Team reciprocity 'kicks the can' tariffs while the 'angel' lies in the inflation details

Markets

Stocks flirted with all-time highs while the dollar took a hit as President Donald Trump opted to delay his much-hyped reciprocal tariffs—kicking the can down the road, likely until April. The market read it as a classic Trump move: an opening gambit to extract concessions, much like his previous playbook with Mexico and Canada, rather than an outright commitment to a full-scale tariff war.

Say what you will about Trump, but when it comes to “ The Art of the Deal,” he knows how to play the game better than any president in modern history. That’s not to say traders should start making assumptions—predicting Trump’s next move with certainty is a fatal flaw. But one thing is clear: by not pulling the trigger immediately, he’s left the door wide open for the worst offenders—those slapping the heaviest tariffs on U.S. goods—to step up with counteroffers or, at the very least, start waving some olive branches. India, for example, will likely ramp up purchases of U.S. oil as the trade chessboard shifts

With Trump's tariff threats looming, some countries are already looking to make strategic moves to stay in his good graces—or at the very least, avoid getting hit with the next wave of duties. India, a major crude importer, has long sought to diversify its energy sources, and given the geopolitical tightrope it walks between the U.S., Russia, and the Middle East, securing more American crude could be a smart hedge.

Not to mention, with OPEC+ production dynamics still in flux and Russian crude facing Western price caps, U.S. oil presents a relatively stable and politically savvy option. If India does indeed step up its U.S. crude imports, it could serve as a subtle trade concession—one that aligns with Trump's broader push to narrow trade deficits while giving India a buffer against potential tariff fallout.

Still, this isn’t a straightforward negotiation—it’s a puzzle with more moving parts than the 551,232-piece monstrosity assembled by 1,600 students at Ho Chi Minh City’s University of Economics back in 2011. And just like that record-breaking jigsaw, the pieces need to fit perfectly before any clear resolution emerges. Markets are betting Trump is positioning himself for a better deal, but the sheer complexity of trade dynamics ensures this story is far from over.

On the surface, a rally in U.S. stocks right after back-to-back scorching inflation prints seems completely counterintuitive. But as always, the "devil"—or in this case, the "angel"—is in the details.

The raw inflation numbers weren’t exactly the apocalypse many feared. A closer look at CPI shows the bump was driven mainly by energy flipping from price pressure headwind to a tailwind and a slightly smaller decline in core goods prices—both of which are now getting washed away by falling oil prices.

The hotter-than-expected 0.4% jump in January’s Producer Price Index (PPI) was the biggest acceleration in nearly 18 months. But scratch beneath the surface, and you’ll find a few hidden offsets that could take some of the edge off the Fed’s inflation headache. Healthcare, a heavyweight component of core PCE, actually dipped by 0.06%, and portfolio management fees—another major driver—posted only a modest 0.4% gain. These details, while not enough to justify an immediate policy shift, were sufficient to keep traders from hitting the panic button on paring rate cuts.

Equity traders seized the opportunity, pushing the S&P 500 up over 1% and the Nasdaq even higher on Thursday. But the question remains: Can Asian markets carry the torch into Friday? That’s far from guaranteed. The region still has to navigate Trump’s two-pronged playbook—talking up a Ukraine peace deal while simultaneously gearing up for a global tariff offensive.

On the sector front, the China AI trade remains compelling. If anything, it’s mirroring the resilience of the U.S. AI "Teflon" trade. Just as U.S. megacap AI stocks have shrugged off broader macro concerns, China’s AI space could carve out a similar path—especially with Beijing placing tech at the heart of its economic revival strategy. If traders can look past the immediate tariff risks, Chinese AI stocks might start displaying the same kind of durability that has defined their American peers, with today’s AI-fueled rally in the U.S. spilling into Chinese tech names.

Meanwhile, the growing buzz around Russia-Ukraine peace talks has injected fresh optimism into risk assets. And in the bond market, the inflation scare was met with a cooler head—Wednesday’s Treasury selloff reversed, with the 10-year yield sinking nearly 10 basis points to around 4.53%. If this newfound confidence holds, it could set the stage for an even stronger risk-on push heading into next week.

Forex markets

The euro—and European currencies in general—are floating on two risk-friendly balloons: the delay in reciprocal tariffs and the much-anticipated US-Russia peace talks. A deal to end the conflict in Ukraine would be a game-changer, potentially erasing a significant chunk of the geopolitical risk premium that has weighed on European assets. The real wildcard, however, is energy. If Russian energy supplies are restored, the eurozone could see a material boost in growth, but the devil is in the details.

While Eastern European countries that rely heavily on cheap Russian natural gas would welcome a swift return to pre-war supply chains, the larger European economies may be more hesitant. After all, the past two years have been a crash course in energy diversification, with the EU increasingly turning to U.S. LNG to reduce reliance on Moscow. Rebuilding that dependency could be politically unpalatable, even if it offers short-term economic relief.

At the same time, the U.S. has been positioning its LNG exports as a strategic counterbalance to trade tensions, giving European leaders another factor to weigh as they navigate both the energy landscape and their relationship with Washington. In the end, any shift in European energy policy will likely be slow and calculated, with an eye toward long-term security rather than a simple return to business as usual with Russia.

Gold markets

For the next few weeks, gold traders will find themselves caught between two opposing forces—optimism over potential de-escalation in Eastern Europe, which could trigger a selling impulse, and the looming specter of a full-blown trade war, which could drive a buying frenzy. With April 1 shaping up as "Tariff D-Day," the stakes are high.

If Trump dials up the heat with an all-out trade war tantrum, expect another rush into safe havens, sending gold soaring as investors scramble for protection. But if the tariff rhetoric turns out to be little more than a bargaining chip, or the actual measures are far less severe than feared, we could see a risk-on extension that takes some of the shine off bullion as the classic "fear hedge" fades.

Either way, one thing is certain—volatility isn’t going anywhere. Gold traders should brace for whiplash as headlines continue to dictate the next big move.