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Stocks rally sharply, but US futures turn lower

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Chinese equities rise even as yuan hits multi-year trough

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Bond market rout shows signs of stabilising

By Rae Wee

SINGAPORE, April 10 (Reuters) - Global shares surged and

a manic bond selloff stabilised on Thursday after U.S. President

Donald Trump said he would temporarily lower the hefty duties he

had just imposed on dozens of countries.

However, the sharp overnight rally in U.S. stocks and the

dollar lost steam as a trade war between the United States and

China ratcheted up, with investors also perplexed over the

flip-flopping of the Trump administration's tariff plans.

Following a days-long market rout that erased trillions of

dollars from global stocks and jolted U.S. Treasury bonds and

the dollar, Trump on Wednesday announced a 90-day pause on many

of his new tariffs in a shock reversal.

That pushed European futures up sharply in the Asian

session, with EUROSTOXX 50 futures and DAX futures

climbing nearly 8% each, while FTSE futures

gained 5.4%.

Japan's Nikkei similarly advanced more than 8%.

But Wall Street took a breather after a towering rally

overnight, as investors struggled to come to terms with the U.S.

administration's economic policies.

"The world, political and financial is looking on with

horror, not bemusement, at an administration that prioritises

the signing of an executive order for more water-power in shower

heads, on the same day that the bond market breaks and investors

question the long-term credibility of the administration having

flip-flopped on the largest of their policies, tariffs," said

Martin Whetton, head of financial markets strategy at Westpac.

Nasdaq futures fell more than 1% and S&P 500 futures

were off 0.8%.

Both indexes had clocked their biggest daily percentage

gains in more than a decade during Wednesday's cash session.

The dollar fell 0.8% against the yen and 0.6% on

the Swiss franc, failing to sustain its jump against

the two safe haven currencies in the previous session.

"I think the initial move was just massive short cover, and

this has given the world a bit of a breathing space, except for

China... because markets were starting to price in the

worst-case scenario," said Khoon Goh, head of Asia research at

ANZ.

"But now that the dust has settled, I think markets will

seem to sort of figure out where to go from here."

Trump's reversal on the country-specific tariffs is not

absolute. A 10% blanket duty on almost all U.S. imports will

remain in effect, the White House said. The announcement also

does not appear to affect duties on autos, steel and aluminium

that are already in place.

He also heaped pressure on China, saying he would raise the

tariff on Chinese imports to 125% from the 104% level that came

into effect on Wednesday.

China on Wednesday raised additional duties on American

products to 84% and imposed restrictions on 18 U.S. companies,

mostly in defence-related industries.

Yet investors for now seemed to view the latest escalation

of Sino-U.S. trade tensions with a narrow lens, choosing merely

to focus on the 90-day window Trump has granted to dozens of

countries.

China's CSI300 blue-chip index was up 1%, while

Hong Kong's Hang Seng Index advanced 2.4%.

"I guess at least the relief is now global trade won't grind

to a complete halt," said Wong Kok Hoong, head of equity sales

trading at Maybank.

"The China + 1 supply chain route (is) still intact. As the

rest of the world will be at workable 10% tariffs for 90 days,

companies/businesses have time/alternatives to adjust

supply chain routes."

Still, the onshore yuan fell to its weakest level

since December 2007 at 7.3518 per dollar.

Prior to market opening, the People's Bank of China (PBOC)

set the midpoint rate, around which the yuan is

allowed to trade in a 2% band, at its lowest level since

September 11, 2023.

BONDS SELLOFF

A steep selloff in bonds this week also showed some signs of

easing on Thursday.

The benchmark 10-year Treasury yield dropped to

4.2908%, having touched a high of 4.5150% in the previous

session and rising some 13 basis points.

A violent U.S. Treasury selloff in the previous sessions,

evoking the COVID-era "dash for cash", had reignited fears of

fragility in the world's biggest bond market.

"Sticky inflation, a patient (Federal Reserve), potential

foreign buyer boycotts, hedge fund deleveraging, rebalancing out

of bonds into cash, and an illiquid Treasury market are all

reasons why Treasury yields continue to move higher," said

Lawrence Gillum, chief fixed income strategist at LPL Financial.

Fed policymakers signalled they will not be quick to ride to

the rescue with interest rate cuts because they expect higher

tariffs to boost inflation, even as they worry Trump's trade

policy could deal a blow to economic growth, minutes of the

central bank's mid-March meeting out on Wednesday showed.

Markets are now pricing in just about 80 basis points of

rate cuts by December, down from more than 100 bps earlier in

the week.

Elsewhere, oil prices fell as investors fretted about the

worsening Sino-U.S. trade war.

Spot gold extended its climb and was last up 1.5% at

$3,128.92 an ounce.