Sell side trading desks have reported elevated levels of activity today following the US threat to impose tariffs of 25% on Canadian and Mexican trade, with 10% tariffs on China.
Due to come into effect on Tuesday 5 February, the tariffs were signalled late on Friday 31 January, by the White House and confirmed over the weekend, with more threatened on other geographies including the European Union. Canada responded by levelling tariffs of its own on certain US imports.
The immediacy of the imposition saw the dollar soar relative to other currencies and sell-side desks reported a doubling of FX trading average volume in parts.
In European markets, while equity investors had to react to a drop in the market, fixed income trading desks on the buy-side noted investors were largely sitting on their hands ahead of potential talks between the US, Canadian and Mexican governments ahead of the tariff deadline on Tuesday.
“Trading by headline can be painful at the moment,” noted one head of trading.
While indices widened and spreads were following, little trading was going on, and primary issuance was subdued.
European automotive was seen as a potential weak spot as the cross border trade in cars was flagged as a reason for imposing tariffs on Europe, by US president, Donald Trump. However early moves lower on automotive debt were not seen as significant, and with a lot of cash estimated to be available in the market, there is the potential that some investors will see an opportunity to buy the dip.
©Markets Media Europe 2024
