Following the announcement of a one-month delay on US tariffs by Mexican President Claudia Sheinbaum, stock markets saw a partial recovery. While the S&P 500 and European Stoxx Europe 600 Index experienced declines, they pared back losses earlier in the day. The news comes amidst heightened market volatility triggered by Donald Trump's tariff implementation, which led to a surge in the US dollar and declines in other currencies.
Stock markets experienced a partial rebound after Mexico's President Claudia Sheinbaum announced that US tariffs had been postponed for a month. Sheinbaum conveyed this information on X, stating, 'The tariffs are on pause for one month starting now,' following a phone conversation with US President Donald Trump . Coinciding with this news, Mexico pledged to deploy thousands of troops to the US border to combat perceived drug trafficking.
The S&P 500 index managed to recover some of its losses, concluding the day at 0.9 percent lower. The European Stoxx Europe 600 Index also witnessed a recovery, closing at 0.9 percent lower as of 3:48 p.m. in London. Earlier in the day, the index had dropped as much as 1.6 percent.Motor stocks, significantly influenced by import tariffs, led the decline, while the telecommunications sector outperformed. In Dublin, the Iseq Overall Index fell by 1.4 percent. Despite the temporary reprieve, financial experts remain cautious. Keith Lerner and Michael Skordeles from Truist Advisory Services expressed their doubt about the long-term viability of the tariffs on Canada and Mexico. However, they acknowledged that the uncertainty surrounding the duration and extent of these tariffs introduces significant disruptions to supply chains and pricing for numerous companies across North America.Donald Trump's imposition of tariffs triggered a wave of market volatility on Monday. The US dollar surged, reaching a peak increase of 1.4 percent against a basket of currencies before settling at a gain of 1.3 percent. The Canadian dollar plummeted to its lowest point since 2003, Mexico's currency depreciated nearly 3 percent, and the euro declined by 1.3 percent. Trump himself acknowledged on Truth Social that his tariffs might inflict 'some pain' but maintained that the ultimate benefits would outweigh the costs. Global investment banks issued warnings that the tariffs would negatively impact the US economy, alongside the rest of the world. Analysts at UBS and Morgan Stanley projected that if these tariffs were sustained, they could potentially reduce US real GDP growth by half this year, leading to a decline of more than 1 percentage point.In the bond market, the US two-year Treasury yield increased by 0.07 percentage points to 4.27 percent, while the 10-year yield rose by 0.01 percentage point to 4.55 percent. Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas, commented that the market had initially perceived the tariffs as a negotiating tactic, but underestimated the Trump administration's resolve. Economists have expressed concerns that these tariffs are likely to exacerbate inflationary pressures within the US. Eric Winograd, chief economist at AllianceBernstein, stated that the most evident consequence would be a stronger dollar. He emphasized that a long dollar position is the most direct indicator of the trade war that has now commenced.Trinh Nguyen, economist for emerging Asia at Natixis, warned that a strong dollar poses a significant threat to emerging markets. She predicted that developing economies would experience a decline in risk appetite for assets and an increase in their dollar-denominated debt burdens. After experiencing initial declines, Hong Kong's Hang Seng index recovered to close at a flat position. Mainland China's stock market remained closed until Wednesday.
TARIFFS MEXICO STOCK MARKET DONALD TRUMP US DOLLAR GLOBAL ECONOMY
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