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Stocks yo-yo, dollar slides as all-out trade war saps confidence

Published: 12 Apr. 2025, 11:39

A cargo ship sits outside of the Port of Elizabeth marine terminal seen from Bayonne, New Jersey, on April 9. [REUTERS/YONHAP]

Global stocks seesawed in volatile trade Friday while the dollar sank as investors jostled to square their books after a brutal week marked by an all-out trade war and a dramatic loss of confidence in U.S. assets as anchors of market stability.

The dollar slid to its lowest in 10 years against the Swiss franc and a six-month low against the yen as investors sought other safe haven assets. The euro surged 1.7 percent to $1.14, a level last seen in February 2022, and gold, seen as a safe asset during times of crisis, hit another record high.

Investors are grappling with worries over the escalating China-U.S. trade war after U.S. President Donald Trump ratcheted up tariffs on Chinese imports, raising them effectively to 145 percent.

On Friday, Beijing hit back, hiking its tariffs on U.S. goods to 125 percent from 84 percent, helping unleash another wave of money into other markets, such as Europe, where the euro roared to more multiyear highs against the dollar and the Chinese currency.

An overnight selloff in U.S. Treasuries abated but left the 10-year note yield at 4.4 percent, still up about 45 basis points in the week, its biggest increase since 2001, LSEG data showed. Bond yields go up when prices go down.

"U.S. and China tariffs are now so high on one another, it’s easy to argue trade in most goods will come to a complete stall apart from essential items and those with high margins. U.S.-China commercial flows will be in free-fall, casting doubt on the long-term and short-term role of the dollar," Mizuho head of fixed income, currencies and commodities strategy Jordan Rochester said.

European stocks pared earlier losses to trade up around 0.1 percent on the day, having fallen by as much as 1 percent previously. The STOXX 600 is still down around 1.7 percent this week, one of its most volatile weeks on record.

U.S. Treasury Secretary Scott Bessent tried to assuage skeptics by telling a cabinet meeting on Thursday that more than 75 countries wanted to start trade negotiations. Trump himself expressed hope of a deal with China, the world's No. 2 economy.

But James Athey, fixed income manager at Marlborough, said the outlook remains clouded in more uncertainty than it did a month ago, remarking, "There are still so many unanswered and unanswerable questions."

U.S. futures for the S&P 500 and Nasdaq were up almost 1 percent, but trading was highly erratic, with both having traded down as much as 2 percent earlier before rallying as much as 1.6 percent.

The anxiety about tariffs has sparked a renewed rush into safe havens, after a brief but massive relief rally following Trump's move on Wednesday to temporarily postpone tariffs on many countries.

"The short-term outlook for global risk assets remains uncertain given growth and inflation concerns, fluid sentiments and fast-changing developments on the trade and tariff fronts," said Vasu Menon, managing director of investment strategy at OCBC Bank in Singapore.

U.S. President Donald Trump holds a signed executive order on tariffs in the Rose Garden at the White House in Washington on April 2. [REUTERS/YONHAP]

A violent U.S. Treasury selloff this week, evoking the Covid-19-era "dash for cash," has reignited fears of fragility in the world's biggest bond market.

Thirty-year bond yields rose to 4.9 percent, on course for their biggest weekly jump since at least 1982, LSEG data showed.

"What we are seeing in U.S. bond markets is not currently about inflation concerns," said Michael Krautzberger, Global CIO for fixed income at Allianz Global Investors.

Krautzberger said the price action in Treasuries could be reflecting investor fears that a sharp growth slowdown, or recession, "makes an already unsustainable U.S. fiscal outlook even worse."

"On the other hand, we could just be witnessing a rebalancing among institutional investors or a deleveraging from levered funds."

In commodities, gold hit another record high, rising 1.2 percent to $3,212 an ounce.

Oil prices rose on Friday, but still headed for a second straight week in the red on concerns about a prolonged trade war between the United States and China. Brent crude futures were last up 0.35 percent at $63.54 a barrel.

Reuters