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Gold and equity futures rise after Trump's tariffs

Investors worried about U.S. president Donald Trump's announcement that 10% tariffs will be applied to all imports with higher rates for certain trading partners, fell into the equity futures market on Wednesday following the U.S. stock market closing. Gold and bonds were also up in price as they are considered safe havens.

S&P 500 Eminis futures rose initially after Wall Street closed higher in the regular session, but lost ground when Trump detailed his tariff plans at a White House Rose Garden Event.

S&P futures dropped 1.6% after Trump's speech, while Nasdaq Futures fell 2.4%.

Trump, who referred to the day as "Liberation Day", has announced a number of tariffs for various countries, including 34% on imports coming from China, 20% on imports coming from the European Union, and 24% on Japan imports.

He also announced a 25% tariff on cars, light trucks and engines.

When the press conference began, the President announced that tariffs would begin with a baseline of 10% across the board. This was better than anticipated, and that's why futures rallied," said Chris Zaccarelli. Chief investment officer at Northlight Asset Management, Charlotte, North Carolina.

Zaccarelli continued, "But as soon as he started to give examples that were higher than 10% - the futures went from positive to negative."

In the short term, tariffs will increase costs and decrease corporate profits. "If we have a reshaping the economy, markets will have a very different judgement, but in the short term, the knee-jerk response is to initial price increases."

On Wednesday, investors focused on the announcement of reciprocal taxes.

The Dow Jones Industrial Average closed the session up 235.36, or 0.56%. Meanwhile, the S&P 500 gained 37.90, or 0.67%. The Nasdaq Composite ended the session with a gain of 151.16 or 0.87% at 17,601.05.

The MSCI index of global stocks rose by 3.96 points (0.48%) to 836.11.

Some investors have noted that the future of the market will depend on how U.S. trading partner's respond.

"We only have one side to the story - what we do." Walter Todd, Chief Investment Officer at Greenwood Capital, Greenwood, South Carolina, said: "The other side is how other countries react to what we are doing."

Todd said it would be "a major component of how the market will ultimately digest what is said right now."

After the announcements, gold prices are moving closer to records highs. This is due to safe-haven flows.

Spot gold increased by 0.64%, to $3.130.38 per ounce. U.S. Gold Futures increased 1.3% to $3.159.30 per ounce.

After Trump's tariff announcement, U.S. Treasury rates fell. Two-year yields dropped to their lowest levels in three weeks.

The yield on the benchmark 10-year U.S. notes dropped 1.6 basis points, to 4.14% from 4.156% at late Tuesday. The 30-year bond rate fell 0.5 basis point to 4.5098%, from 4.515% on Tuesday.

The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Federal Reserve fell by 0.5 basis points, to 3.858% from 3.863% at late Tuesday.

The dollar has lost its currency value.

The euro rose 0.38% to $1.0834, while the sterling strengthened by 0.54% at $1.2989.

The dollar fell 0.17% against the Japanese yen to 149.36.

Oil prices on energy markets fell after tariff news raised fears that a trade war could dampen crude demand.

U.S. crude dropped 0.27%, to $71.00 per barrel after rising 0.72%. Brent, however, fell to $74.07 a barrel, down by 0.59%, after having settled at $74.95 a barrel. (Reporting from Sinead carew in New York and London, Amanda Cooper in Singapore, Ankur Banerjee, in Singapore, and Tomaszjanowski, Alex Richardson Matthew Lewis, Nia Williams, and Tomaszjanowski)

(source: Reuters)