Reversal in U.S. Markets Just Hours After Relief Rally
On the 2nd (local time), when U.S. President Donald Trump's reciprocal tariff policy was announced, U.S. stock index futures all fell. Except for some countries such as Mexico, which was exempted from some reciprocal tariffs, investment sentiment weakened across Europe and Asia.
As of 8:50 PM Eastern Time, the Dow Jones Industrial Average futures were down 2.01% from the previous close, trading at 41,640.00. At the same time, S&P 500 futures fell 3.07%, and Nasdaq 100 futures plunged 3.88%. A decline in futures prices indicates a negative outlook on future stock prices.
Major U.S. stock markets showed a relief rally with about a 1% increase during the regular daytime session but reversed to a decline immediately after the reciprocal tariff announcement. Reuters in the U.S. analyzed that the expectation that the impact of reciprocal tariffs would not be significant had faded. The Trump administration's announcement to impose reciprocal tariffs ranging from 10% to 49% on global imports was cited as the background for the stock market decline.
European stock markets showed overall weakness, reflecting anxiety ahead of the reciprocal tariff announcement. European markets closed lower before President Trump's announcement. The UK FTSE index fell 0.3%, while Germany's DAX index (-0.66%) and France's CAC index (-0.22%) also declined together.
Asian stock markets also mostly weakened, reflecting the shock of the U.S. reciprocal tariff announcement. Japan's Nikkei 225 index started in a panic mode, dropping more than 4%, and as of 10:19 AM on the 3rd, it was down 3.21% at 34,578.72. The Shanghai Composite Index rose 0.05%, maintaining a slightly positive level.
With increased uncertainty in risk assets due to the reciprocal tariff announcement, safe-haven assets stood out, and gold prices hit a record high. On the New York Commodity Exchange, the spot price of gold rose 0.6% to trade at $3,129.46 per ounce. Copper prices, included in the tariff exemption list, closed up 0.1%. The 10-year U.S. Treasury yield was down 11 basis points (bp, 0.01 percentage points) from the previous close, at 4.074%. The 2-year Treasury yield showed little change.
Currency movements were mixed. In the New York foreign exchange market, the U.S. Dollar Index, which reflects the value of the dollar against six major currencies, fell 0.6% to 103.19. The Mexican peso closed higher, influenced by Mexico's effective exemption from reciprocal tariffs.
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