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Stocks rally sharply, European futures jump

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Bond market rout shows signs of stabilising

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Fed funds futures retreat

By Rae Wee

SINGAPORE, April 10 (Reuters) - Global stocks rallied,

the dollar found footing 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.

Following a days-long market rout that erased trillions of

dollars from global stocks and pressured 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.

The move sent Wall Street's "Magnificent Seven" stocks

tacking on more than $1.5 trillion in market value overnight and

the S&P 500 and Nasdaq Composite Index clocked

their biggest daily percentage gains in more than a decade.

But U.S. futures turned lower on Thursday, with Nasdaq

futures falling 0.67% and S&P 500 futures down

0.17%.

The dollar logged its largest one-day jump against the yen

in two months and in five against the Swiss franc

in the previous session, and held to most of those

gains in Asia on Thursday.

Japan's Nikkei surged 8%, while European futures

shot up.

EUROSTOXX 50 futures and DAX futures

climbed roughly 9% each. FTSE futures jumped 6%.

"This is a piece of news that surprised market participants,

given the magnitude of the move ... Obviously this is a pretty

strong risk-on environment we're seeing in the aftermath of the

announcement," said Jeff Schulze, head of economic and market

strategy at ClearBridge Investments.

"However, given the tariffs that have been announced and

that are staying in place ... that is still going to

dramatically increase the average effective tariff rate in the

U.S. to close to 20%."

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.

"It is difficult to see either side backing down in the next

few days. But we suspect that talks will eventually happen,

although a full rollback of all the additional tariffs applied

since Inauguration Day appear unlikely," said Paul Ashworth,

chief North America economist at Capital Economics.

"Our long-standing assumption that the effective tariff rate

on China would settle around 60% still seems like the best bet."

Ahead of the onshore open of Chinese markets, the offshore

yuan was last 0.15% weaker at 7.3570 per dollar, having

struck a record low earlier in the week.

BONDS SELLOFF

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

easing on Thursday.

The benchmark 10-year Treasury yield was last at

4.3160%, 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 rose on optimism over the pause on

tariffs.

Spot gold extended its climb and was last up 0.5% at

$3,097.52 an ounce.