It feels like time has returned to 2016, as some traders' muscle memory has been awakened. As soon as today's news broke, traders and analysts flocked to their computers.
The Chinese stock market and offshore yuan performed better than expected today, thanks to the market's prior preparations. Similarly, the Canadian dollar, which was also mentioned by Trump, fell by 1.2%, while the offshore yuan exchange rate hovered around a drop of 0.2%. Looking at the Chinese stock market, the fluctuations were very small; the importance of the volatility today was greater than the ups and downs, which reflects the market's nonchalance.
Not only has China prepared well, but the Chinese market is also ready. Compared to investors from other countries, Chinese investors have experienced more storms. However, there are a few points to note:
1. From the numbers, '10%' is far lower than the '60%' he claimed in the past, which is the first surprise, indicating a positive rather than negative risk appetite. However, this may just be one phase, as Trump wants to ease the impact of inflation, which would naturally lead him to start with products that have a smaller inflation impact.
2. The timing of the announcement was unexpected. Trump chose to speak at this time (before taking office) to influence the market. The news of the new U.S. Treasury Secretary on Monday had just reassured the market, and on Tuesday the tone shifted dramatically, creating a carefully orchestrated surprise for the market.
Trump has just appointed several key members of his cabinet and has released news indicating that he is ready to act swiftly. There are less than two months left before Trump begins signing executive orders, and the market remains highly volatile.
3. U.S. stock futures showed a significant decline, breaking the stability of the U.S. stock market, making it very difficult for it to rise tonight. However, U.S. Treasury yields have already fallen from their highs, so the risk of a sharp drop in U.S. stocks is not high.
4. Many details of Trump's statements are very important. For example, he stated that 'the reasons for the tariff increase are not linked to trade disputes,' indicating that there may be room for negotiation. Furthermore, whether a 10% tariff will be applied to all goods or just an additional 10% on the existing taxed goods is still controversial, and the impact on the market will differ in both cases.
Now, it is best not to rush to any conclusions. Considering that Trump often uses social media to convey his unfiltered thoughts, we can anticipate a similar pattern in the future.
