Yen Surges as Trump Imposes 104% Tariffs on China

The yen and Swiss franc rallied as investors fled to safe havens after President Trump’s 104% tariffs on Chinese goods took effect at midnight, intensifying fears of a global recession. Asian stock markets plunged, European futures pointed lower, and the yuan hit a 19-month low while the Indonesian rupiah neared a record 17,000 per dollar. Despite mounting recession concerns, US 10-year Treasury yields surged 21 basis points, with ING attributing the move to a "sell America" trend overriding typical risk-off dynamics.

Equities

The FTSE 100 rose 2.7% on Tuesday, marking its strongest session since March 2022. The index recovered from its lowest close in over a year, supported by investor hopes that the US may soften some of its aggressive tariff measures against China. The FTSE 250 also climbed, rising 3.3% after three days of declines.

Among individual UK stocks, Rolls-Royce gained 6.8% and BAE Systems rose 4.6%, leading the aerospace and defence sector 5.6% higher overall. Gains were also seen across precious metals miners, which rose 3% after gold prices pushed back above $3,000 an ounce. Utilities stocks rose 2.1%, benefitting from falling bond yields and a weaker dollar. Meanwhile, UK 30-year gilt yields climbed to their highest level since January, tracking a broader sell-off in global government debt. In politics, Finance Minister Rachel Reeves confirmed she would soon meet US Treasury Secretary Scott Bessent to discuss a potential economic partnership aimed at easing tariffs.

In the US, markets closed lower after Washington confirmed tariffs of 104% on some Chinese imports would come into force just after midnight. The S&P 500 fell 1.57% to close below 5,000 for the first time in nearly a year, having lost nearly $6 trillion in market value since last Wednesday. The Dow dropped 0.84% and the Nasdaq shed 2.15%, weighed down by concerns about inflation and slowing growth.

JPMorgan Chase, Citigroup and Wells Fargo are set to kick off quarterly results on Friday. JPMorgan CEO Jamie Dimon warned this week that trade tensions could lead to lasting inflationary pressure and possibly a recession. On the bond market, the US Treasury yield curve steepened to its widest level since early 2022. The 10-year yield jumped 12.6 basis points to 4.283%, while the two-year yield slipped to 3.715%.

Forex & Commodities

The dollar slipped sharply against traditional safe-haven currencies on Wednesday, with the yen gaining 0.7% to 145.23 and edging closer to its recent six-month high. The Swiss franc also climbed, touching a fresh six-month peak against the greenback at 0.8430. Traders continue to unwind carry trades as risk sentiment weakens, while the euro advanced 0.4% to $1.0996, buoyed by signs of political stability in Germany. Meanwhile, the Chinese offshore yuan fell to a record low of 7.4288 per dollar, following confirmation that the US would impose 104% tariffs on Chinese goods. Beijing has held firm on its retaliatory levies, adding to pressure on the renminbi.

Gold prices rose by nearly 2%, trading at $3,038.54 an ounce in early London hours, supported by a weaker dollar and growing interest in safe-haven assets. US gold futures climbed 2.2% to $3,056.60. The gold market remains on track for further strength, with prices only recently pulling back from a record high of $3,167.57. Meanwhile, the latest data from the World Gold Council showed gold-backed ETFs marked their highest quarterly inflows in three years.

In commodities, oil prices dropped to their lowest since February 2021, with Brent crude down over 2% to $61.43 a barrel and WTI falling to $58.08. Both benchmarks lost up to 4% during the session. The downturn reflects demand concerns linked to the US-China tariff escalation and a surprise OPEC+ decision to boost output by 411,000 barrels per day starting May. API data also reported a 1.1 million barrel fall in US crude inventories last week, ahead of EIA figures due later today.