Highlights
In periods of significant uncertainty and increased market volatility, investors are reminded of the importance of diversification and defensive asset allocation in one’s portfolio. The Trump administration’s announcement of a broad range of harsher-than-expected tariffs led to the largest one-day decline for some indexes since 2020 on Thursday, and stocks continued to slide through Friday. Expectations for the number of Federal Reserve interest rate cuts in 2025 jumped following the announcement, as investors wagered that negative growth effects from the new policies will force the Fed to ease monetary policy to support the labour market and spur economic growth. The Chair of the Federal Reserve on Friday noted that the size and duration of the resultant effects of the tariffs remained to be seen but he reiterated that the “economy is still in a good place” and that the central bank remained well positioned to wait for greater clarity before taking any monetary policy actions. Meanwhile, the ECB President Christine Lagarde noted that while there was still a bit of work to do to reach the 2% inflation target sustainably, U.S trade policy would have a negative impact on the global economy at large. ECB policymakers, as per Bloomberg reports, were said to be ready to pause interest rate cuts due to the pronounced uncertainty caused by the U.S. trade policies.
Data Highlights:
USA announced a 10% base tariff on all imports except those compliant with the United States–Mexico–Canada agreement. Additionally, a reciprocal tariff was announced and countries will be charged approximately half of what they charge USA. The base tariff was effective immediately and the reciprocal tariffs will go into effect on 9th April. The non-farm payroll (NFP) employment report showed jobs jumped by 228k in March, much higher than analysts’ expected jobs increase of 135k. Canada unemployment rate rose to 6.7% in March from 6.6% in the previous month. Eurozone inflation fell to 2.2% YoY in March from 2.3%. This was at par with analyst expectations. The Eurozone unemployment rate fell to 6.1% on February which is lower than 6.2% expectation from analysts. Japan’s unemployment rate unexpectedly fell to 2.4% in February, down from 2.5% in the previous month, defying expectations that it would remain unchanged. The Reserve Bank of Australia, as widely anticipated, held its benchmark interest rate steady, while opting to keep the cash rate target unchanged at 4.10 percent.
Week Ahead:
Eurozone Retail sales YoY – Monday |U.S. Reciprocal Tariff Implementation– Wednesday |U.S. Consumer Price Index – Thursday |U.S. Produce Price Index, U.K. GDP – Friday.
