Bitcoin Struggles to Rise Meaningfully Amid Trade Uncertainty — Market Talk

0814 GMT - Bitcoin rises only marginally as U.S. trade policy uncertainty keeps investors cautious over risky assets. The U.S. and China on Monday agreed to lower tariffs for 90 days. However, investors are "under no illusions that the end game is yet in sight" as the recent tariff reprieve could prove temporary, Interactive Investor analyst Richard Hunter says in a note. Tariffs are still higher than before the U.S. presidential election and it's unclear whether the measures are filtering through to real economies yet, he says. Recession fears have receded for now but rising production costs and supply chain blockages will have an impact, while the U.S. consumer is showing signs of strain. Bitcoin rises 0.4% to $103,864, according to LSEG. ([email protected])0808 GMT - The 90-day U.S. "reciprocal" tariff truce, which now includes China from mid-May, provides near-term relief for Singapore's economy, DBS senior economist Chua Han Teng says in an email. The country's non-oil domestic exports rose by 12.4% on year in April, the quickest pace since July. Chua says that exporters are likely to capitalize on temporarily lowered tariffs by front-loading export orders, benefiting Singapore's export performance in the near term. However, there is still significant uncertainty around U.S. tariff negotiations and possible U.S. import duties on semiconductor and pharmaceutical products, he adds. ([email protected])0740 GMT - Sterling is likely to weaken against the euro as ongoing uncertainty over U.S. tariffs weighs on risk appetite, Danske Bank analyst Kirstine Kundby-Nielsen says in a note. "An investment environment characterised by elevated uncertainty, widening credit spreads and a positive correlation to a dollar negative environment, in our view, favors a weaker sterling." The U.K. runs a large current account deficit that makes sterling vulnerable when capital inflows fade. This keeps sterling at risk of falling versus the euro in the wake of souring global risk sentiment, she says. Danske expects the euro to rise to 0.87 pounds in six months. It last trades up 0.1% at 0.8418. ([email protected])0738 GMT - In the absence of a U.S. recession, investors are upbeat about corporate earnings growth, Jochen Stanzl, chief market analyst at CMC Markets says in a note. "While company executives continue to emphasize growth risks, they are simultaneously presenting robust balance sheets to their shareholders," he says. Companies from sectors outside of automobiles, pharmaceuticals and energy--which are worst hit by tariffs--are navigating the trade policy challenges quite successfully. There, business is "thiving" and investors are leaning toward these sectors, he says. ([email protected])0653 GMT - Investors could take increased protection against losses stemming from a weaker dollar given that global portfolios are heavily invested in U.S. companies, Swissquote Bank analyst Ipek Ozkardeskaya says in a note. This could weigh on the dollar's valuation in the medium term, she says. Investors previously didn't feel the need to hedge against a weaker dollar because in times of market volatility the currency typically strengthens on safe-haven flows. "But recently, the dollar has been weakening despite rising volatility, and the latter increases hedging costs, leading to an unusual negative correlation between the dollar and volatility." This is creating a "serious headache" for investors, she says. The DXY dollar index falls 0.3% to 100.570. ([email protected])0632 GMT - The dollar falls as recent evidence of easing price pressures boosts expectations for further interest rate cuts by the Federal Reserve. Data on Thursday showed the U.S. producer price index unexpectedly fell in April. It came after lower-than-expected U.S. consumer prices data on Tuesday. A decline in oil prices also adds to the sense that inflationary pressures are easing, Deutsche Bank analysts say in a note."With investors feeling less concerned about inflation, they then dialled up their expectations for Fed rate cuts in response." The DXY dollar index falls 0.3% to 100.576.([email protected])0630 GMT - Eurozone government bond yields fall in early trade, tracking U.S. Treasury yields lower, according to Tradeweb data. "Bunds and Treasuries are rallying alongside equities and the euro," says Commerzbank Research's Christoph Rieger in a note. "This pattern is sometimes called 'liquidity-on', suggesting that something dovish is happening in the U.S.," the head of rates and credit research says. This time, the lower U.S. producer prices are mainly behind the excitement, he says. The 10-year Treasury yield falls almost 5 basis point to last trade at 4.408%, while the 10-year Bund yield is down 4.5 basis points at 2.588%, according to Tradeweb. ([email protected])0619 GMT - As clarity is set to arise on U.S. fiscal policy, long-term Treasury yields are expected to decline as some of the uncertainty premium abates, Barclays rates strategists say in a note. However, to the extent the tail risk of a hard landing has been reduced and because the Federal Reserve is likely in no rush to cut, Barclays expects two- and 10-year Treasury yields to decline to 3.7% and 4.2%, respectively, they say. Both of these are 20 basis points higher than Barclays's earlier forecasts, the strategists say. However, the 10-year yield forecast is still about 25 basis points below the forwards that Barclays thinks reflects too-optimistic economic forecasts. The current two- and 10-year yields are at 3.940% and 4.417%, respectively, according to LSEG. ([email protected])0602 GMT - U.S. Treasury yields drop in early European trade, extending Thursday's trend as money markets continue to bet on interest-rate cuts by the Federal Reserve after this week's soft CPI print. "The soft CPI print was shrugged off by a market that continues to price out Fed cuts," Societe Generale Research rates strategists say in a note. That said, the U.S. Treasury yield curve should steepen as investors price in rising term premium--additional yield investors seek to hold a long-dated bond rather than a short-dated one. "Term premium expansion will likely continue, and the Fed will cut later this year," the strategists say. The two- and 10-year Treasury yields fall by around 3 basis points each to 3.944% and 4.421%, respectively, according to LSEG. ([email protected])0558 GMT - U.S. interest rates remains significantly restrictive, says MainSky Asset Management's Eckhard Schulte, seeing risks of the Federal Reserve being behind the curve. "The Federal Reserve should cut rates soon," the chairman of MainSky's board says. While tariffs could lead to higher inflation, it would be a one-off effect, he says. The Fed is likely to let June pass without a rate cut, he notes, adding that "however, this carries the risk that it will then fall behind the curve due to its overly reactive approach." For MainSky Asset Management, this potential policy error represents currently the highest U.S. recession risk. The fed funds target range is currently 4.25%-4.50%. Money markets price in a 25bp rate cut for September, according to LSEG. ([email protected])0545 GMT - ​​The German 10-year Bund yield is expected to move higher on a six- to 12-month horizon, to be driven by rising state expenditures, DZ Bank Research's Birgit Henseler says in a note. "The planned state investment programs as well as higher defense expenditures in Germany will probably lead to rising new debt," the analyst says. The rising supply of government bonds as well as an economic pickup could lead to higher 10-year Bund yields, she says. DZ Bank Research expects the 10-year Bund yield at 2.70% in six months, to 2.85% by year-end and to 3.00% in 12 months, the analyst says. The 10-year Bund yield closed at 2.624% on Thursday, according to Tradeweb. ([email protected])0427 GMT - Reduced U.S.-China trade tensions prompt Goldman Sachs to raise its 2025 GDP growth forecast for South Korea to 1.1% from 0.7% previously. The export-led economy will get a boost from the world's two largest economies likely seeing improved GDP growth following their May 12 trade deal to roll back tariffs on goods, Goldman Sachs economists Goohoon Kwon and Andrew Tilton write in a note. South Korea's GDP growth is seen to find support in an additional government budget spending bill that was recently approved, as well as possibly more fiscal stimulus later this year, they say. ([email protected])