US Markets Smashed on Tariff Concerns – Nasdaq down 2.4%
US equity markets were hit hard in their first trading session of the week as investors continued to react to President Trump’s latest tariff threats. The Dow Jones fell 1.76% to close at 48,488, while the S&P 500 dropped 2.06% to 6,796 and the Nasdaq led losses, sliding 2.39% to finish at 22,954, as risk sentiment deteriorated sharply across global markets. US Treasury yields surged, extending the recent sell-off in global bonds. The 2-year Treasury yield rose 1.1 basis points to 3.597%, while the benchmark 10-year yield jumped 7.0 basis points to 4.293%, its highest level since August. The move was compounded by a heavy sell-off in Japanese government bonds earlier in the day, which spilled over into other global bond markets. Despite the rise in yields, the US dollar came under significant pressure as the so-called “sell America” trade gathered momentum; the DXY fell 0.83% to 98.57. In commodity markets, oil prices spiked amid renewed tariff concerns and reports of a temporary suspension of production at Kazakhstan’s major oil fields. Brent crude rose 1.53% to $64.92 a barrel, while WTI crude gained 1.51% to $60.34. Gold continued to surge as investors sought safety, rallying 1.98% to a fresh record high of $4,763.43 an ounce.
Are Markets Heading for a Tailspin in the Coming Days
Volatility was hugely elevated across financial markets yesterday as investors started to price in potential dramatic changes in underlying fundamentals. Stock markets took big hits across the globe. Gold and silver again punched up to brand new record levels. Japanese markets saw a run on bonds, while US yields and the dollar took diverging paths—yields pushing to multi-month highs while the greenback lost big numbers against the majors. A lot will now depend on the so-called “TACO Trade” — Trump Always Chickens Out — especially with regard to his aspirations towards Greenland. Any escalation in rhetoric and the potential for bigger tariffs and a trade war with Europe could see some of yesterday’s moves move into a tailspin, while a “TACO” move could see a calming in volatility and some corrections, not just in the recent moves, but also in correlations.
Another Busy Day Ahead for Traders
Looking ahead, traders are bracing for further volatility in the sessions ahead, with scheduled comments from world leaders expected to drive price action. There is very little on the schedule in the Asian session today, although, again, traders will keep a close eye on Japanese markets after yesterday’s bond crash. The European session will see the initial focus on UK markets again, with key CPI data due out. The headline year-on-year number is expected to show a ‘sticky’ 3.3% rise, up from 3.2% last month, which should continue to add fuel to the MPC hawk’s fire. Focus will then jump across the Channel to Davos, Switzerland, and the WEF annual meeting, with ECB President Christine Lagarde due to speak early in the day. However, the main headlines are likely to come later in the day when President Trump speaks from the event. The New York session is likely to be heavily influenced by any comments from the President; however, US Pending Home Sales data will also be released later in the day.
