ORLANDO, Florida, April 14 (Reuters) -

TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist

Global rally fizzles as it reaches Wall Street

Another tariff climb down from the Trump administration sparked a relief rally in world stocks and bonds on Monday, but smoldering growth fears and deep-rooted doubts over the wisdom and execution of U.S. trade policy limited the euphoria.

Zoom out and the world continues to reassess its long-held faith in the dollar and U.S. Treasuries, the fates of which increasingly appear to be in the hands of foreign private sector investors.

More on all that and more below, but first, a round-up of the day's main market moves. 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.

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.

1. INSIGHT-How China went from courting Trump to 'never yield' tariff defiance

2. 'Attentive' ECB can lean against euro rise: Mike Dolan

3. Trump trade team chases 90 deals in 90 days. Experts say good luck with that

4. S&P 500's looming 'death cross' may not be as ominous as it sounds, analysts say

5. How to navigate tariff chaos: Five questions for the ECB

Today's Key Market Moves

* Wall Street rises less than 1%, lagging Asian and European peers as optimism over Trump's tech tariff exemptions fades.

* The dollar index remains anchored at its lowest levels in three years, falling for a fifth straight day.

* Short-dated U.S. bond yields slide as much as 14 basis points but long yields fall only 6 bps, resulting in yet another curve steepening.

* Argentina's peso sinks nearly 10% to 1195 per dollar after Buenos Aires introduces a new FX regime and trading band for the peso between 1,000-1,400 pesos per dollar.

* Argentina's stocks jump over 4% and its hard-currency bonds rally across the board, with the 2046 maturity rising almost 7 cents on the dollar. There's no doubt investors welcomed the news late on Friday that smartphones, computers and other electronics imported mainly from China will be exempt from the steepest U.S. tariffs, but Wall Street's fizzle as Monday's trading progressed was telling.

The main U.S. indices posted considerably smaller gains than their main Asian and European counterparts earlier in the global day, and the steep fall in short-dated Treasury yields reflected investors' underlying gloomy view of the U.S. economy.

Fed Governor Christopher Waller said the economic shock from Trump's tariff policies could necessitate steeper-than-expected rate cuts even if inflation remains high. The New York Fed's latest consumer survey showed one-year inflation expectations jumped last month to the highest in two and a half years, while unemployment fears were the highest since the pandemic.

All in all, and even accounting for the latest tariff exemption, the shadow of 'stagflation' is looming large over the U.S. economy. It's the worst of both worlds for policymakers and investors.

The performance of tech shares on Monday was revealing. Chinese tech stocks listed in Hong Kong rose more than 2% - their fifth daily rise in a row - and European tech stocks climbed 2.6%. But despite a strong open and shares in Apple surging as much as 7.5% at the open, the wind came out of U.S. tech's sails and the sector ended the day only 0.6% higher.

China said it is evaluating the impact of the exemptions, and if Beijing confirms its initial cautious welcome, global trade tensions may ease for a while. Or at least stop intensifying.

This could allow markets to take their cue from other drivers, such as the first quarter U.S. earnings season that is now picking up steam. Big banks like JPMorgan and Goldman Sachs have reported strong results, although the trading and economic environment in the January-March period will bear no resemblance to the following quarters.

But Trump himself has signaled investors should not get too excited, telling reporters on Sunday that although there will be flexibility with some tech companies, he plans to announce tariff rates on imported semiconductors over the next week.

Foreign private sector holds key to U.S. Treasuries, dollar Amid the cacophony of chaos in financial markets created by the Trump administration's tariffs, the loudest - and most alarming - signal is surely the simultaneous slump in the dollar and U.S. Treasury bonds.

It's too early to say whether this is the beginning of a more prolonged trend. But it is a warning that faith in U.S. assets - and indeed, the global financial system of the past half-century shaped in America's image - cannot be taken for granted.

It's never advisable to let long-term forecasts be swayed by short-term price moves but last week was potentially pivotal, both for the dollar and Treasuries.

Whether it turns out that way will be determined to a large extent by overseas private sector investors, who have emerged as significant marginal buyers even as foreign official sector holdings of Treasuries barely moved over the past decade.

Private sector investors have greatly increased their holdings of Treasuries and, by doing so largely on an unhedged basis, also greatly increased their exposure to the dollar.

If a global crisis of confidence in the U.S. does snowball, they will be more likely to head for the exits before their more staid, conservative central bank counterparts.

Foreigners held $8.5 trillion of Treasuries in January, U.S. Treasury figures show - central banks with $3.8 trillion and the private sector with $4.7 trillion. Five years ago central bank holdings were $4.2 trillion and private sector investors held $2.9 trillion, and a decade ago official holdings were more than twice as large as the private sector's stash of $2 trillion.

Japanese institutions and households are among the largest holders of Treasuries on the planet, and if they reflect private sector thinking in other countries, investors and policymakers should brace for further market upheaval.

According to Bank of America, Japanese private investors sold $17.5 billion in long-term Treasuries in the week through April 4, the largest amount of foreign bond sales since before the U.S. election in November.

DOLLAR TIDE TURNING

Eroding confidence in the dollar and Treasuries, the two pillars of the global financial system would of course have serious long-term consequences for the world. The more immediate fallout for investors has been no less dramatic.

Last week the 30-year U.S. Treasury yield rose 48.5 basis points. It was the biggest weekly rise since June 1982. The benchmark 10-year yield's 50-basis point surge was its steepest weekly rise since November 2001.

At the same time, the dollar fell nearly 3% against a basket of major currencies. Excluding the Global Financial Crisis and the COVID-19 pandemic, this has only happened five times in the past 30 years, and one of them was last month.

Analysts at Goldman Sachs note that last week also marked only the fifth week since 1980 where the euro, or a pre-single currency weighted equivalent, rose 2% and the S&P 500 fell 2%. In other words, a significant slump on Wall Street is rarely accompanied by an equally steep decline in the dollar.

Goldman's FX strategy team last week flipped their dollar call to a bearish view, arguing that the recent breakdown in "usual" correlations is a clear sign that "markets are concerned about what recent policy actions imply about U.S. governance and institutional credibility."

They were joined on Monday by strategists at HSBC, who note that "as long as U.S. economic policy uncertainty is elevated, it will be difficult for the dollar to recover versus other core currencies."

Also on Monday, Barclays' FX team published a note, "The end of the dollar as we know it?", in which they observe that the euro's spike to $1.1480 from $1.0950 last week was a move rarely seen over a six-month time frame never mind two days.

The tide is turning against the dollar and U.S. bonds, certainly at the long end of the curve, and the power to direct the flow is now increasingly in private, not official sector hands.

What could move markets tomorrow?

* India inflation (March)

* Germany ZEW sentiment index (April)

* Canada inflation (March)

* U.S. New York Fed manufacturing index (April)

* Richmond Fed President Thomas Barkin speaks

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 from bias.

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(By Jamie McGeever, editing by Nia Williams)