Equity markets rebounded after Friday’s falls as investors looked to ‘buy the dip.’ Tech stocks led the market higher. The rally in globally treasuries was extended which also supported stock valuations.
The ISM Manufacturing PMI dropped 1.3pt to 49pts, returning to the contractionary territory after two months above the neutral level of 50. The survey highlighted a rapid decline in demand, with the new orders index falling 3.4pt to only 45.2, the lowest level in almost two years and almost 10pts below the level only two months ago.
Markets are pricing in risks of tariffs with diverging movements across regions and asset classes.
Tariffs risks saw US and Asian equities retreat while European equities outperformed.
However, most G10 currencies outperformed the USD. Commodity- linked currencies like the CAD, AUD and NOK performed best.
The US imposed steel and aluminium tariffs which sparked a response from the EU. The emerging trade tensions saw Asian equity markets close lower.
A potential ceasefire in Ukraine added support to European equities despite rising trade tensions between the EU and the US with the EU announcing retaliatory tariffs.
A weak than expected US CPI print saw the sell off in bonds continue in the US and oil prices rise.
Metals prices lifted over concerns of tariffs and tight supply.
Markets were spent most of the overnight session reacting to the implementation of tariffs by the US. However, news of a possible reversal late in the session saw reversals.
The DXY fell as implications of tariffs on the US economy are considered. The euro outperformed rising to a multi-month high following the announcement of a defence fund in Germany.
An increase in risk sentiment saw bond yields jump while equities finished lower.
