Financial markets surged early this week in light of easing trade tensions between the US and China. Following initial talks over the weekend, the two blocks agreed to a temporary ceasefire, with both countries committing to a 90-day reprieve during which tariffs would be greatly reduced. Chinese goods imported into America will face tariffs of just 30% as of today, compared to 145% before the agreement. On the other side of the deal, tariffs on US imports into China will fall from 125% down to just 10%. It will obviously take many months and even years to fully restructure such international trade deals, but for the time being stock markets are content.
The good news continued on Tuesday with the release of the latest round of CPI data. For all the fearmongering, US inflation once again dipped below expectations in April. Prices rose 2.3% YoY – the lowest increase in four years – while core inflation fell in line with predictions at 2.8%. The latest report is significant in that in encompasses the impact of the liberation day tariff regime, which came into effect on the 2nd of April.
The progress made on the tariff front has not lent itself to safe-haven assets, particularly precious metals. Gold fell precipitously on Monday, losing the better part of $100 per ounce and making very little effort to resist the descent. The meteoric rise in gold this year has been in no small part because of the uncertainty surrounding global trade. Should such fears continue to dissipate, it may become harder to defend the huge gains observed so far this year.
The crypto sphere enjoyed a number of small developments over the last couple of days. The first is the inclusion of Coinbase (COIN) in the S&P 500, the first and only crypto exchange in the index. It is worth remembering that the company has endured aggressive scrutiny from the SEC in recent years, facing intense legal pressure and hostile regulatory measures. While the exchange was already listed on the NASDAQ, its inclusion in the S&P 500 is indicative of a softening of opinion towards crypto in general. The company’s stock shot up 24% following yesterday’s announcement. In other news, US-based financial services company Robinhood announced on Tuesday that it will acquire Canadian crypto firm WonderFi for C$250 million. The acquisition is merely the latest step in Robinhood’s growth, which includes the purchase of crypto exchange Bitstamp last year. Meanwhile, this morning Standard Chartered said that it has formed a strategic partnership with crypto broker FalconX. The above cases barely scratch the surface of the ongoing strengthening of ties between traditional finance and crypto markets. Much more to come.
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