Increased US Tariffs Pose No Strain on Wall Street Investors
Wall Street has developed a surprising nonchalant attitude towards President Trump's ongoing tariff announcements. Despite the latest round of hikes on steel and aluminum imports, the stock market is far from stirred - instead, the indices are on an upward trajectory.
This habituation, as traders call it, doesn't mean that uncertainty has vanished from the tariff conflict. On the contrary, there remains a lingering question mark over how the situation will evolve. The US and China are locking horns, accusing each other of jeopardizing recently agreed trade deals. Moreover, the trade peace between the two economic giants could crumble over the handling of rare earths, according to sources.
Market strategist Jim Reid of Deutsche Bank finds it challenging to keep up with the constantly changing trade landscape. Despite the potential persistence of tariff uncertainty, it seems that the US policy aggression might have reached its peak for now.
On Tuesday, the Dow Jones Index saw a minimal gain, rising by 0.1 percent to 42,305 points. The S&P-500 closed 0.4 percent higher, and the Nasdaq Composite went up by 0.7 percent. Preliminary data shows 1,264 gainers versus 1,487 losers on the NYSE, with 79 stocks remaining unchanged.
The day's economic data painted a mixed picture. While activity in the US industry slowed down according to ISM, the S&P Global survey for the US industry showed a strengthening compared to the previous month.
A retaliatory measure against foreign governments contained in a tax law by President Trump caused a bit of nervousness among investors. This potential change grants the US the authority to impose new taxes of up to 20 percent on foreigners with US investments. This so-called "revenge tax" primarily targets countries accused of unfair or discriminatory treatment of US companies.
The dollar index saw a slide of 0.7 percent, with traders attributing the weakness primarily to the resurfacing tariff theme. The yield on ten-year US Treasury notes rose by 4 basis points to 4.45 percent, despite US Treasury Secretary Scott Bessent ruling out a US default. The high level of US debt, however, has raised concerns among investors.
This re-escalation of the trade conflict led to a surge into the supposedly safe haven of gold, boosted by a weak dollar. Additionally, the Ukrainian attack on Russia's strategic bomber fleet has sparked new concerns about an end to the Ukraine war. Gold rose 2.8 percent to $3,381 an ounce.
Oil prices experienced a boost due to Russian headlines. Brent and WTI prices surged by up to 3.8 percent. Meanwhile, Opec+ agreed to increase production from July, a decision that was widely expected and already reflected in prices.
Steel stocks have become sought-after as US tariffs on steel and aluminum imports drive up their prices. Cleveland-Cliffs saw a surge of 23.7 percent, while Steel Dynamics and Nucor gained 10.3 and 10.1 percent, respectively. In other news, Biontech shares vaulted 18.1 percent after the Mainz-based biopharmaceutical company signed a deal with Bristol Myers Squibb to develop and commercialize its antibody candidate "BNT327."
Source: ntv.de, toh/DJ
Insights:
- Market habituation to US tariff announcements causes less market reaction than initially expected.
- Initial tariff announcements often led to market volatility, but the market has grown more accustomed to them, leading to more stable responses over time.
- The ongoing impact of tariffs remains a significant factor in market dynamics.
- The market is likely to experience more churning in the short term; risks lean towards the downside due to rapid price increases.
- The Commission (Deutsche Bank's Market Strategist Jim Reid) finds it challenging to keep up with the constantly changing trade landscape, as the US tariff announcements have led to a certain degree of habituation among financial markets.
- Despite the seemingly nonchalant attitude of Wall Street towards President Trump's tariff announcements, the general-news of the trade conflict between the US and China and the potential implications for business and politics continue to impact the global finance market.