that.
• US and Russia undertook a prisoner swap early-Thursday in Abu Dhabi, via WSJ citing officials; swap was reportedly organises by the CIA Director and a senior Russian official.
• Adviser to Iran leader Khamenei says "continued threats" against Tehran could lead to expulsion of IAEA inspectors and transfer of enriched material to unknown locations, via Journalist Elster

US Event Calendar

• 8:30 am: Mar CPI MoM, est. 0.1%, prior 0.2%
  • Mar CPI YoY, est. 2.53%, prior 2.8%
  • Mar CPI Ex Food and Energy MoM, est. 0.3%, prior 0.2%
  • Mar CPI Ex Food and Energy YoY, est. 3%, prior 3.1%
• 8:30 am: Initial Jobless Claims, est. 223k, prior 219k
  • Continuing Claims, est. 1884k, prior 1903k
• 2:00 pm: Mar Federal Budget Balance, est. -130b, prior -236.56b

DB's Jim Reid concludes the overnight wrap

Market turmoil turned into elation yesterday as Trump announced a 90 day pause on reciprocal tariffs for countries other than China, which marked a sizable backing off from last week’s tariff escalation. That triggered a sharp relief rally as the S&P 500 soared by +9.52% in its best day since October 2008. Other risk assets including credit and commodities also gained, with gold (+3.33%) posting the biggest daily advance since 2023, while 2yr Treasury yields (+18.2bps) saw their largest rise in 6 months.

Starting with the tariff announcement, Trump posted that he would pause for 90 days specific reciprocal tariff rates on non-retaliating countries, with all such countries instead facing a minimum additional tariff rate of 10%. The one exception was China, which Trump said would instead face even higher 125% tariffs, up from 104% the previous day. That came in response to China announcing earlier yesterday higher 84% reciprocal tariffs on US goods, effective today.

Trump suggested that the decision to delay tariffs had been made yesterday morning as people had been “a little bit afraid”. And while Commerce Secretary Lutnick later denied that the move came in response to market pressure, Trump’s comments suggested some sensitivity to the market stress, as he said that “The bond market is very tricky” and “I saw last night where people were getting a little queasy”. Trump noted that he would look at tariff exemptions for certain companies, but also signaled further sectoral tariffs, notably on pharma. As a quick estimate, limiting the reciprocal tariff increase on countries outside of China to a 10% universal rate would take off about 7pp from the near 25% new average US tariff implied by last week’s announcement (from our note last Friday), though this would in part be offset by higher tariffs on China.

With Trump taking at least a temporary off-ramp away from very broad tariff escalation, markets saw a dramatic rebound. The S&P 500 (+9.52%) posted its biggest gain since 2008 with a mere 9 decliners in the entire index, while the NASDAQ (+12.15%) posted its biggest advance since 2001. Other risk assets also benefited, with the sharpest tightening in US HY credit spreads (-27bps to 426bps) since December 2023, and Brent crude oil (+4.23% to $65.48/bbl) posting its biggest gain in six months. The VIX fell by -18.7pts to 33.6.

This morning Asian equity markets are posting their biggest jump in more than two years. Japan’s Nikkei (+8.360%) and and Topix (+8.01%) are leading the way, while the KOSPI (+5.81%) and the S&P/ASX 200 (+4.57%) are also surging. Despite the increase in duties on Chinese goods, Chinese markets are also seeing gains with the Hang Seng (+1.80%) outpacing the CSI (+1.00%) and the Shanghai Composite (+0.93%). And European futures on the DAX (+7.55%) and Stoxx 50 (+7.78%) are soaring in overnight trading, though US futures on both the S&P 500 (-0.72%) and NASDAQ 100 (-1.26%) are trading in the red after yesterday’s dramatic gains.

While yesterday saw a historic rally on Wall Street, this still left the S&P 500 -3.77% below its level prior to the reciprocal tariff announcements on April 2. And other assets have seen less of a recovery, with 10yr Treasury yields +20bps higher and US HY credit spreads +92bps wider. So while there has been understandable relief as evidence of a Trump put reemerged following the extreme market conditions that we highlighted yesterday morning, the genie is still out of the bottle on policy unpredictability. Indeed, a 10% minimum universal tariff represents the largest tariff increase in decades and heightened trade uncertainty is likely to linger, with limited visibility on what kind of deals the US would find acceptable. Perhaps most crucially, we are currently still on course for a disorderly economic decoupling between the world’s two largest economies, with no immediate signs of either US or China backing down.

Prior to tariff pause announcement, market sentiment already saw some improvement yesterday following yesterday's strong 10yr Treasury auction. This saw $39bn of 10-year notes issued at a yield of 4.435%, -3.0 bps below the pre-sale yield, which came amid very strong demand by indirect bidders. This supported a rally in Treasuries, as 10yr yields fell from 4.46% just before the auction to 4.34% by the close (+4.1bps on the day). 30yr yields declined by -2.8bps to 4.74%, despite having briefly touched 5% in overnight trading yesterday. Treasuries are seeing a further rally in Asia trading, with the 10yr yield down -5.3bps.

On the topic of bond market stress, Cleveland Fed President Hammack said yesterday that “The markets look strained, but functioning”. Our own Matt Raskin discussed the conditions under which the Fed might intervene to preserve market functioning in a note yesterday.

By contrast, the risk-on mood drove a sharp sell-off at the front-end of the Treasury curve, with 2yr yields rising +18.2bps to 3.91%. That came as the amount of cuts priced by the December meeting fell by a full -25bs to 77bps. The move also came amid hawkish-leaning Fedspeak, with Minneapolis Fed President Kashkari writing that with tariffs the bar for rate cuts is higher even if facing a weaker economy, echoing Fed Chairman Powell’s more hawkish messages from last Friday. Meanwhile, the minutes of the March Fed meeting showed some participants seeing “difficult tradeoffs if inflation proved to be more persistent while the outlook for growth and employment weakened”.

Earlier on in Europe, equities had seen a sharp decline, with the STOXX 600 and FTSE 100 falling by -3.50% and -2.92% respectively. The market mood had been weighed on by China’s retaliation against US tariffs, as well as yesterday’s announcement that the EU had approved tariffs on €21bn of US goods in retaliation for Trump’s 25% steel and aluminium duties. European bond yields saw mixed moves as 10yr bunds (-3.9bps) rallied, but OATs (+0.2bps) and BTPs (+2.5bps) saw modest sell offs. GIlts underperformed, with the 10yr yield up +16.9bps and the 30yr yield (+23.3bps) rising to 5.58%, its highest since 1998.

In other European news yesterday, Germany’s incoming chancellor Friedrich Merz sealed a deal with the Social Democrats to form the next government. The sooner-than-expected coalition presented their policy roadmap for the next four years, presenting no major fiscal or macro surprises as our German economists note. The coalition treaty has yet to be approved by the parties before it can be formally signed.

Overnight in China, consumer prices fell for the second straight month, down -0.1% y/y in March after a -0.7% fall in February. Producer prices (-2.5% y/y v/s -2.3% expected) fell for the 29th month in a row, notching the largest contraction in five months. Following the data release, the onshore yuan was hovering near multi-decade low, trading at 7.3454 against the dollar, its weakest level since 2007. The latest drop also came after the PBOC weakened the yuan fixing for a sixth straight session.

To the day ahead now, the main release will be the US CPI for March, where our US economists expect a +0.3% core inflation print, albeit in a close call with +0.2%. You can see their full preview and register for the post-release webinar here. Other data release include the US federal budget balance, initial jobless claims, China March CPI and PPI, Japan , Denmark, and Norway March PPI. The US 30yr bond auction is also taking place today.