Equities Whipsaw, Oil Drops After Tariffs Kick In: Markets Wrap

(Bloomberg) — Equities fluctuated as President Donald Trump’s tariffs on Canada, Mexico and China went into effect. Oil extended losses.

Financial markets largely took the moment the tariffs came into effect in stride — with Chinese stocks even climbing intraday. In the run-up to the deadline, though, US equities tumbled the most this year, while Treasury note yields earlier fell to the lowest in four months and oil dropped to a three-month low.

“Now the market may be recognizing the limitation of US tariffs hike in the full-blown trade war when the US economy shows sign of weakness,” said Ken Cheung, chief Asia FX strategist at Mizuho Bank Ltd.

US tariffs on its biggest trading partners went into effect at midnight New York time as Trump pushes to remake global trade. In response, Canada announced a sweeping package of levies and China retaliated by imposing tariffs as high as 15% on US exports. Investors have been seeking safer havens as they become wary about rising geopolitical tensions and the prospect of tit-for-tat levies.

“China’s hit back isn’t exactly aggressive,” said Billy Leung, an investment strategist at Global X ETFs in Sydney. That level of tariffs on “US agricultural goods, but nothing broad-based on tech or autos, suggests to me they’re leaving room for negotiation rather than going full tit-for-tat. That’s probably why Chinese stocks are rebounding instead of selling off harder.”

Trump putting tariffs on Canada and Mexico is a broadside against the two biggest US trading partners. The long-promised duties would easily be among the most sweeping of the Trump era, applying to around $1.5 trillion in annual imports.

Trump also said Monday that the US would impose tariffs on “external” agricultural products starting on April 2, adding another layer of threats to impose trade barriers on imported goods. He didn’t detail which products would be affected, or if there would be any exceptions.

The S&P 500 fell 1.8% on Monday, and a gauge of the Magnificent Seven megacaps sank 3.1%. 

The Bloomberg Dollar Spot Index was steady. The Canadian dollar and Mexican peso slipped. The outlook for emerging Asian currencies is worsening again after the new tariffs on China. Trump said Monday that Japan and China are putting the US at an unfair disadvantage when they weaken their currencies. 

“Markets were hoping there was potential for more wiggle room, more negotiation or the possibility of an extension but those hopes have been dashed,” said Prashant Newnaha, a senior rates strategist at TD Securities in Singapore. “For markets, the concern is tariffs are coming into play just as cracks are showing in US growth.”

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In Asia, investors are also focusing on the National People’s Congress meeting, which starts in Beijing Wednesday, amid expectations China will spell out measures to stimulate the economy. The annual session will run till March 11. 

Communist Party-backed news outlet Global Times reported Monday that Beijing is considering retaliatory measures on US agriculture and food products in response to the president’s latest actions.

Investors are looking to China’s NPC for clues on how the country will boost economic growth. Policymakers are expected to push its official budget deficit target to the highest in over three decades, pumping trillions of yuan into a system battling deflation, a property crash and now a trade war with the US.

Still, some investors see ways to benefit.

“There are plenty of opportunities across Asia,” said Vikas Pershad, an Asian equities portfolio manager at M&G Investments, in a Bloomberg TV interview. “We like China and Japan and India for the medium to long term term for different reasons.”

In economic data, Monday’s manufacturing reading was the latest in a slew of disappointing US economic reports in the last two weeks, showing weaker housing, rising unemployment claims and a drop in personal spending. 

There is a “very small” chance that the US economy tips into a recession, despite the uncertainty surrounding global trade policy, according to Goldman Sachs Group Inc. Chief Executive Officer David Solomon at the Australian Financial Review Business Summit in Sydney on Tuesday. 

Cryptocurrencies remained volatile after Trump stepped up calls for a digital-asset stockpile. Bitcoin declined for a second day after sinking more than 9% on Monday. The MVIS CryptoCompare Digital Assets 100 Index slipped as much as 9.8%.

In geopolitics, Trump ordered a pause to all military aid to Ukraine, turning up the heat on Volodymyr Zelenskiy just days after an Oval Office blowup with the Ukrainian president left the support of his country’s most important ally in doubt. 

In commodities, oil extended losses from the lowest in almost three months as OPEC+ said it will proceed with plans to revive halted production. Gold steadied after having advanced the previous day. 

Key events this week:

• Eurozone unemployment, Tuesday
• President Donald Trump’s speech to a joint session of Congress, Tuesday
• China Caixin services PMI, Wednesday
• Eurozone HCOB services PMI, PPI, Wednesday
• US ADP employment, ISM services index, factory orders, Wednesday
• Fed’s Beige Book, Wednesday
• Eurozone retail sales, ECB rate decision, Thursday
• US trade, initial jobless claims, wholesale inventories, Thursday
• US Treasury Secretary Scott Bessent speaks, Thursday
• Fed’s Christopher Waller and Raphael Bostic speak, Thursday
• Eurozone GDP, Friday
• US jobs report, Friday
• Fed Chair Jerome Powell gives keynote speech at an event in New York hosted by University of Chicago Booth School of Business, Friday
• Fed’s John Williams, Michelle Bowman and Adriana Kugler speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 2:37 p.m. Tokyo time
• Japan’s Topix fell 1%
• Hong Kong’s Hang Seng fell 0.2%
• The Shanghai Composite was little changed
• Euro Stoxx 50 futures fell 0.8%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0482
• The Japanese yen rose 0.1% to 149.32 per dollar
• The offshore yuan rose 0.2% to 7.2860 per dollar

Cryptocurrencies

• Bitcoin fell 1.3% to $84,199.89
• Ether fell 0.2% to $2,106.08

Bonds

• The yield on 10-year Treasuries was little changed at 4.15%
• Japan’s 10-year yield advanced one basis point to 1.420%
• Australia’s 10-year yield declined six basis points to 4.27%

Commodities

• West Texas Intermediate crude fell 0.6% to $67.94 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott, Abhishek Vishnoi, Shery Ahn, Haidi Lun and Matthew Burgess.

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