US markets resume slide as trade war worries persist
Updated Updated Thu, 2025 April 10 09:04
- Wall Street ends sharply lower as tariff risks send investors fleeing
- Dollar retreats on lingering levy worries, hits 10-year low versus CHF
- Gold closes at record high in strong two days of buying
FX: USD tumbled to fresh lows for the move and through its 200-day SMA at 102.60. The long-term low from December 2023 sits at 100.61 as a key support zone which includes the lows from last September. US growth worries are now the major concern for markets and the greenback, also after softer than expected CPI data. As well, confidence in US policymaking has been severely dented and markets will remain vulnerable to trade-related headlines while the US and China continue to slug it out. Moreover, US tariffs are still higher than they were. Indeed, by some estimates, the aggregate effective trade-weighted tariff remains around 25% after Wednesday’s moves and more (copper, pharma) tariffs might still be coming.
EUR charged higher, only lagging the safe haven CHF. Bulls made a fresh cycle top at 1.1241, last seen in October. The major is now through a long-term downtrend line from the 2008 top, though below the prior cycle peak at 1.1213. The EU is set to suspend tariff countermeasures. It is also reported to be working on concessions, the latest of which would be an increase in energy imports and specifically US LNG. Markets are currently pricing in about 23bps of easing for next week’s ECB meeting, despite some policymakers’ shift toward a pause.
GBP is back into the March range between 1.29 and 1.30. Buyers have taken cable through the 200-day SMA at 1.2813. Fundamentals are shifting in the pound’s favour as markets pare back their expectations for BoE rate cuts. That offers support via wider UK -US interest rate spreads.
USD/JPY dropped sharply as yields were subdued and risk appetite also muted after the stellar one-day rally. The recent low at 143.98 is in view and a Fib level (78.6%) of the September to January rally at 143.70.
AUD lagged most of the majors apart from GBP and CAD. These two strong days of buying have taken prices back above this year’s low at 0.6087 and back into the 0.62-0.64 range. China news is key going forward. USD/CAD fell again though the loonie underperformed. The 200-day SMA sits at 1.3994. There was a little confusion around the temporary roll-back of US tariffs.
US stocks: The S&P 500 lost 3.46% to settle at 5,268. The tech-laden Nasdaq finished down 4.19% at 18,344. The Dow closed 2.50% lower at 39,594. Consumer staples was the only sector in the green (+0.21%) while energy, tech, communication services and consumer discretionary led the losers. The SOX semiconductor index finished down 7.87%.
Asian stocks: Futures are mixed. APAC stocks surged following the historic rally on Wall Street where the S&P 500 posted its biggest gain since 2008 after President Trump announced the tariff pivot. The ASX 200 rallied with the broad-based gains led by outperformance in the tech and energy sectors. The Nikkei 225 rocketed back above the 34,000 level as Japanese exporters cheered the tariff-related relief. The Hang Seng and Shanghai Comp joined in on the global rally but with gains were somewhat moderated in the mainland. Trump upped the total tariffs on China to 125% from 104% due to China’s recent retaliation. There were reports that Chinese leaders are to meet on stimulus following the tariff shock.
Gold enjoyed another great day of buying as the dollar dived. Treasury yields were also muted and don’t likely look to pop higher after Trump’s pivot. Bullion closed at a record high, above the early April top, at $3173.
Day Ahead – US CPI, Post-Trump Pivot Day
It was inevitable that stocks would pull back in the US after the historic rally. The yo-yoing in markets is symptomatic of politics colliding with financial markets. That generally means uncertainty, which is unlikely to go away with blanket tariffs still enacted and ongoing skirmishes between the US and China.
At least we know where the Trump “put” and backstop is now – around 4,800 on the S&P 500 or the 5% yield in the US Treasury 30-year yield. It’s good to remind ourselves that sharp moves and parabolic price action might have been put to rest in the near term, but that doesn’t mean markets won’t slide lower in a more protracted move further out. Trump’s decision making and flip-flopping is being questioned which likely will result in slower growth going forward. That said, we tend to think inflation won’t go as high as some think due to falling energy and commodity prices for one thing. We may also start to hear more about tax cuts and deregulation going forward.
Chart of the Day – S&P 500 rebound stalls
President Trump caving in sent S&P 500 10% higher in one go (!) This is a rare thing: it was the best session since October 2008 and the third best session since World War. But US equities have not regained the pullback since 2 April which is up nearer 5,600 on the S&P 500.
Similar to most rebounds it was cyclical large caps which did the outperformance. Tech stocks and consumer discretionary at the top, with Tesla, Apple and Nvidia surging around 20% each. On the S&P 500 chart, the 50% point of the late 2022 to February 2025 top is at 4,819. The 200-week SMA is below at 4,679. Initial resistance is 5,339 with initial support at 5,132.
