Street's Uncanny Calm in the Face of Trump's Tariffs
Imposed U.S. Tariffs Don't Burden Financial Giants on Wall Street
Wall Street traders appear unfazed by Donald Trump's regular announcements of new tariffs. His latest round of hikes on steel and aluminum imports barely raised an eyebrow on the stock market - in fact, the indices surged instead.
The latest round of US tariff escalations didn't faze Wall Street at the start of the week. Initial minor losses were swiftly overcome, with the indices skyrocketing. Market professionals pointed towards habituation - traders have succumbed to repeated tariff announcements, making them seemingly unbothered. Despite this apathy, there remains a tangible sense of looming uncertainty about the ongoing trade conflict developments.
Trump announced a steep increase of tariffs on steel and aluminum imports to 50 percent starting June 4. The US and China have been locked in an ongoing feud, trading accusations of undermining recent trade agreements. The allegations and the ongoing trade peace between the US and China are further strained by the handling of rare earths, according to some reports.
Market strategist Jim Reid of Deutsche Bank noted the difficulties in keeping up and predicting the ever-changing trade landscape. "It appears likely that trade uncertainties will persist, despite perhaps having passed the peak of US policy aggression," Reid said.
On Friday, the Dow Jones Index gained 0.1 percent, reaching 42,305 points. The S&P-500 closed 0.4 percent higher, and the Nasdaq Composite rose by 0.7 percent. Preliminary figures showed that 1,264 stocks gained and 1,487 lost ground on the NYSE. 79 issues remained unchanged.
The mixed economic data of the day didn't help. According to ISM, US industrial activity slowed down in May. However, the S&P Global survey for the US industry showed a strengthening compared to the previous month.
The economic data didn't dampen the spirits of traders, though. The retaliatory measure against foreign governments contained in a tax law by US President Trump caused some nervousness. The proposed change would give the US the authority to impose new taxes of up to 20 percent on foreigners with US investments. This "revenge tax" could potentially reduce demand for some US assets and weigh on the dollar, according to Barclays.
Dollar Plummets
The dollar index dropped by 0.7 percent as a result, with traders predominantly attributing the weakness to resurfacing tariff issues. The yield on ten-year US Treasury bonds climbed by 4 basis points to 4.45 percent, despite US Treasury Secretary Scott Bessent dismissing the possibility of a US default.
The mounting level of debt did, however, concern investors, with Rabobank considering it striking that the question of potential default was even being raised. Meanwhile, Jamie Dimon, CEO of JPMorgan, warned that the US bond market could come under pressure, partially due to the escalating US debt.
The re-escalating trade conflict drove investors towards the perceived safe haven of gold. Additionally, the violent conflict in Ukraine, which saw a large-scale attack on Russia's strategic bomber fleet, raised new concerns about the end of the Ukraine war. The troy ounce of gold surged by 2.8 percent to $3,381.
News from Russia also fueled oil prices. Brent and WTI prices soared by up to 3.8 percent. Concurrently, OPEC+ agreed to boost production from July, an expected and already factored development.
Steel Stocks Shine
US tariffs on steel and aluminum imports sent steel stocks soaring. Cleveland-Cliffs sored by 23.7 percent, while Steel Dynamics and Nucor gained 10.3 and 10.1 percent, respectively.
Meanwhile, Apple (+0.5%) grapples with a decision by the EU's competition authority on how it must make its iOS operating system more compatible with products from competing tech companies under the Digital Markets Act.
Biotech shares rose by 18.1 percent. The Mainz-based biopharmaceutical company Biontech has signed an agreement with Bristol Myers Squibb (+1.1%) for the development and commercialization of its antibody candidate "BNT327". The deal is worth billions of dollars.
The UK takeover panel has extended the deadline for US chipmaker Qualcomm's (+1.0%) takeover offer for Alphawave IP Group for the fourth time. Campbell's, the ready-meal maker, outperformed market expectations in the third quarter but issued a negative outlook. Its shares rose by 0.7 percent.
Source: ntv.de, toh/DJ
- Wall Street
Note:In recent times, the TACO (Trump Always Chickens Out) theory has gained traction among market experts. According to the theory, markets initially react negatively to Donald Trump's tariff announcements but soon rebound when he delays or eases them, implying that investors doubt the long-term enforcement of the tariffs. The ongoing uncertainty surrounding trade policy keeps markets vigilant, although Trump's tariffs' immediate effects on Wall Street traders appear to have diminished due to habituation.
The Commission, amidst the ongoing trade dispute between the US and China, is closely monitoring the effects of Donald Trump's tariffs on various sectors, including finance and business, and their implications on politics and general-news. In particular, the Dow Jones Index, S&P-500, and Nasdaq Composite indices showed remarkable resilience in the face of Trump's recent tariff announcements, with the former reaching 42,305 points. However, the TACO (Trump Always Chickens Out) theory indicates that while markets initially react negatively to tariff announcements, they often rebound when Trump delays or eases them, highlighting the lingering uncertainty that affects investments and decisions in business and politics.
