Wall Street headed lower, and the value of the dollar fell on Thursday despite the FTSE 100 (^FTSE) and European stocks soaring higher as investors cheered US president Donald Trump’s U-turn on sweeping reciprocal tariffs.
He announced that he was halting a levy hike for almost all nations for 90 days, whilst raising tariffs on Chinese exports to 125% effective immediately.
Asked why he had ordered the pause, the US president told reporters: “People were jumping a little bit out of line. They were getting yippy.”
However, investors are more concerned that Trump’s tariff regime could spark a downturn in the world’s largest economy. Goldman Sachs (GS) put the chances of a recession at 45%, while bond giant Pimco said the probability was 50/50.
The European Union also revealed on Thursday that it is pausing its countermeasures on President Trump’s tariffs for 90 days. European Commission president Ursula von der Leyen said, “We took note of the announcement by President Trump. We want to give negotiations a chance.
“While finalising the adoption of the EU countermeasures that saw strong support from our Member States, we will put them on hold for 90 days.
“If negotiations are not satisfactory, our countermeasures will kick in. Preparatory work on further countermeasures continues. As I have said before, all options remain on the table.”
The euro rose on the back of the news. The single currency was up more than a cent against the US dollar to $1.108, a gain of 1.1%.
Meanwhile, China urged the US to meet it “halfway” in the escalating trade war between the two economies while promising to “fight to the end” if a compromise cannot be reached.
Commerce Ministry spokesman He Yongqian said: “The door to dialogue is open, but it must be based on mutual respect and conducted in an equal manner.”
Bank stocks jumped on the day as traders reduced their expectations for interest rate cuts.
Elswehere, US inflation came in lower than expected in March, a boost to Donald Trump that inflation is easing on his watch.
On an annual basis, inflation dropped to 2.4% in March from 2.8% in the year to February.
Energy prices fell by 2.4%, thanks to a drop in gasoline prices, while food prices were up 0.4%.
On an annual basis, the energy index decreased 3.3% for the 12 months ending March. The food index increased 3.0% over the last year.
