- Global stocks and the dollar decline sharply as trade war fears intensify.
- U.S. Treasury yields surge, marking the biggest weekly jump since 2001.
- Gold hits a record high of $3,210 per ounce as investors seek safety.
- The Swiss franc reaches a 10-year high against the dollar.
- Trade tensions escalate as U.S. and China impose higher tariffs.
Global Markets React to Escalating Trade War
Global stocks, the dollar, and bonds faced significant losses on Friday as escalating trade tensions between the U.S. and China rattled investor confidence. The dollar slid to a 10-year low against the Swiss franc and a six-month low against the yen, while gold surged to a record high of $3,210 per ounce as investors sought safe-haven assets.
Bond Market Selloff Intensifies
The selloff in U.S. Treasuries accelerated during Asian trading hours, with the 10-year note yield rising to 4.45%, marking a 45-basis-point increase for the week—the largest since 2001. The 30-year bond yield also climbed to 4.90%, on track for its biggest weekly jump since at least 1982. Analysts attribute the bond market turmoil to fears of a sharp economic slowdown or recession, exacerbated by the escalating trade war.
Trade War Escalation
U.S. President Donald Trump recently raised tariffs on Chinese imports to an effective rate of 145%, prompting China to retaliate by increasing its tariffs on U.S. goods to 84%. The tit-for-tat measures have heightened fears of a prolonged trade conflict, which could further destabilize global markets. Treasury Secretary Scott Bessent attempted to reassure investors by stating that over 75 countries are interested in trade negotiations, but skepticism remains high.
Investors Flee to Safe Havens
Amid the uncertainty, investors have flocked to safe-haven assets. The Swiss franc reached its highest level against the dollar in a decade, while the euro surged 1.7% to $1.13855, its highest since February 2022. Gold, traditionally seen as a hedge during crises, continued its upward trajectory, gaining 1.1% to reach a new record high.
Recession Fears Loom
The violent selloff in U.S. Treasuries has reignited fears of fragility in the world’s largest bond market. Michael Krautzberger, Global CIO Fixed Income at Allianz Global Investors, noted that the price action in Treasuries could reflect investor concerns about a sharp growth slowdown or recession, which would worsen the already unsustainable U.S. fiscal outlook. Others suggest the selloff may be driven by institutional rebalancing or deleveraging by leveraged funds.
Commodities and Oil
While gold soared, oil prices rose modestly on Friday but remained on track for a second consecutive weekly decline due to concerns about the prolonged trade war. Brent crude futures were up 1% at $63.97 a barrel, but the overall outlook for energy markets remains uncertain.
Market Volatility Continues
European stocks pared early gains, leaving the STOXX 600 index down nearly 1% for the day and 1.7% for the week. U.S. futures for the S&P 500 and Nasdaq were mostly flat but highly erratic, having traded down as much as 2% earlier before rallying by 1.6%. Vasu Menon, managing director of investment strategy at OCBC Bank in Singapore, warned that the short-term outlook for global risk assets remains uncertain due to growth and inflation concerns, as well as rapidly changing developments on the trade front.
The escalating U.S.-China trade war has sent shockwaves through global markets, with stocks, bonds, and the dollar all facing significant losses. As investors seek safety in assets like gold and the Swiss franc, fears of a recession and prolonged trade conflict continue to weigh heavily on market sentiment. The coming weeks will be critical in determining whether the U.S. and China can de-escalate tensions or if the global economy will face further turmoil.