Markets were on the verge of collapse by the close of trade Friday. US equities were smashed and the tech-heavy NASDAQ crashed into ‘Bear Market’ territory. The US Dollar had been savaged, in trade on Thursday, but recovered sharply to close on Friday. The EUR had traded as high as 1.1100, but crashed back to 1.0960, while the GBP fell from above 1.3100 to 1.2860! Wild market swings in equities and currencies were also replicated in the US Bond Market. US Bonds were telling a different story though, with the 10-year plummeting below the ‘Big Figure’, of 4%. This contradicts statements from Federal Reserve Chaiman Powell, who cited the tariff turmoil, as a reason to halt all near term rate cuts. Market volatility may well continue, as the world begins to comprehend the massive changes occurring in world trade. Most Countries are going to cut rates, in response to the Trump Administrations tariff levy’s, especially Asian Tigers. The major adversaries that will respond aggressively against the US, may be China and the EU. China already responded, with a blanket 34% imposition of Tariffs on all US goods, which was a huge contributor to Friday’s market crash.Trade exposed commodity trading countries were hit hard by the markets on Friday, with the AUD crashing below the ‘Big Figure’ of 0.6000, while the NZD slumped to 0.5551. NZ and Australia suffered the minimum tariff rate of 10%, which may well be negotiated away, although the Australian Labor Party is fighting an election campaign and may choose to raise the political stakes. As Countries recognise what is happening, most will cut tariff rates on US Goods and Services, thus eliminating the reciprocal tariffs from the US. This will lead to, in time, to less barriers to global trade and a more fair, balanced global trading system.
