Markets Have Spoken: They Don't Like Trump's U.S. Trade Tariffs, Says Scotiabank

United States equities are faring worse than anywhere else early Thursday, noted Scotiabank, as the equity futures are down by over 3.5%-4.5% after President Donald Trump introduced global trade tariffs the day before.

With these moves, the S&P will be about 3% lower than the day before the United States presidential election in November, so wiping out more than the post-election rally until early February and with more downside, said the bank. European cash markets are down by roughly 1.5%-3%. Asian equities were hit hardest in Tokyo, where they fell by about 3%, while everywhere else across Asia the declines were substantially more modest; Hong Kong fell 1.5%, all other exchanges declined by less.

The US dollar (USD) is being ditched as a safe haven, stated Scotiabnak. Every major currency cross is up against it. Markets are losing confidence in the U.S. and that's a dangerous development for the world financial system.

The Canadian dollar (CAD or loonie) is appreciating by about 1% to the US dollar but underperforming crosses like the yen, Swiss franc and euro, pointed out the bank.

Bonds don't think it's so good for growth either, added Scotiabank. Sovereign yields are broadly lower. U.S. yields are volatile but are down about 9bps-11bps at present across the curve except for less on the long bond. They are vulnerable to Fed-speak shortly. Gilts and eurozone government bonds are richer by as much as 10bps at the front end in Bunds and French bonds and 14bps toward the Gilts front end.

Oil is cheaper with WTI down about $5 a barrel and Brent is off by a similar amount.

Gold was gaining overnight Wednesday but is now down about $50/oz compared with just before the tariff announcements. Gold's exemption from tariffs halts the patriation of gold flows to the U.S. and isn't an indication that gold has lost its value as a safe haven amid turmoil in the financial system, according to Scotiabank.