Risk Assets Rebound as Trade Pessimism Subsides

 

Equities bounce back after trade concerns abate slightly. Risk assets continue to move on headlines, and US equities rebounded after President Trump said he’s speaking with China to come to an agreement on trade. Stocks that are heavily exposed to China and exports like Caterpillar and Apple rebounded after their worst days in as much as four months, advancing 1.74% and 1.58% respectively. The S&P 500 climbed 0.80%, led higher by technology stocks which rose 1.60% on the day. The VIX or “Fear Index” fell 2.5 points but remains elevated at 18.06–showing investors remained concerned about downside risk despite the President’s recent comments.

 

 

Treasurys trade sideways despite rebound in risk assets. Treasury yields rose slightly- 8/10ths to a 1 basis points higher across the curve. Rates shrugged off President Trump’s cajoling of the Federal Reserve to match the Bank of China’s economic stimulus. Elsewhere, the NFIB Small Business Optimism Index rebounded for the month of April, and New York Fed President John Williams reiterated the Fed’s policy of patience and affirmed that the US economy remains in a “good place.”

 

 

Commodities rebound despite new China tariffs. The Bloomberg Commodity Index rose 1.28% on the day after renewed hope for a trade resolution with China. Agricultural products have been targeted specifically by China’s retaliatory tariffs. Soybeans in particular were hit by a 25% tariff last fall, forcing the US government to authorize $7.2 billion in domestic soybean purchases to support farmers. The Bloomberg Soybean Index rose 3.62% on the day.