Ian Reynolds
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Overnight
Markets (mostly) cheered the trade agreement with China.
The key points
- Tariffs cut for 90 days
- US tariffs on China now 30%
- China tariffs on US now 10%
But the narrative is stronger than just the temporary numbers above
- A negotiation framework is now in place
- China's economy is not strong enough to ride out a sudden shutdown in demand
- China respects Trump rather than the abject disrespect they had for Biden.
AND A REAL BONUS
China sent their deputy minister for public safety to address the fentanyl crisis. US officials called this an "upside surprise" - completely unexpected at a trade meeting.
Equities rallied hard and BTC and Gold fell, reflecting the de-escalation. Worryingly US 10 year treasury bond yields rose sharply nearing 4.5% where prime dealers will be worrying about liquidity, something that Scott Bessent has been talking about.
US Equity Markets
Breaking
‘Buy America’ Sweeps Across Global Markets After Trade Talks [Bloomberg]
Bonds
The market still digesting the poor 10 and 30 year auctions last week, sold off aggressively and to a point where action may be needed, be it jawboning or liquidity or QE.
US 10 Year Government Bond Yield Daily
Commodities
Gold breaks lower but the demand is still there at a lower level.
GOLD / USD Daily
Bitcoin
And BTC definitely now the asset not correlated to tech stocks and acting like a digital Gold.
BITCOIN / USD Daily
Equities
Big pump on the news and the key point is that something has happened.
Markets can now reassess the economy for at least the next 3 months.
S&P 500 Daily
Foreign Exchange
It took a lot of good news but the USD finally popped
DXY Daily
Economic Indicators Today
