Markets fade the latest China retaliation, at least for now

S&P 500 futures are now back up around 1% on the day while 30-year bond yields in the US have eased to around 4.84% currently. On the latter, that’s down from around 4.91% at the high earlier and will allow broader markets to breathe a little easier heading into US trading. China retaliated by increasing tariffs before saying that they won’t go any further than that. It’s logical as effectively, over 100% tariffs is already a trade embargo between the US and China. Anything more doesn’t change that.

US futures might have recovered but as things stand, I will continue to emphasise that the focus should be on the bond market still. That triggered Trump’s pain threshold earlier in the week and we’ll see if that will happen again before the weekend comes along.

With China choosing not to blink first, there is a line of thinking that it is either Trump or the Fed who will surely have to blink next. The question though is when? Will it be before the weekend or during? Or perhaps even after? That as the turbulence and pain threshold in markets continue to be pushed to its limits.

As such, it looks like we’re just going to stay glued to the screens and watch for headlines over the next 10 hours.