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We’ve had another record night on Wall Street – and on the ASX down under – after Trump declared he’d pause reciprocal tariffs for 90 days.
Supposedly, according to Trump, he decided to pause given that U.S. bond yields were looking a little too tasty. (That’s a problem because the higher a bond yield goes, the fewer people are buying them.)
Why do bonds matter?
In between the lines: Investors weren’t feeling so confident about the safety of the U.S. Government, with trust and confidence issues unsettled by weeks of flip-flopping on tariff decisions largely responsible.
(Many analysts are wondering whether or not China has been dumping U.S. Treasuries in an apparent bid to hurt the American economy.)
Regardless of whether or not that’s true (or more importantly, to what extent it’s true,) with the debt profile America currently has, the Trump Administration has no interest in its bonds being unattractive.
Thus the 90-day tariff pause. At least that’s a normal, non-bodacious and understandable governance decision. You could even call it prudent, which doesn’t appear to be Trump’s favourite approach.
Some tariffs still remain
So Trump has yielded to market pressure, sort of. Blanket 10% tariffs still remain; so auto tariffs, and Trump’s administration this week flagged via multiple mouthpieces tariffs on pharmaceuticals are coming.
In the background we’re still waiting for copper tariffs to hit, which Commerce Secretary Howard Lutnick has suggested are going to happen, and automakers aren’t happy that auto tariffs were excluded from the 90-day reprieve.
U.S. futures as of Thursday suggest maybe the market got too excited overnight.
Gold rises as US futures red again
As of the Aussie arvo, U.S. futures are in the red – though, under 1% for major indexes.
What is interesting is despite this apparent relief and broad reallocation back into equities, the price of gold has started shooting back up on Thursday, in what appears to be a contrarian run on safe-haven assets at the same time the market bounces back.
What does that point to? In my mind, uncertainty. The fact both risk assets and safe-haven assets are rising in tandem says a lot – and it’s worth considering too gold has travelled upward as U.S. futures dip back into the red.
I’m not going to try and bother predicting what will or won’t happen over the coming days as we head into Week 16.
What about other commodities?
It’s also worth keeping tabs on where other commodities are heading on Thursday as markets digest the latest tariff backflip.
In the background, of course, is now the prospect of a Chinese trade war with the USA. Trump is no longer the sole catalyst in the room.
The question is whether the global stage has room for two beasts or only one alone.
As of mid-arvo this Thursday:
- Iron ore prices have bounced back to US$95.55/tn on the SGX
- Brent Crude has recovered to US$64.64/bbl from US$60/bbl
- Copper has remained largely unchanged but climbed +0.3% to US$4.4/lb
- US lumber futures jumped 4% as Canadian supply tariff risk eases
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