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Tariff-induced market crisis whips up epic volatility

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Stocks, Treasuries reverse big moves

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Currencies more stable, dollar yo-yos

By Amanda Cooper and Samuel Indyk

LONDON, April 10 (Reuters) - U.S. President Donald

Trump's U-turn on tariffs has rained yet more volatility on

markets, leaving investors skidding from stocks to safe-havens

and back, and while previous crises have seen bigger moves, few

have been this fast.

Trump said on Wednesday he would temporarily lower the hefty

duties imposed on dozens of countries while ramping up pressure

on China, igniting one of the most intense turnarounds for

markets since the 2020 COVID crisis.

With volatility, it's the speed of a move that can set alarm

bells off. And April's market swings have played out with

roughly the same intensity as they did in 2020 and near that of

the 2008 financial crisis, but in a fraction of the time.

Here's how the moves have unfolded since Trump's reciprocal

tariff announcement on April 2:

1/ TO THE MOON?

Equity markets across the globe rebounded on Wednesday and

Thursday after Trump's pause. The S&P 500 soared 9.5% on

Wednesday, its biggest daily gain since 2008, while Europe

staged its biggest jump since March 2020 on Thursday.

But most major indexes remain below Trump's "Liberation Day"

announcement, and all have suffered some of their steepest falls

in years.

Hong Kong shares slumped 13% on Monday, their biggest

fall since 1997, while Europe's STOXX 600 index and S&P 500 had

their steepest three-day falls since the COVID-19 pandemic.

"We are seeing levels of uncertainty and levels of

volatility that we haven't seen since the global financial

crisis," said George Lagarias, chief economist at Forvis Mazars.

"These levels of volatility are not good for financial

markets. It risks dislocations," he added.

2/ BOND VORTEX

The U.S. bond market has found itself at the epicentre of

the gyrations as investors, rattled about the impact of tariffs

on the U.S. economy and the ensuing damage to the stability of

U.S. assets, dumped Treasuries. Ten-year Treasury yields, which

fell 30 basis points over the days following April 2, rose by as

much as 25 bps at one point on Wednesday, before dropping almost

as quickly once news of the pause hit. Yields soared by as much

as 36 bps between April 2 and the high on April 9 and are now 14

bps higher. During the COVID crisis in early 2020, they fell as

much as 120 bps before snapping back to trade some 100 bps

higher when the worst of the crisis had passed.

3/ BUDDY, CAN YOU SPARE THE DOLLAR?

The dollar has not acted as the FX market's safe-haven

anchor and has fallen against a number of major currencies since

April 1. It has lost almost 5% against the Swiss franc

and nearly 3% against the Japanese yen and the euro

. As far as volatility is concerned, traders have

rushed to lock in protection against big price swings, not least

because the winners and losers of the next set of tariff

headlines may not be obvious. Against a basket of currencies

, the dollar has had the kind of round trip since April 2

that it did during COVID, but again, in a fraction of the time.

4/ BANKING ON A REBOUND?

Global banks have had to contend with expectations of a

shock to global growth and the prospect of accelerated rate cuts

in the wake of Trump's tariff plans, a combination that sent

shares plunging, before rebounding with Trump's pause.

The U.S. KBW Bank Index slumped almost 16% in two

days, its biggest such slide since March 2020, while European

lenders fell by their most since 2020, two days after

"Liberation Day".

That marked a remarkable turnaround for the sector that had

previously benefited from higher interest rates, a robust U.S.

economy and improved growth in Europe.

Markets quickly priced in rate cuts from the European

Central Bank and the Federal Reserve due to increased recession

risks but have since dialled back some of those expectations.

Banking shares have rebounded. The KBW Bank Index surged 9%

on Wednesday, its biggest one-day jump since Trump's re-election

in November.

European bank stocks rallied almost 7% on Thursday, on track

for their biggest one-day rally since a rebound in March 2022

after Russia's invasion of Ukraine.

5/ AN EPIC BOUT OF VOLATILITY

There have been times when markets have moved more in one

direction or another than now, but few periods with such speed.

The VIX index, which reflects the extent to which

investors are snapping up protection against volatility, has hit

crisis levels. It jumped to a high of 60 this week, something

that has happened in just three instances since the inception of

the index in 1990 - a sharp market selloff in August, 2020 and

2008. The index has since dropped to closer to 35, meaning the

rise and fall over the past three days has been one of the

fastest on record.