Market warning lights flash amber after Trump tariff shock

By Amanda Cooper and Dhara Ranasinghe

LONDON (Reuters) -Global markets person been sucked into a down-draft aft U.S. President Donald Trump's sweeping tariffs, mounting investors' go-to informing lights flickering but not yet flashing red.

Stocks person seen immoderate $3 trillion wiped disconnected Wall Street truthful acold this week. European and Japanese markets person mislaid astir $500 cardinal successful an uncomfortable reminder of past crises, specified arsenic the 2008 planetary fiscal situation and the 2020 COVID-19 pandemic outbreak.

So far, indicators of marketplace accent bespeak the nervousness that precocious volatility brings, but nary signs yet of full-on panic.

VIX ON THE MOVE

Wall Street's closely-watched fearfulness gauge, the VIX volatility index, has deed its highest since August's stocks slide.

It's acceptable for its biggest two-day percent leap since December successful a motion of increasing marketplace unease.

But adjacent aft this week's spike, the VIX - astatine astir 40 points - remains good beneath levels seen during the COVID situation and successful 2008.

The MOVE enslaved volatility index, besides appears comparatively contained.

BONDS SHINE

One classical indicator of marketplace accent is investors piling into safe-haven authorities bonds and truthful Friday's 20-basis constituent autumn successful 2 twelvemonth Treasury yields and the 15 bps autumn successful German Bund yields is notable.

Over the past 2 days, Treasury yields person fallen implicit 30 bps, their biggest two-day determination since August.

Still, Analysts said the world's biggest authorities enslaved markets appeared to beryllium functioning well.

"There are nary concerns close present connected that beforehand (trading conditions), it’s each precise orderly. There’s nary accent successful that sense," said PIMCO money manager Konstantin Veit.

BANKS WOBBLE

Japanese mega banks ended the week with the biggest losses since 2008 successful 1 of the markets' astir unsettling signals truthful acold astir the consequences of Trump's commercialized war.

European and U.S. banks slumped implicit 9% and 7% respectively connected Friday and the outgo of protecting against slope defaults has risen.

"Sentiment is driving slope equities down, there’s nett taking, there's worries astir planetary growth," said Altaf Kassam, Europe caput of concern strategy and research, State Street Global Advisors. "But it doesn't consciousness similar a genuine recognition oregon liquidity crunch close now."

CROSS-CURRENCY BASIS SWAPS

These derivatives measurement non-U.S. capitalist request for the dollar, which is often the harmless haven of prime successful times of turmoil. This dynamic is not playing retired astatine each close now, arsenic investors shun the dollar and drawback up the yen and the Swiss franc.