Anxieties over the US $36 trillion debt have also been employed as Republicans seek to approve a broad package of tax cuts.
US Treasury Secretary Scott Bescent used a television interview on Sunday to reject the downgrade, but if they fail to offer the transaction in “good faith,” trading partners will face the biggest tariffs.
Bessent will be heading out to the G7 meeting this week for more consultations, but US Vice President JD Vance and European Commission Chairman Ursula Von Der Leyen met on Sunday to discuss trade.
“We still don’t know if the mutual tax rates of 10%, excluding Canada and Mexico, remain widespread, or if they will go up or down in some countries,” said JP Morgan economist Michael Ferroli, estimates that the current effective tariffs of around 13% equal a tax increase equivalent to 1.2% of GDP.
“Beyond the confusion from the higher tariffs themselves, policy uncertainty should further pressure growth.” The tariff war places emphasis on consumer sentiment, and analysts will wash away revenues from Home Depot and Target this week for updates on spending trends. The impact of the trade standoff with China could be a little clearer if Beijing released April data on retail sales and industrial output later on Monday. Analysts are looking for slowing down both, but forecasts are very different.
In the market, MSCI’s most broad index of Asia-Pacific stocks other than Japan eased 0.2%, while Japan’s Nikkei fell 0.6%.
Dollar Questions
The S&P 500 futures eased 0.7% and NASDAQ futures lost 0.8% in early trade, but that followed a massive rally last week following President Donald’s decision to lower taxes in China.
Treasury yields for 2010 increased another four basis points to 4.48%, extending the reversal of Moody’s news on Friday.
The market is priced at only 53 basis points of this year’s Federal Reserve cuts, compared to 100 basis points a month ago. Futures means a 33% chance of travel by July and a rise to 72% by September.
Higher yields provided little comfort to the dollar, which was drifting lower amidst investors’ uncertainties with the volatility of US trade policy. The euro rose 0.2% to $1.1188, while the dollar slipped 0.3% to 145.19 yen.
In an interview released over the weekend, European Central Bank President Christine Lagarde said the recent decline in the dollar reflects a loss of confidence in US policies, which could benefit the euro currency.
In the commodity market, gold has risen again after dropping almost 4% last week. Metal traded 1.2% at $3,241 per ounce.
Oil prices have now remained stable due to the risk of increased production from OPEC and Iran.
Brent rose 6 cents per barrel to $65.47, while US crude added 15 cents to $62.64 per barrel.
