Shares in Japan rose more than 1% with companies such as Toyota Motor Corp. jumping after President Donald Trump said he is exploring a pause in auto tariffs. Futures contracts for the S&P 500 pared earlier losses from a plan to impose tariffs on semiconductor and pharmaceutical imports. Treasuries were steady and a gauge of the dollar edged higher, trimming some of Monday’s decline.
Investors are still struggling to game out the economic spillovers of the trade war given the back-and-forth in negotiations. While US officials insist the tariff strategy is carefully constructed, critics see the trading order as subject to the whims of a transactional president. The White House on Monday announced trade probes into semiconductors and pharmaceuticals, seen as a precursor to imposing tariffs that threaten to broaden Trump’s sweeping US trade war.
“There is probably still a lot of damage being done to the real economy and there remains a confidence crisis in the markets, meaning further downside and volatility in risk assets is probable,” wrote Kyle Rodda, a senior market analyst at Capital.com. “The risk of a recession in the US remains higher, if not because of the tariffs, then the ongoing policy uncertainty alone.”
Meantime, Treasury Secretary Scott Bessent played down the recent selloff in the bond market, rejecting speculation that foreign nations were dumping their holdings of US Treasuries, while flagging that his department has tools to address dislocation if needed.
“I don’t think there’s a dumping” by foreign investors, Bessent said in an interview Monday with Bloomberg Television. He pointed to what he said was increased foreign demand at auctions for 10-year and 30-year Treasury securities last week.Bessent rejected concerns about the simultaneous decline in Treasuries and the dollar last week signifying that the US was losing its haven status.“We are still a global reserve currency” and there is still a “strong dollar policy,” Bessent said.
The biggest Wall Street firms have highlighted how difficult it has been to predict the trajectory for equities. Barclays Plc’s Venu Krishna said the recent volatility leaves little confidence in any pricing now, while JPMorgan Chase & Co.’s Dubravko Lakos-Bujas indicated that forecasting in the current environment is a challenge and leaves a wide range of outcomes.
Strategists at BlackRock Inc.’s research arm said they are dialing up their risk-taking and embracing US and Japanese stocks following the pause of tariffs on many global trading partners, even as they steer clear of longer-dated US debt.
“The near-term risk of a financial accident has eased,” wrote the BlackRock Investment Institute strategists including Jean Boivin and Wei Li. “Checks on policy allowed us to extend our tactical horizon back to six to 12 months and resume our positive view on US and Japanese stocks.”
