Bonds Drop Down, and Stocks Stutter as Investors Assess US Trade Policies

After a tumultuous week marred by doubt over U.S. trade policy and a global increase in borrowing costs, investors were greeted with some calm on Friday as a sharp purchase in bonds subsided and currencies stabilized, but equities followed Wall Street down.

As U.S. equities face challenges from a deteriorating growth forecast in the most excellent economy in the world and uncertainty around U.S. President Donald Trump’s tariff policy, the Nasdaq confirmed overnight that it has been in a correction since its high in December.

Trump threatened to implement a worldwide system of reciprocal tariffs on all U.S. trade partners on April 2, so on Thursday, he froze the 25% tariffs he slapped this week on most products from Canada and Mexico until that day.

While gold and other assets like the Swiss franc and the yen have been among the few that investors have flocked to as they seek protection, Trump’s rapidly shifting trade policies have pushed markets into a spiral.

The Swissie touched a three-month high of 0.8822 per dollar on Friday, while the Japanese currency was close to its best level in five months at 147.95, on course for a 1.8% weekly rise.

Although gold prices somewhat decreased, they were still close to a record high of $2,904.62 per ounce. According to Tony Sycamore, a market analyst at IG, the quickly shifting sands of U.S. tariffs are becoming quicksand that firms in the United States, Canada, and Mexico are drowning in.

I’m not confident about investing in the market because there is so much uncertainty. The environment in which investors operate is terrible. With French OAT futures up 0.7% and bund futures soaring more than 0.8%, Friday’s steep purchase in European bond markets, which was sparked by Germany’s plans for a massive spending package, appeared to be cooling off. Bond yields fluctuate in opposition to price changes. Although not as much as in the previous session, government bonds in Japan continued to fall.

While the yield on the 20-year Japanese government bond (JGB) increased by two basis points to a more than 16-year high of 2.22%, the yield on the 10-year JGB increased by 1.5 basis points to 1.53%, its highest level since June 2009. [JP/]

The euro has plummeted due to this week’s spike in European borrowing prices, and on Friday, it is expected to rise more than 4%, marking its most considerable weekly increase in over five years. At $1.0794, it recently traded 0.07% higher.

In addition to cutting interest rates again on Thursday, the European Central Bank (ECB) raised the possibility of a halt in its policy easing next month by warning of “phenomenal uncertainty,” which includes the possibility that trade conflicts and increased defense expenditure might drive inflation.

According to Mark Wall, chief European economist at Deutsche Bank, the ECB is in a difficult position between the growing commitment to higher defense spending over the coming years and the threat of U.S. tariffs shortly, which could justify further policy rate cuts and a move into stimulative territory. A careful hand on the monetary policy lever and the maintenance of policy discretion are necessary in this setting.

Upbeat is Asia Stocks:

The MSCI’s broadest index of Asia-Pacific stocks outside of Japan was on course for a weekly rise of almost 2.5%, which would be its most significant advance in nearly six months, but it ended the day 0.5% down.

A surge in its Chinese equivalents contributed to the increase as investors kept purchasing shares in artificial intelligence and applauded Beijing’s new legislative backing.

The Shanghai Composite Index was also on course for a 1.85% weekly increase, while China’s CSI300 blue-chip index dropped 0.2% but was expected to rise 1.5% for the week.

The Hang Seng Index in Hong Kong increased by 0.3% and was on track to rise by over 6% this week. As stated in a note by Goldman analysts, “We anticipate substantial fiscal easing this year, with increased priorities on consumption and high-tech manufacturing, but acknowledge this is different from a ‘bazooka.'” Japan’s Nikkei fell 1.85% elsewhere.

Aside from trade concerns, investors will also be watching Friday’s U.S. nonfarm payrolls data for February, which will offer more hints about the state of the biggest economy in the world. After a 143,000 increase in January, 160,000 jobs are expected to have been added last month.

Following a string of less-than-expected U.S. economic reports and concerns about the effects of Trump’s tariffs, investors have increased their bets on more rate cuts from the Fed this year. Fed funds futures currently show just over 77 basis points of easing priced in this year.

The dollar is now expected to fall more than 3% weekly compared to a basket of currencies. U.S. West Texas Intermediate oil futures increased by 0.2% to $66.49 per barrel, while Brent futures increased by 0.27% to $69.65 per barrel.