Some trade policy relief and strong bank earnings helped push Wall Street up on Tuesday, while US government bonds and the dollar were steady, after US President Donald Trump touted possible tariff changes on autos.
Mr Trump said on Monday he was considering a modification to the 25 per cent tariffs imposed on foreign auto and auto parts imports from Mexico, Canada and other places. That followed Friday’s move to exempt smartphones, computers and some other electronics from Mr Trump’s “reciprocal” tariffs.
The main US stock indexes ticked higher on Tuesday morning, with Bank of America, Citigroup and Wells Fargo gaining after the trio of banking giants posted strong profits for the first quarter. The broad gains followed Monday’s advance on Wall Street, its second straight daily rise for the first time since Trump announced his reciprocal tariff plan on April 2nd.
In morning trading, the Dow Jones Industrial Average rose 0.5 per cent, the S&P 500 added 0.7 per cent, and the Nasdaq Composite gained 0.75 per cent.
“Markets have been itching for any signs of positivity,” said Dan Boardman-Weston, chief exexutive at BRI Wealth Management.
Investors took whatever good news they could get after the recent heavy selling across markets, and pushed shares higher.
The pan-European STOXX 600 index rose 1.2 per cent on Tuesday, led by the autos and parts sector whose gauge jumped about 2.5 per cent.
“When we start to see some of these exemptions flow through for particular sectors, it helps markets think about tariffs as something that aren’t necessarily going to be all-encompassing, and that they might actually be reprieved,” said Illiana Jain, an economist at Westpac.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.1 per cent. Japan’s Nikkei rose 0.8 per cent, with shares of auto companies like Toyota and auto parts maker Denso among the top gainers.
Trump’s tariffs: “The rest of the world is now going to de-risk from the United States”
Analysts remained cautious, however, as uncertainty over Mr Trump’s trade policies, and his constant back-and-forth on tariffs, continued to cast a cloud over markets and the global economic outlook.
In a reminder that markets are not yet out of the woods, China ordered its airlines not to take any further deliveries of Boeing jets, Bloomberg News reported on Tuesday, citing people familiar with the matter.
US bonds held on to most of Monday’s gains on Tuesday after a manic selloff last week that led to the largest weekly increase in borrowing costs in decades. Bond yields move inversely to prices.
The benchmark 10-year yield was flat at 4.366% per cent, having fallen nearly 13 basis points in the previous session.
Some analysts said comments from Federal Reserve governor Christopher Waller contributed to the fall in yields. He said on Monday that the Trump administration’s tariff policies were a major shock to the US economy that could lead the Fed to cut rates to head off recession even if inflation remained high.
Atlanta Fed Bank President Raphael Bostic, meanwhile, suggested the US central bank should stay on hold until there is more clarity.
Markets are now pricing in about 83 basis points worth of monetary policy easing by the end of the year, with most expecting the Fed to hold rates next month.
The dollar held steady on Tuesday, trading near a three-year low against the euro and a six-month trough against the yen, as investors trying to make sense of the constant changes to tariffs remained wary of US assets. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was flat on the day.
“The US exceptionalism narrative that had previously underpinned the surge in US equity markets over the past couple of years, and boosted the dollar, has lost much of its shine,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.
Oil prices were subdued after the International Energy Agency cut its oil demand forecast, having earlier been boosted by the latest tariff exemptions floated by Trump. US crude rose 0.18 per cent to $61.64 (€54.43) a barrel and Brent advanced to $64.98 per barrel, up 0.15 per cent on the day.
Spot gold rose 0.2 per cent to near its record high at $3,215 an ounce. - Reuters
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