S&P 500 futures are now up 0.6%, getting a shot in the arm from the headlines above. China then doubled down to bolster risk sentiment further in Asia trading, by delivering a host of supportive measures including a slew of rate cuts. Eamonn’s got the summary on that here before adding one more to the relending rate here.
For now, hope springs eternal. There is good chance for de-escalation but what does that really mean is a separate discussion. But market players are taking on a more optimistic side for the time being. Buy the rumour, as one would put it.
But as a reminder, the bar is set relatively low. At 145% tariffs currently, any step down to allow for some trade to be facilitated instead of no trade at all is an improvement. However, if we do move to 50-60% tariffs, it’s still a major hit to both economies. But at least, there are signs of trying to work something out I guess.
Come what may, the end goal is basically what markets have to really consider ultimately. If it is moving towards de-escalation and slow removal of tariffs or a much lower level, then sure there is something to be cheerful about.
But if the base case is for higher tariffs in general i.e. Trump hoodwinking the world into forcing tariffs on everyone, I think that’s a consequence towards the global economy that markets have yet to really price in. But for now, baby steps.
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