Investors dumped US government bonds, the dollar tumbled and stocks seesawed Friday, capping a volatile week as President Donald Trump’s unpredictable tariff policy rattled market confidence.
Beijing said Friday that it would hit back with 125 percent duties on American products, but suggested it would not retaliate further in the future.
Wall Street indexes opened in the red Friday but rose shortly thereafter as investors sought to make sense of the latest trade war news, with the broad-based S&P 500 edging up 0.3 percent around midday.
European markets also had a roller-coaster trading day, with Frankfurt closing 0.9 percent lower and Paris down 0.3 percent. London rose 0.6 as data showed the UK economy grew far more than expected in February.
“The main driver of the renewed market pressure was an increased focus on the US-China escalation,” said Jim Reid, managing director at Deutsche Bank.
“Neither the US nor China are showing signs of backing down, with President Trump expressing confidence in his tariff plans,” Reid said.
The dollar plunged to its lowest level against the euro in more than three years as investors fled what is typically considered a key haven currency, though it later pared some of its losses.
In a more worrying sign of cracking investor confidence in the US economy, the yield on the 10-year US Treasury bill rose sharply to 4.5 percent as its price tumbled.
John Higgins, chief markets economist at Capital Economics, said it was a sign of “concern that China might dump its vast holdings of Treasuries” even if that risked losses for Beijing and driving the yuan higher against the dollar.
With Treasuries being sold off, sending their yields higher and making US debt more expensive, there is a fear of a bigger exodus from American assets down the line.
JPMorgan Chase CEO Jamie Dimon on Friday rejected the notion that US Treasuries were no longer a haven.
“If you’re going to invest your money in something, America is still a pretty, pretty good place in this turbulent world,” Dimon said in a conference call after his bank reported hefty first-quarter profits and revenue.
