ORLANDO, Florida, April 2 (Reuters) - TRADING DAY

Only 24 hours until Trump unveils new tariffs

The first trading day of the quarter on Tuesday was a nervy

affair ahead of U.S. President Donald Trump's "Liberation Day"

on Wednesday, with markets struggling for clear direction as

Trump's new trade barriers loomed into view.

Stocks mostly rose but U.S. Treasury yields tumbled, while

gold and the dollar broadly held steady. Talking of the

greenback, I will dig deeper into the IMF's latest FX reserves

data below, but first, here are the scores on the doors from

Tuesday's trading around the world.

Today's Key Market Moves.

* A late surge on Wall Street lifts the Nasdaq and S&P 500

out of

the red. The Nasdaq rises 0.8%, the S&P 500 gains for a second

day.

* Tesla shares rebound 3.6% ahead of its first-quarter

vehicle

deliveries report on Wednesday.

* U.S. Treasury yields fall across the curve. A 9 bps

decline at

the long end bull flattens the curve.

* Benchmark European stocks rise more than 1% for their best

day

in two weeks.

* The dollar index holds steady, with gains against the euro

offset by losses against the yen and Australian dollar.

* Bitcoin rises 3% back above $85,000, its best day in

nearly

three weeks.

The specter of Trump's new tariffs on Wednesday has sucked

the oxygen out of world markets in recent weeks, and despite the

generally positive performance on Tuesday, anyone hoping life

will be injected back into them once the announcement is made is

setting themselves up for disappointment.

There's simply too much uncertainty and too little

visibility around how the new tariffs will work, how long they

will be in place, what exemptions or concessions there may be,

how other countries will react, and what the implications will

be for specific sectors, markets and asset classes.

To paraphrase former U.S. Defense Secretary Donald Rumsfeld,

that's a lot of known unknowns, and a fair sprinkling of unknown

unknowns too. That fog of uncertainty won't lift on Wednesday,

and indeed, is more likely to thicken - hardly the conducive

environment for investors, consumers and businesses to get

spending.

An announcement has been scheduled for 4 p.m. Eastern Time

(2000 GMT) on Wednesday, and it wouldn't be surprising if

investors try to maintain a holding pattern across markets until

then as best they can.

The longer term dilemma they and policymakers face was

encapsulated in a couple of U.S. economic indicators on Tuesday

that showed manufacturing slipping back into contraction, and a

measure of factory gate inflation jumping to the highest in

nearly three years.

Stagflation risks are rising, markets are skittish, and the

common denominator is Trump's tariff agenda.

Japanese stock futures point to the benchmark Nikkei 225

index rising around 0.4% at the open on Wednesday, a pretty

small bounce considering the index had plunged 4% on Monday.

Dollar's record low FX reserves share not all bad news for

Trump

In January, U.S. President Donald Trump warned the so-called

BRICS nations against replacing, or backing any currency to take

the place of, the "mighty U.S. dollar."

While the International Monetary Fund's latest foreign

exchange reserves data for the fourth quarter of last year

suggests central banks around the world continue to pull away

from the greenback, there may be a silver lining for the

president.

The IMF's Currency Composition of Official Foreign Exchange

Reserves (Cofer) data, the gold standard for FX reserves

information, show that countries have been gradually chipping

away at their dollar holdings and diversifying for years.

Indeed, the greenback's nominal share of official FX reserve

holdings in the third quarter of last year fell to a record low

57.3% from over 72.0% in 2001.

That crept up slightly to 57.8% in the fourth quarter, a

rare rise, but the dollar surged 7.6% against a basket of major

currencies in the period, its biggest quarterly appreciation in

nearly a decade. All else equal, this reduces the dollar value

of reserves held in non-dollar currencies such as the euro,

sterling, or Japanese yen.

When adjusting for these FX changes, the dollar's share of

reserves slid to a record low of 54.1% from 55.3%, according to

Goldman Sachs. At the start of the millennium, that share was

over 71%.

Importantly, the Cofer figures only go up to December 31, so

do not take into account any reserve shifts made amid the

historically high policy uncertainty and market ructions of

recent months.

With military, diplomatic and trade ties going back decades

now fraying at an alarming rate, reserve managers are bound to

be rethinking their FX allocations. And that is unlikely to

involve a sudden re-discovered love for the dollar.

STILL NUMBER ONE

Reserve managers do not typically make knee-jerk reactions

to market gyrations or the headlines du jour. They're a cautious

breed, prioritizing liquidity, stability and long-termism over

yield, opportunity and a fast buck.

But further diversification of their FX reserves can hardly

be considered an impulsive reaction, as the trend is pretty well

entrenched. The emergence of any new world order in the coming

years would likely only strengthen it.

No matter how you slice it, the dollar's overwhelming

dominance in global FX reserves is weakening. But that doesn't

mean the greenback's place as the world's preeminent reserve

currency is under threat.

Its share is not being eaten up by its nearest rival, the

euro, but by a bunch of smaller, "nontraditional" reserve

currencies such as the Korean won, Australian and Canadian

dollars, and China's renminbi.

"It's not just diversification out of the dollar. Euro

reserve holdings have fallen in nominal and valuation-adjusted

terms as well," notes Goldman's Michael Cahill.

This is a trend that has been underway for years, taking

hold just after the Global Financial Crisis and accelerating

again after the pandemic.

The Cofer data shows the aggregate share of "nontraditional"

currencies in central banks' FX reserves was 12.6% in December,

just off September's record high of 12.7%. Before 2009, that

share had never exceeded 3%.

The euro's share since its launch more than 25 years ago has

never fallen below 19% and only once, in late 2020, has it

exceeded 21%. Any reduction in the difference between the dollar

and euro shares has been caused by reserve managers shunning the

greenback rather than taking a shine to the euro.

Their preference to build up holdings of several smaller

currencies has created a somewhat curious equilibrium. The

dollar is seeing its dominance gradually diminish, but it's in

little danger of losing its role as the world's sole reserve

currency.

Trump, who seems to want the dollar to remain dominant while

no longer sucking in so much of the world's savings, may be

happy with that.

What could move markets tomorrow?

* South Korea inflation (March)

* India manufacturing PMI (March)

* ECB board member Isabel Schnabel delivers keynote speech

* ECB President Christine Lagarde speaks

* Fed Governor Adriana Kugler speaks on inflation

expectations

* U.S. ADP private sector employment (March)

If you have more time to read today, here are a few articles

I recommend to help you make sense of what happened in markets

today.

1. Tesla sales rout in Europe deepens amid anti-Musk

protests

2. US bond manager PIMCO looks abroad as US

exceptionalism

fades

3. Investors pour record $11 billion into Europe

ETFs to

'Make Europe Great Again'

4. Trump tariffs hinder M&A and IPOs in what was

supposed

to be a blockbuster quarter

5. Trump tariff liberation means endless

complication

I'd love to hear from you, so please reach out to me with

comments at . You can also follow me at [@ReutersJamie and

@reutersjamie.bsky.social.]

Opinions expressed are those of the author. They do not

reflect the views of Reuters News, which, under the Trust

Principles, is committed to integrity, independence, and freedom

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