Highlights
There are decades when nothing happens, and there are weeks that decades happen. In a week that truly lived up to these words, trade policy uncertainty remained the core theme as U.S. stocked whipsawed significantly and the S&P 500 had an intra-week range of over 14% from trough to peak. Equities traded sharply lower on Monday, extending the previous week’s losses as negative sentiment grew ahead of the implementation of the announced tariffs on Wednesday. However, President Trump announced a 90-day pause on the higher reciprocal tariffs for most countries on Wednesday to allow time for negotiations. The news sent stocks sharply higher, with the Nasdaq Composite rallying over 12% and logging its second-best day on record. This was despite the fact that, China – the U.S.A.’s third-largest trading partner – had their tariffs increased to 145% within the week, and while China responded with increasing levies on U.S. goods to 125%. Meanwhile, the Federal Reserve, in their minutes released within the week, noted that they generally saw increased downside risks to employment and economic growth and upside risks to inflation while indicating that high uncertainty surrounded their economic outlooks. However, the Fed maintained that they remain well positioned to respond to incoming data and adjust monetary policy as needed. In Europe, market turmoil prompted by Washington’s tariff announcements prompted central banks to step up their monitoring of financial institutions and markets with the ECB calling on banks to check on deposits and other forms of funding more frequently while the Bank of England (BoE) asked lenders for information about market liquidity and whether hedge funds and other clients were facing problems. Meanwhile, it is estimated that U.S. levies may reduce China’s gross domestic product between 1% and 2% this year but economists believe that China has the capacity to offset the impact of the high tariffs through more fiscal stimulus.
Data Highlights
Consumer Price Index statistics reported a 2.4% YoY drop in March from 2.8% in February, coming in below the analysts’ expectation of 2.6%. YoY Producer Price Index statistics reported that producer prices rose to 2.7% YoY in March, and lower than the 3.3% that analysts had forecasted. Eurozone retail sales rose by 2.3% YoY in February, according to data released by Eurostat. This was higher than the analysts’ expectations of 1.8% growth. The U.K GDP reported a MoM growth of 0.5% in February, higher than economists’ expectation of 0.1%, and also higher than the previous value of 0.0%. The Reserve Bank of New Zealand cut its policy rate by 25bps to 3.5%, in-line with analysts’ expectations. Meanwhile, China’s inflation rate came in at -0.1%, lower than the 0.1% print that was expected.
Week Ahead
U.K Unemployment Rate, Canada Inflation Rate – Tuesday | U.K Inflation Rate YoY, Eurozone CPI, U.S Retail Sales YoY, Canada Interest Rate decision – Wednesday | Australia Unemployment Rate, Eurozone Interest Rate decision – Thursday | Japan Inflation Rate YoY – Friday.
