'Euphoria' on global stock markets after Trump's U-turn

The debacle of global markets turned into 'euphoria' on Thursday after Donald Trump's spectacular reversal on tariffs imposed on the rest of the world except China.

In Europe, the main indices soared right from the opening. Around 07:30 GMT, the Paris stock exchange shot up by 6.35%, Frankfurt by 6.57%, London by 4.66%, and Milan by 6.83%. The Swiss stock exchange climbed by 5.69%. In Tokyo, the Nikkei index closed with a leap of over 9%, and in Seoul, the Kospi index gained 6.6%.

The stock exchanges are following 'Wall Street's euphoria' from Wednesday, notes John Plassard, an analyst at Mirabaud.

The Dow Jones index soared by 7.87% and the Nasdaq by over 12%, marking their best session since 2008 with the announcement of Trump's U-turn on his tariffs. 'With Trump temporarily taking a de-escalation route, the markets have rebounded sharply,' comments Jim Reid, an economist at Deutsche Bank.

After having triggered a global trade war and shaken the markets, the U.S. president announced Wednesday in Washington a 90-day suspension of import duties against dozens of countries and partners, notably against the European Union, in principle in effect since Wednesday 04:01 GMT.

The tone remains the same towards China, an exception to the tariff truce. Trump even announced on Wednesday a tightening of surcharges targeting Beijing due to an alleged 'lack of respect,' raising them to a dizzying level of 125%, from 104% previously. Chinese stock indices are holding their course. In the latest trading, in Hong Kong, the benchmark Hang Seng index rose 2.46%. The Shanghai composite index gained 1.16%, while Shenzhen's rose 2.25%.

'Caution is still advised,' tempers Jochen Stanzl of CMC Market, reminding that 'universal tariffs of 10% are still in force.' Predicting the next chapter of the trade war 'is almost impossible,' the U.S. having completely 'deviated from the usual scenario,' notes Ipek Ozkardeskaya, an analyst at Swissquote Bank, who believes 'uncertainties will persist.'

The debt market in focus

Although the U.S. administration denied that the decision to suspend tariffs was related to market pressure, 'Trump's comments showed some sensitivity to financial stress,' notes Jim Reid. He acknowledged Wednesday that he was monitoring the fall in the U.S. debt market, or bond market, before deciding on his pause, adding before to the press that he had noticed his tariff hikes were 'scaring a bit.'

U.S. borrowing rates had surged Wednesday, up to 4.5%, a sign of investor flight, after being praised as a safe investment, as they offer a guaranteed return for investors. The more sought-after a bond is by investors, the more its interest rate will fall. They seek instead to be better compensated when they consider a state's debt riskier, which drives the rate up.

The rate at which the U.S. borrows at ten-year maturity reached 4.32% around 07:30 GMT compared to 4.34% at Wednesday's close.

Gold near record

Gold, considered the ultimate safe haven, is once again in high demand on Thursday 'despite the return of investors to riskier assets,' notes Matt Britzman, an analyst at Hargreaves Lansdowne. 'The ongoing tensions with China and the prospect of higher inflation are two drivers of demand,' he explains.

It had fallen from its historic peak reached in early April, as investors were forced to sell to cover their losses amidst the stock market debacle and tariff turmoil.

Around 07:30 GMT, an ounce of gold was up by 0.97% at $3,112.69, nearing its record of over $3,167 an ounce. On the oil front, prices are bending after the previous day's Russian maneuvers, attentive to 'escalating trade tensions between the U.S. and China,' notes Britzman. The price of a Brent barrel from the North Sea was down 1.45% at $64.53, while its U.S. equivalent, the WTI, fell 1.33% at $61.52.