That was after Trump and his Treasury secretary, Scott Bessent, sent a clear message to other countries after announcing their tariff pause: “Do not retaliate, and you will be rewarded.”
The European Union said on Thursday it will put its trade retaliation measures on hold for 90 days and leave room for a negotiated solution.
It all demonstrates why many on Wall Street are preparing for more swings to hit markets, after the S&P 500 at one point nearly dropped into a “bear market” by almost closing 20 per cent below its record. Often, the whipsaw moves have come not just day to day but also hour to hour. The S&P 500 still remains below where it was when Trump announced his sweeping set of tariffs last week on “Liberation Day.”
One encouraging signal had been coming from the bond market, where stress had seemed to be easing.
The bond market has historically played the role of enforcer against politicians and economic policies it deemed imprudent. It helped topple the United Kingdom’s Liz Truss in 2022, for example, whose 49 days made her Britain’s shortest-serving prime minister. James Carville, adviser to former US President Bill Clinton, also famously said he’d like to be reincarnated as the bond market because of how much power it wields.
Earlier this week, big jumps for US Treasury yields had rattled the market, so much that Trump said he had been watching how investors were “getting a little queasy”.
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Several reasons could have been behind the sharp, sudden rise in yields. Hedge funds may have been selling Treasury bonds in order to raise cash, and investors outside the United States may be dumping their US investments because of the trade war. Regardless of the reasons behind it, higher yields crank up pressure on the stock market and push rates higher for mortgages and other loans for US households and businesses.
But the 10-year Treasury yield had calmed following Trump’s U-turn on tariffs, and it dropped all the way back to 4.30 per cent shortly after Thursday morning’s release of a better-than-expected report on inflation in the United States. That’s after it had shot up to nearly 4.50 per cent Wednesday morning from just 4.01 per cent at the end of last week.
But the yield began climbing again as Thursday progressed, reaching 4.35 per cent.
In stock markets abroad, indexes rallied across Europe and Asia in their first chances to trade following Trump’s pause. Japan’s Nikkei 225 surged 9.1 per cent, South Korea’s Kospi leaped 6.6 per cent and Germany’s DAX returned 4.5 per cent.
AP
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