Today's markets: China’s time comes – and shares are falling

We expected things to move fast and to be volatile, and traders were too hopeful when it came to China and tariffs. President Donald Trump has now said he will impose a 10 per cent tariff on the country’s exports to the US from next month. After rising following the inauguration, when Trump failed to mention China, overnight the renminbi fell dragging mainland shares down with it, as the Shanghai Composite fell 0.9 per cent, while the Hang Seng down 1.6 per cent. The CSI 300 also fell 0.9 per cent.

In reverse, US markets are on the up, with the S&P 500 rising 0.8 per cent and the tech-heavy Nasdaq up 0.6 per cent, buoyed by general investor positivity and a new AI consortium committing to spending £100bn on AI infrastructure, led by the likes of Oracle and Softbank. Futures show both shares will keep on rising when markets open later on. Netflix is also on the up after reporting solid numbers, you can read the full Netflix report here, as part of our US company results coverage.

And China’s woe seems to be Europe’s gain, with the FTSE 100 rising 0.3 per cent as Trump has yet to mention any meaningful tariffs on the region. Bear in mind we thought this yesterday with China, so that could quickly change. But mainland traders are taking the wins where they can, with Paris up 0.9 per cent and Frankfurt 1.2 per cent. The mainland Stoxx 600 index is nearing a record high.

It’s all a bit too short term. Whether or not you support Donald Trump and his ideology, the rate at which legislation is being passed does not make for good laws. Yes, the governmental process can often be slow, but there’s often a reason for that. Checks, balances and well, making sure things make sense. It’s not perfect, but neither is autocracy, and for traders, it poses a problem of not knowing what comes next. Markets hate uncertainty, we know that here in particular and a huge reason for the discount the FTSE trades at was the years of uncertainty caused by Brexit negotiations. They were never pro or anti-Brexit plays, traders just wanted to know what was going to happen.

But at the moment, traders are taking the opposite approach, assuming everything is good until it’s bad. The problem will come when it turns out unstructured laws fall apart and unintended consequences come to the fore, such as inflation. Then the panic sets in. US inflation estimates will change as the impact of Trump’s new laws settles in, and that’s when things could get really volatile.

By Taha Lokhandwala