Swissquote Bank: Sovereign bond markets said the last word
The red line was the sovereign bond markets. It was the flash selloff in US Treasuries over the past few days that finally made Donald Trump take a step back from his tariff strategy.
He didn’t care about the equity selloff, he couldn’t care less about the global risk rout, and he was likely pleased to see Chinese assets and crude oil tank. But the fire sale in U.S. Treasuries dialled up the pressure to a point that apparently became unbearable—even for Trump. He announced a 90-day pause for countries that haven’t retaliated, while doubling down on China. Chinese products will be taxed at 125%, in response to China’s announcement of 84% tariffs on US imports.
Ironically, it seems the Europeans—who did retaliate—might still benefit from the 90-day ceasefire. That said, the universal 10% tariffs are still in place, and the trade war is far from over. We'll be talking about this nonstop for the next 90 days and nights—and probably for years to come.
Now, the market reaction to the tariff pause was incredible. First, the pressure on US Treasuries eased: the 10-year yield dropped below 4.30% from above 4.50%, and the 30-year yield fell below 4.70% after spiking above 5% earlier in the day. Then, US equities staged the biggest rally since 2008—and the fifth largest in history. The S&P 500 jumped 9.5%, Nasdaq 100 soared 12%, and the Dow nearly 8%.
Nvidia recovered more than 18% of its value in one session. Apple surged 15% from a yearly low, Amazon rose 12%. US energy stocks rebounded nearly 8% alongside crude oil. Even Nasdaq’s Golden Dragon China Index climbed 4.5%. Wild moves.
This morning, European stock futures are up more than 8%, though US futures are taking a breather. Investors are hoping this 90-day pause gives countries enough time to renegotiate, reorganize supply chains, and soften the tariff shock. That’s fundamentally positive—whether the tariffs go ahead or not. Having time to put together a Plan B is a gift... but I wouldn’t pop the champagne just yet. We’ve already seen how the uncertainty alone has hit businesses.
- Delta Airlines lowered its earnings guidance, citing global trade tensions.
- Amazon cancelled orders for China-sourced products to cut exposure to Chinese supply
- Walmart, on the other hand, stuck to its full-year forecast, betting that chaos will drive more shoppers to its low prices.
Let’s not forget: China remains a critical market for companies like Apple and Nike. And on that front, the war rages on. So yes—some relief, but tread carefully.
Tomorrow kicks off the US earnings season. Expect more focus on guidance than on the actual numbers. Forecasts will likely be revised downward—unless for companies that thrive in downturns like Walmart or Dollar General. The key is how much guidance gets cut, and whether that’s already priced into recent market selloffs. The good news? Market pessimism ran deep enough to leave room for a rebound.
Still, trying to predict the next minute in this market is nearly impossible. The US has gone completely off-script. Donald Trump will go down in history as the most unpredictable US president at best—and at worst, as the one who dismantled the very idea of American exceptionalism.
Uncertainties will persist, though yesterday’s rebound rests on solid ground. We could see it extend—if Trump can just stay quiet for a few days, let the market digest the news, and watch how companies react.
On the data front, the US CPI update is due today and should land with a bit less tension. Headline inflation is expected to ease from 2.8% to 2.5%, likely helped by lower energy and egg prices. Core inflation should stay near 3%.
The Federal Reserve (Fed) has remained relatively quiet during the selloff, simply noting that policy is “in a good place” amid growth and inflation uncertainties. Recession bets may have eased, but they’re still far higher than before Trump took office. And if inflation stays in check, the Fed should cut rates more 3-4 times this year depending on the Trump-induced damage that’s impossible to predict at this point.
Markets presently price in more than a 10% chance of a 50bp cut in June. As little sense as it made to cut rates by 50bp last September, it may make just as much sense now. Therefore, if inflation softens and economic data disappoints, dovish expectations could help keep risk appetite afloat.
As for China—it’s complicated
The 90-day reprieve doesn’t apply. Inflation data shows deflationary pressures persist despite Beijing’s stimulus efforts. But that weakness might just be the fuel needed for stronger support measures. For those betting that US exceptionalism is fading, China remains an intriguing – though risky - diversification play.