Markets Wobble as Tariff Reversals Fail to Boost Sentiment; Interest Rate Jitters Take Center Stage
President Trump’s latest tariff flip-flop isn’t providing the expected boost to risk assets, with stocks and crypto struggling for direction midway through Thursday’s U.S. trading session.
Markets initially showed signs of relief after Commerce Secretary Howard Lutnick told CNBC that Mexico would be exempt from the newly announced 25% tariff, provided existing trade agreements covered the goods or services in question. Trump later confirmed the exemption via social media, sparking a brief recovery in equities and bitcoin (BTC), which climbed above $91,000.
However, the momentum was short-lived. The Nasdaq erased early gains and sank to session lows, down 2.3% by midday. Bitcoin also reversed course, sliding to $88,500—down nearly 1% in the past 24 hours.
Stagflation Concerns Eclipse Trade Drama
While the back-and-forth on tariffs continues to grab headlines, a more pressing issue is emerging: a sharp spike in global interest rates, fueled by rising inflation and slowing economic growth.
With U.S. military aid to Europe in question, several European nations are ramping up defense budgets, triggering significant bond market volatility. Germany’s 10-year Bund yield surged over 40 basis points this week to 2.83%, marking one of its worst bond sell-offs in history. Meanwhile, Japan’s 10-year Government Bond (JGB) yield climbed another 6 basis points overnight to 1.51%—more than double its level just six months ago.
The U.S. is not immune to the global bond rout. After declining roughly 70 basis points since Trump’s inauguration, the 10-year Treasury yield has spiked over 20 basis points in the last 48 hours, now sitting at 4.30%.
“The recent move in global bond yields has put me on high alert,” wrote Quinn Thompson of Lekker Capital, highlighting that yields are rising even as economic growth weakens.
“We are witnessing the textbook definition of stagflation, which historically hasn’t been kind to risk assets,” he added.
All Eyes on Friday’s Jobs Report
The surge in interest rates places even greater significance on Friday’s U.S. Nonfarm Payrolls report.
Economists expect payrolls to have grown by 160,000 in February, up from 143,000 in January, with the unemployment rate forecasted to hold steady at 4%. Given that recent jobs reports have consistently exceeded expectations, another strong print could push yields even higher—potentially sending risk assets, including crypto, into another leg lower.
With economic uncertainty mounting, investors will be watching closely to see whether markets can stabilize or if further turbulence is ahead.
