Digest | 8 April 2025
- Edward von der Schmidt
- Apr 9
- 3 min read
Updated: 5 days ago
An overnight risk-asset rally that had pushed European stock indices ~2.5% higher gave way to the collective realization that no reprieve would be forthcoming for US "reciprocal" tariffs, which are now in effect. The latter helped to engineer a substantial S&P 500 reversal into the red on Tuesday. An additional 50 percentage points to China's penalty rate (now 104%) augured an entrenched trade war as a backlog of negotiation requests meant that trade talks seeking tariff reprieve would play out over months and with uncertain returns. Likely aggravated by position unwinds, US risk reduction, and liquidity requirements, Treasuries defied any flight-to-quality as benchmark yields continued their torrid climb with another material leg higher into Wednesday. While another Fed official cautioned against a rush to action, heightened geopolitical tensions weighed on the broader risk environment. Look for the FOMC minutes to shed light on where Fed debates stood in March, prior to "Liberation Day".