Global Markets Grapple with Trade War Impact

Global stock markets displayed muted activity on Tuesday, while the U.S. dollar edged toward its most substantial monthly decline in several years. This movement occurred as investors braced themselves for the anticipated effects of the ongoing trade war on corporate earnings and overall economic performance.

President Trump’s imposition of tariffs has shaken confidence in U.S. assets. Despite subsequent pullbacks that aided the S&P 500 in recovering a significant portion of its early April losses, the dollar has only managed to stabilize, failing to achieve a substantial rebound.

The dollar experienced a dip following remarks from the U.S. Treasury Secretary, who stated that de-escalation of tariffs, currently at 125% for a majority of U.S. exports to China, was China’s responsibility.

A holiday in Japan led to reduced currency trading in the Asian session, resulting in relative stability for most currency pairs. However, the euro, trading at $1.1409 and up 5% for April, is on track for its largest monthly gain against the dollar in nearly 15 years. Concurrently, the dollar’s 7% drop against the Swiss franc, a safe-haven currency, marks its most significant decline in a decade.

Nikkei and S&P 500 futures saw slight increases, influenced by indications of potential easing of automotive tariffs. Nevertheless, investors remained cautious, awaiting more significant relief from the substantial 145% U.S. tariffs on Chinese goods.

China has initiated certain exemptions but has refrained from implementing stimulus measures, anticipating a concession from Washington.

China’s foreign ministry also clarified that President Xi Jinping had not recently engaged in discussions with President Trump, nor were their respective administrations actively pursuing a tariff agreement, contradicting claims made by the U.S. president in a recent interview.

Hong Kong’s Hang Seng index showed a 0.3% increase in early trading, while the mainland blue-chip index experienced a 0.2% decrease.

Analysts suggest that upcoming first-quarter GDP figures and U.S. jobs data for April are likely to be bolstered by early purchases made to avoid the new taxes. However, a decline in shipments from China suggests a potential correction may be imminent.

Analysts noted a significant decline in China’s shipments to the U.S. over the past 10 days, cautioning that if sustained, this trend could have widespread repercussions across supply chains.

Concerns are growing about a potential decoupling of U.S.-China trade relations, with expectations of increasing adverse effects in the near future.

In addition to U.S. economic data, investors are closely monitoring the Canadian election outcome and upcoming inflation data from Europe, starting with Spain and Belgium.

Power was gradually being restored to parts of the Iberian Peninsula following a large-scale outage that had brought much of Spain and Portugal to a standstill.

Several major corporations, including HSBC and other large Chinese lenders, are scheduled to release quarterly results, alongside BP, Deutsche Bank, Adidas, Coca-Cola, General Motors, and Visa.

Tech giants like Apple, Microsoft, Amazon, and Meta Platforms are set to report their earnings later in the week.

The weaker dollar has driven a surge in gold prices, reaching $3,333 an ounce, reflecting gains of nearly 7% in April and almost 27% year-to-date. Brent crude experienced a slight decrease, trading at $65.68 a barrel.

Treasuries remained inactive in Asia due to the holiday in Japan, keeping benchmark 10-year yields at 4.206% with futures remaining generally stable.