Markets reacted to the US proceeding with tariffs on steel and aluminium products which prompted a response from the EU of retaliatory tariffs. Pessimism around tariffs was offset by markets digesting news of a potential 30-day ceasefire in Ukraine after Ukrainian President Zelenskyy’s announcement. However there have been few updates of talks overnight.
Equities across developed markets closed higher after two days of losses
In the US, tech stocks supported the 0.5% gain in the S&P500. The NASDAQ was up 1.2%. The announcement of retaliatory tariffs against the US alongside news of a potential ceasefire between Russia and Ukraine lifted European equities. The EuroStoxx 50 rose 0.9% while German equities outperformed, the DAX was up 1.6%. This was also supported by a sharp climb in European defence stocks. Tariff tensions saw Asian and domestic equities close lower with falls in Australia, China, Hong Kong and India. Japanese stocks however held on as pessimism around tariffs was offset by optimism around Friday’s wage outcome after Nippon announced it agreed to 80% of the wage increase demanded.
In currencies, the USD index rose 0.2% to 103.572
The downtrend in the DXY seems to be stabilising with the index having traded in a tight range of 104.1 and 103.2 since Friday. The euro and Japanese yen depreciated against the greenback while the CAD, AUD and NZD were top performers among the G10. The AUD finished the session barely changed at 0.6320. The GBP continues its ascent which started in mid- January and is anticipated to test the 1.30 level today.
In bond markets, US treasuries continued their sell-off prompted by the softer-than-expected CPI read. The 10Y yield rose 3bps while the 2Y was up 4bps. Market pricing shows the next rate cut by the Fed fully priced in for June, albeit with less certainty, while a third cut for 2025 also seems more uncertain. The German yield curve flattened, the 2Y yield was up 3bps while the 10Y yield was down 2bps. The curve shifted up in the UK with both the 2Y and 10Y up by 5bps. Markets continue to price in the next cut for August while a third cut has not been fully priced in. Australian futures suggest the bonds should sell off this morning with the 10Y up 3bp and the 3Y up 5bps.
Crude saw a decent bounce with the pickup in risk sentiment, softer than expected US CPI and lower than expected inventory build all helping. The WTI futures rose 2.2% to 67.70. Metals were mixed with copper making fresh multi month highs as concerns over tariffs and tight supply lifted prices. Copper prices were up 1.1% to $9,770. Nickel rose 1.38% to $16,720, a 5 month high helped by Nyrstar announcing that it would cut production at its Hobart plant by around 25% from April in a “direct response to deteriorating market conditions and financial losses being sustained by Nyrstar Australia”.
Gold traded to a 1-week high of $2940/oz overnight, following a weaker than expected US CPI, before settling within the $2930-32/oz range. Epcoro, a Bolivian gold trading firm has announced plans to quadruple gold purchases in 2025 with the aim of increasing central bank gold holdings. WA gold mining firm Black Cat conducted a $65 million equity placement to fund the acquisition of the Lakewood gold mill from Westgold Resources.
