Dollar Sinks and Gold Soars in Spiraling Trade War: Markets Wrap

(Bloomberg) — The dollar tumbled on concern its status as the world’s reserve currency is being eroded as the US-China trade war intensifies. Gold soared and the euro topped a three-year high.

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In a week that’s seen the biggest swings in decades erupt across stock and bond markets, currency moves took the spotlight on Friday. A index of the dollar sank 1% to a six-month low. Treasuries were steady.

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“The question of a potential dollar confidence crisis has now been definitively answered – we are experiencing one in full force,” ING Bank NV strategists including Francesco Pesole wrote in a note. “The dollar collapse is working as a barometer of ‘sell America’ at the moment.”

In the latest tit-for-tat move, China announced it would raise tariffs on all US goods from 84% to 125% and warned that it plans to “resolutely counterattack and fight to the end” if the US continues to infringe on its rights and interests. The Ministry of Finance also called the Trump administration’s actions a “joke” and said it no longer considers them worth matching.

S&P 500 futures edged higher as bank earnings kicked off, with JPMorgan Chase & Co. posting record equity trading revenue but sounding a warning on the souring economic outlook.

The lender’s shares rose as much as 4% in US premarket trading as it boosted loan-loss provisions and bolstered its reserves. Rival Morgan Stanley also climbed after reporting soaring trading revenue amid market volatility.

“The economy is facing considerable turbulence,” JPMorgan CEO Jamie Dimon said in commentary accompanying the results. “Clients have become more cautious amid an increase in market volatility driven by geopolitical and trade-related tensions.”

BlackRock Inc. reported lower-than-expected net inflows in the quarter — which ended just before Trump unleashed his latest tariffs — with CEO Larry Fink likening current conditions to the “structural shifts” seen during the global financial crisis and the Covid pandemic.

“Uncertainty and anxiety about the future of markets and the economy are dominating client conversations,” Fink said in a statement.

Earlier, Bank of America Corp.’s Michael Hartnett said President Donald Trump’s tariffs and the resulting market turmoil were turning US exceptionalism into “US repudiation.” He advised investors sell any rallies until the Federal Reserve steps in and the US and China de-escalate, recommending a short position on stocks — until the S&P 500 hits 4,800 points — and a long bet on two-year Treasuries.