Markets rebound as Trump imposes 90-day pause on tariffs

Asian shares climbed and a manic bond selloff stabilised on Thursday after US President Donald Trump said he would temporarily ease the hefty duties he had just imposed on dozens of countries.

Following a days-long market rout that erased trillions of dollars from global equities and jolted US Treasury bonds and the dollar, Trump on Wednesday announced a 90-day pause on many of his new tariffs in a shock reversal.

But US stock futures and the dollar missed out on Thursday’s relief rally—despite an overnight surge on Wall Street—as investor confidence in the US administration continued to erode and the “sell America” trade gained traction.

“The world, political and financial, is looking on with horror—not bemusement—at an administration that prioritises the signing of an executive order for more water power in shower heads on the same day that the bond market breaks and investors question the long-term credibility of the administration, having flip-flopped on the largest of their policies: tariffs,” said Martin Whetton, head of financial markets strategy at Westpac.

Nasdaq futures slid more than 1 per cent after a brief rally early in the Asian session, while S&P 500 futures sank 0.75 per cent. Both indexes had notched their biggest daily gains in over a decade during Wednesday’s cash session.

The dollar fell 0.7 per cent against the yen and 0.6 per cent versus the Swiss franc, failing to sustain its sharp overnight rebound against the two safe-haven currencies—underscoring market uncertainty over the longer-term outlook.

“I think the initial move was just massive short covering, and this has given the world a bit of breathing space—except for China… because markets were starting to price in the worst-case scenario,” said Khoon Goh, head of Asia research at ANZ. “But now that the dust has settled, I think markets will try to figure out where to go from here.”

In broader markets, Japan’s Nikkei and European futures were among the standout winners of Asia’s rally.

The Nikkei surged 8 per cent, while EUROSTOXX 50 and DAX futures each climbed around 8 per cent. FTSE futures gained 5.4 per cent.

Trump’s reversal on the country-specific tariffs is not absolute. A blanket 10 per cent duty on nearly all US imports remains in effect, the White House confirmed. The pause also excludes duties already imposed on autos, steel and aluminium.

Trump further escalated pressure on China, announcing that tariffs on Chinese imports would rise to 125 per cent from the 104 per cent level introduced on Wednesday.

In turn, China raised duties on American goods to 84 per cent and imposed restrictions on 18 US companies, mainly defence-related firms.

For now, investors appeared to focus narrowly on the 90-day window Trump has given the rest of the world, rather than the broader escalation of Sino-US trade tensions.

China’s CSI300 blue-chip index rose 1 per cent, while Hong Kong’s Hang Seng advanced 2.2 per cent.

“I guess at least the relief is that global trade won’t grind to a complete halt,” said Wong Kok Hoong, head of equity sales trading at Maybank. “The China-plus-one supply chain route is still intact. With 10 per cent tariffs holding for 90 days, companies and businesses now have time—and options—to adjust.”

However, the yuan painted a more cautious picture. The onshore unit fell to its weakest level since December 2007, trading at 7.3518 per dollar. Prior to the market open, the People’s Bank of China set the midpoint rate at its lowest since September 2023.

Bond selloff

A steep selloff in bonds showed signs of easing on Thursday.

The benchmark 10-year Treasury yield dropped to 4.2774 per cent, down from a peak of 4.5150 per cent in the previous session.

The earlier rout in Treasuries—reminiscent of the COVID-era “dash for cash”—rekindled fears over fragility in the world’s largest bond market.

“Sticky inflation, a patient Federal Reserve, potential foreign buyer boycotts, hedge fund deleveraging, rebalancing out of bonds into cash, and an illiquid Treasury market are all reasons why yields continue to rise,” said Lawrence Gillum, chief fixed income strategist at LPL Financial.

Minutes from the Fed’s mid-March meeting showed that policymakers remain hesitant to deliver interest rate cuts, even as they fear Trump’s trade policy could damage growth. They expect higher tariffs to lift inflation.

Markets now price in around 80 basis points of rate cuts by December, down from over 100 basis points earlier in the week.

Elsewhere, oil prices fell as concern over the deepening US-China trade war mounted.

Spot gold extended its climb, last up 1.5 per cent at $3,128.92 an ounce.