Financial Markets – Digital Finance Analytics (DFA) Blog

In A Hyper Financialised World, Bond Markets Rule…

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia. This past week was an object lesson in the power of the Bond market. And not for the first time. A favourite quote on markets comes from the former CEO of Citicorp, Walter Wriston, who observed that, “Capital goes where it is welcome and stays where it is well treated. Remember those Words.

I made shows through the week about the fallout from the Trump tariffs and the subsequent 90 day pause of the reciprocal tariffs, the extra hikes directed at China, and China’s escalation back, (Beijing increased its tariffs on U.S. imports to 125% on Friday after Trump’s move to hike duties on Chinese goods) and the turmoil on financial markets, especially a significant sell-down in US Treasuries. This lifted yields (remember bond prices and yields move in opposite directions), with the 10-year up 12.4% across the week to 4.494, while the two year was up 9.07% to 3.970. The long 30-year was up a massive 10.39% across the week, even though selling partially reversed as the Friday session progressed. This is NOT normal. Rumours went around it was China, or Japan selling bonds, but more likely it was driven by hedge funds caught out of position. “Until Treasuries stabilize and start to behave normally, risk assets will struggle,” Barclays analysts said in a note on Friday.

Normally, bond markets, though a huge element in the financial system do not make moves of this scale, after all they are meant to be the safe, secure, boring backstop to the financial system. Macro commentator James Aitken told his clients. “Financial history reminds us that when a policymaker tells hyper-financialised markets he or she is not targeting markets, markets will force the policymaker to target them. Indeed.

In Asia, Japanese stocks were by far the worst performers, given that the country holds large export exposure to both the U.S. and China. Mainland Chinese stocks fell relatively less than their peers, boosted by apparent buying by state-backed funds – China’s so-called national team.

The Australian share market closed lower on Friday, sealing a week that had the exchange record some of its most outsized moves since 2020 as a trade war between the world’s two largest economic powers gathered momentum. The S&P/ASX 200 fell 0.8 per cent, or 63.1 points, to 7646.5 points at the close. The index dropped more than 2 per cent earlier in the session, but improved in afternoon trading as US futures climbed. The ASX 200 tumbled around 0.3 per cent this week – its second consecutive weekly loss.

Investors are redirecting money once bound for Wall Street and fast-growing Silicon Valley tech giants back towards the Australian share market as intense volatility in the United States turns the ASX into a safe haven. Despite a drop on Friday taking the S&P/ASX 200’s falls this year to 6.3 per cent, the local benchmark has performed far better than Wall Street, where the S&P 500 is down more than 10 per cent and the NASDAQ some 15 per cent.

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Trumps Tariff Tidal Wave Swamps Markets With Stagflation Incoming…

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way.

The 2nd of April “T” day will go down in infamy, as global markets have since lost around $6 trillion of value as the global world trade order was trashed. The U.S. now accounts for 70% of the global equity market, up from 40% during the Global Financial Crisis. CNN’s Fear and Greed Index fell to 4 out of 100, falling deeper into ‘extreme fear’ territory.

US Treasury Secretary Scott Bessent, the former hedge fund manager who the market hoped would be the voice of reason in President Donald Trump’s second administration, did an interview with Tucker Carlson on Friday night amid more carnage on Wall Street. And remarkably, he claimed it had nothing to do with the tariff war launched by his boss.

Things got so wild that Warren Buffett’s team had to make a public statement after Trump shared a video on social media that suggested Buffett endorsed Trump’s apparent plan to send the share market down 20 per cent on purpose to ultimately revitalise the US economy.

While the 10% level of tariffs are now in place, and the higher levels, calculated on the back of an envelope it seems, following, it is not clear whether they are here to stay, a negotiating point of departure, or an attempt to drive yields lower, thus easing the US deficit.

Jerome Powell on Friday said the FED expects US grow to fall, and inflation to rise which sounds like stagflation to me while acknowledge the tariffs were larger than expected.

China responded with a matching 34% on many US good, Canada imposed 25% tariffs on cars to the US, while other countries are circling the wagons trying to maintain the existing world order, even as the new world order is emerging. This is not going to abate anytime time soon, and there are consequences for households, especially US households actually, businesses and countries. “We’re in the Wild West of a trade war right now,” said Mariam Adams, managing director at UBS Wealth Management.

Trump likened the process to a surgical operation on a patient, stating, “It was an operation like when a patient gets operated on, and it’s a big thing. I said this would exactly be the way it is.” He further predicted that the markets, stocks, and the country will experience a boom.

What is clear so far is that US big firms who have invested in global supply chains, to source cheaply and mark-up massively to sell branded good like Nike and Apple, are right in the front line. Future cash-flows are at risk, so stock valuations are down, with Apple down 25% year to date and Nvidia down 29%.

This market insecurity is set to continue, as the tariff game is played, this is a world class science experiment, driven by Trump and his team, with significant and long lasting collateral damage well beyond the US. As I discussed in my recent post, the basis of the calculations are largely political, and the potential implications enormous. Many will need to reevaluate the potential future earnings from stock, and so value, stocks which generally were priced to perfection, and which are still some way from fundamental value. So, volatility and more falls need to be expected. Duck and cover as stagflation enters centre stage!

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Plenty Of Fudge Around Tariffs, Markets And The Election Campaign!

Markets have continued to react negatively with the ASX 200 down another 2.38% on Friday, taking year to date falls to 6.02%. The local volatility index was also elevated.

It was a similar story across Asia, apart from in China and Hong Kong which were closed for a holiday, with the Japanese Nikkei down 2.8% and down 9% across the week, and down 15% year to date; while the KOSPI was down 0.86% (perhaps impacted also by the news on the presidential impeachment, and overnight).

In the US, the S&P 500 was down 4.84%, the Dow down 3.98% and the NASDAQ down 5.97%. It will interesting to see if that trend continues on Friday and I will make my normal weekly review show tomorrow. The VIX remains elevated and the Dollar index fell again.

Meantime, Trump seemed to suggest the tariffs were open to negotiation in his latest grab, though other officials seem less open to changing them.

And we also go more clarity, (if that is the right word) on just how much fudge there is in the calculations they used to come up with figures, which as I said yesterday, were suspect. Originally commenters assumed more science behind them, including things like exchange rates and GST or VAT rates, but now according to the BBC, if you unpick the formula it boils down to simple maths: take the trade deficit for the US in goods with a particular country, divide that by the total goods imports from that country and then divide that number by two.

So plenty of fudge in these numbers to justify a political stance. And as Albo said yesterday, not the action of a friend. And the fudge continues, if you have been following the Australian election campaigns, as both sides try to react, without reacting.

Which takes us nicely to a show recorded yesterday with Adam Stokes, on his channel, where we discussed the tariffs, the end of globalisation, and also the local political scene. So I am going to play that now, and I will be back with my normal weekend show tomorrow, where I will look at the damage across the markets in more detail.

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Market Disorder Incoming As “Pax Americana” Unwinds…

It seems that markets are beginning to read the room, as the unwinding of the so-called rules based order – which really was based on a Pax Americana Hegemony, is falling apart. After the 25% auto imports tariffs were announced this week, the so called “Liberation Day”, on April 2, when Trump said he plans to announce reciprocal tariffs to end the days of other nations ripping off the US, or “T “ day is looking to be the next milestone.

No surprise then that safe-haven gold hit a fresh record high on Friday with the futures at $3126 and up more than 18% this year, even as the MSCI index of global shares fell, down 1.58%, and down year to date too, while the STOXX 600 European index fell 0.77% on Friday but is still up 6.79% this year. The SP500 was down 1.97% on Friday erasing -$1 TRILLION of market cap and posted its largest daily decline since March 10th and it’s down 5.11% year to date while the ASX 200 was up 0.16% as the election was announced, but down 2.17% so far this year, all weighed down by worries over a looming trade war sparked by tariff decisions from U.S. President Donald Trump.

With the price of BTC down over 4% this week from weekly highs of $89,000 to $83,654, it really has not value anchor so this may not be the end of the pain for holders of Bitcoin and, of course, other crypto assets, as when the leader falls, others follow.

But sometimes, it only takes one number to shift sentiment on the market, and this time, that number came from the latest inflation report. The price of Bitcoin has now lost a crucial technical support level – the 200-day moving average – after the latest Personal Consumption Expenditures (PCE) data was released, adding more weight to an already uncertain macroeconomic backdrop. For Bitcoin, which tends to struggle in tight liquidity conditions, the break below the 200-day moving average could signal further downside if macro pressures persist. What comes next? That depends on whether inflation slows or if markets have, once again, been too eager to price in victory too soon.

Markets Trying To Make Sense Of The Senseless…

This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in Australia, covering commodities and crypto along the way.

It was another complex week, with the interplay of tariffs, central bank non-decisions, and company reports plus the witching trades on Friday adding to the mix. Never-ending market disruptions are upending investment blueprints everywhere in 2025, while hitting sentiment across US stocks. This week the Fed, Bank of England and Bank of Japan left interest rates unchanged as they assessed the economic impact of U.S. President Donald Trump’s trade tariffs against global trading partners. Many of the world’s major central banks sent a strong message this week that the uncertainty caused by U.S. President Donald Trump’s trade wars is weighing on growth, stoking inflation, and dramatically reducing visibility on the interest rate outlook.

For the week the MSCI global index was 0.7% higher, but still down nearly 4% lower over the past month and flat year to date. Compare that to the European STOXX 600 which is up more than 8% year to date, while the SP500 is down 3.64% from 1 Jan, and the ASX 200 is down 2.79%.

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Seeking The Bottom, Choppy Waters For Markets Again!

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way.

World markets on Friday ended another choppy week on an upbeat note as investors pushed aside growing concerns over the global trade war and bought back beaten down stocks, although few will be confident a definitive market bottom has been reached yet. U.S. President Donald Trump’s tariff agenda is very much in place, and markets remain vulnerable to the next escalation in tensions. The lack of any new announcement from Trump on Friday was, for investors, perhaps a classic case of ’no news is good news’.

The U.S. Senate did pass a stopgap spending bill, averting a partial government shutdown, after Democrats backed down in a standoff driven by anger over President Donald Trump’s campaign to slash the federal workforce. After days of heated debate, top Senate Democrat Chuck Schumer broke the logjam on Thursday night, saying that he would vote to allow the bill to advance. Schumer said he did not like the bill but believed that triggering a shutdown would be a worse outcome as Trump and his adviser Elon Musk were moving swiftly to slash spending.

And another dose of good news on Friday came from Germany, where Chancellor-in-waiting Friedrich Merz secured support from the Greens to revise the country’s debt brake and unleash the biggest fiscal package since 1990, proposals that should deliver a massive boost to German and European growth.

But frankly, the broader horizon is filled with dark, ominous clouds, indicated by some key market moves and economic data on Friday – safe-haven demand propelled gold above $3,000 an ounce for the first time, while U.S. consumer confidence fell to its lowest in nearly two and a half years and longer-term inflation expectations hit their highest since 1993.

In a post on X, former US treasury secretary Larry Summer said: “I am convinced there is nearly a 50 per cent chance of recession, and maybe even a far greater risk of recession, unless the current policy approach of tariff threats lurching is altered.”

Although markets clawed higher on Friday, the global MSCI Index was down a further 1.77% across the week, while the European STOXX 600 was down a further 1.22% over the 5 trading days.

In the US, The S&P 500 confirmed a correction on Thursday with the index closing down more than 10 per cent from its February 19 record high amid heightened uncertainty about President Donald Trump’s tariff moves and his determination to revamp the US federal government. That said, U.S. stocks rebounded on Friday as investors hunted for bargains at the end of a tumultuous week. S&P 500 +2.13% Dow +1.65% NASDAQ +2.61%. The S&P 500 and NASDAQ logged their biggest one-day percentage gains since November 6, the day after the U.S. presidential election. It was a broad rally, with recently battered tech-related megacaps enjoying a comeback.

The S&P/ASX 200 closed on Friday with its third-largest weekly loss this year despite a rally in Australian iron ore and gold mining stocks. The index shed almost 2 per cent of its value this week. It closed 9 per cent off its February 14 peak of 8555 points, after hovering at correction levels for days. It rose 0.5 per cent, to 7789.7 – its first day in the green since Monday. But Morgan Stanley has recommended clients avoid Australian equities citing their close correlation to Wall Street after a torrid start of the year for both markets as they hover at or near correction territory.

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