Market drivers and catalysts
Equities: US-China tariff relief; strong US earnings; Europe cautious but futures rise sharply
Volatility: VIX eases but remains high; cautious optimism amid earnings and economic data
Digital Assets: Crypto rebounds; BTC resistance near $86k; crypto stocks rally
Currencies: USD opens trading weaker across the board after Trump tariff carveouts for some imports from China.
Fixed Income: US yields steadied late Friday and overnight after wild sell-off last week
Commodities: Gold’s record-breaking run continues
Macro events: US Fed’s Waller to speak
Macro data and headlines
The Trump administration announced a temporary exemption for smartphones, computers, and tech items from the new reciprocal tariffs on Chinese imports. However, President Trump stated China remains subjected to the 20% Fentanyl Tariffs and they will soon announce sector specific tariffs on semiconductors.
China’s March export jumped ahead of US tariffs rising 12.4% YoY, exceeding forecasts, with record shipments to Vietnam and Thailand. With imports shrinking by more than expected by 4.3%, the trade surplus reached a near record at $102.6 billion
US PPI (MoM) fell by 0.4%, the first drop since October 2023, below forecasts of a 0.3% rise. Goods prices decreased by 0.9%, mainly due to an 11% plunge in gasoline, with declines in chicken eggs, beef, vegetables, diesel, and jet fuel. Services costs fell by 0.2%, led by a 1.3% drop in machinery and vehicle wholesaling.
The US preliminary April University of Michigan sentiment indicator dropped to 50.8, the lowest since June 2022, from 57 in March, missing the 54.5 forecast. The Expectations component dropped to 47.2, the lowest level in 45 years. This marks the fourth monthly decline, with sentiment down over 30% since December 2024 amid trade war concerns. Consumers noted worsening expectations for business conditions, finances, incomes, inflation, and labour markets, signalling recession risks.
Earnings events
Today: Goldman Sachs
Tuesday: Johnson & Johnson, Bank of America
Wednesday: ASML, Abbot Laboratories, Progressive Corporation
Thursday: TSMC, UnitedHealth, Netflix, American Express, Blackstone, Charles Schwab, Marsh & McLennan, ABB
Equities
US: US equities surged Friday, capping a volatile week on optimism about US-China trade talks. The S&P 500 (+1.8%), Nasdaq 100 (+1.9%), and Dow (+1.6%) all rose sharply, with futures pointing higher Monday following Trump's temporary tariff exemptions for electronics. Tech and financials led gains, highlighted by JPMorgan (+4%) and Morgan Stanley (+1.4%) after strong earnings, though consumer sentiment hit a multi-year low. Investors brace for a busy earnings week, including Goldman Sachs, Johnson & Johnson, and Netflix.
Europe: European stocks closed lower Friday, reversing earlier gains amid escalating US-China tariff tensions. STOXX 50 (-0.6%) and STOXX 600 (-0.2%) ended in the red, despite Novartis (+2.5%) rising on major US investments. Stellantis (-3.8%) fell sharply following weak vehicle shipment data. Futures rose significantly (+2.5%) early Monday, buoyed by the temporary US tariff pause on key electronics, though uncertainty remains ahead of major earnings from ASML and LVMH.
UK: FTSE 100 ended Friday up 0.65%, benefiting from stronger-than-expected UK GDP growth (+0.5%). Mining stocks Fresnillo (+7.4%) and Endeavour Mining (+6.4%) led gains. However, BP (-2.9%) declined on weaker production forecasts. The index was still down 1.1% for the week, despite recent recovery. Futures indicate cautious optimism heading into a holiday-shortened week.
Asia: Asian markets rallied Monday, led by Hong Kong's Hang Seng (+2.4%) following Trump’s temporary tech tariff exemptions. Tech shares like Lenovo (+8.6%) soared, supported by stronger Chinese lending data. South Korea's KOSPI (+0.9%) gained, with Samsung Electronics and LG Energy Solution rising over 1%. Japan’s Nikkei (+1.5%) and Australia's ASX (+1.3%) advanced amid improving investor sentiment.
Volatility
VIX fell sharply Friday to 37.56 (-7.8%), indicating easing concerns after Trump's temporary tariff relief. Despite this drop, volatility remains significantly elevated, suggesting continued market caution amid ongoing trade uncertainty. VIX futures indicate a likely calmer opening Monday, but investors remain wary, focusing on upcoming economic data and corporate earnings.
Digital Assets
Cryptocurrencies rallied modestly amid easing trade tensions, with Bitcoin (+1.4%) reaching $84,897, and Ethereum (+2.5%) hitting $1,638. XRP and Solana rose 1.7% and 4.2%, respectively. Crypto-related stocks surged, notably Marathon Digital (+6.6%) and MicroStrategy (+10.2%), amid renewed optimism. Market sentiment improved slightly, yet analysts warn of potential resistance for Bitcoin at $86,000.
Fixed Income
US Treasury yields spiked further on Friday to close a wild week, with the 10-year treasury benchmark topping out just below 4.60% before closing the week just below 4.50%, up some 50 basis points from the prior weekly close. In Monday’s Asian session, yields dipped slightly.
At the shorter end of the US yield curve, the 2-year benchmark rose to close the day and week at 3.96%, up over 30 basis points on the week as the market moved to price lower odds of Fed easing this year.
European bond yields saw a choppy week last week during a wild week of selling in the US treasury market last week, with the German 10-year Bund ending the week down 1 basis points at 2.57%, slightly below the mid-point of a 28-basis point trading range during the week.
US high yield credit spreads tightened Friday, with a Bloomberg High Yield spread to US treasuries ending the day at 419 basis points, down 15 basis points on the day and from the cycle high earlier in the week at 453 basis points.
Commodities
Crude prices trade steady after last week’s recovery from a four-year low show signs of fading with traders focusing on the latest US moves in the trade war, and “constructive” talks between Washington and Tehran, with easing tensions potentially weighing on prices. In addition, monthly oil market reports will be released by OPEC today and the IEA on Tuesday.
Gold’s record-breaking run extended to USD 3245.75, after gaining more than 6% last week, after a rout in the US bond market rout increased the focus on gold as a haven amid recession worries caused by Trump’s erratic trade policies, heightened geopolitical tensions, and a softer dollar. Analysts continue to lift their end of year forecasts, the latest being Goldmans bumping theirs to USD 3700.
Currencies
The Trump tariff carveouts for Chinese imports see the US dollar opening trading this week on its back foot across the board, with EURUSD climbing back to 1.1400 overnight before easing back (This after a spike to a 1.1473 high on Friday and close for the week at 1.1355)
USDJPY dropped below 143.00 after ending last week near 143.50, as the currency pair has not found support from the sharp rise in long US treasury yields, an unusual set of circumstances as the JPY has historically shown a strong negative correlation to the direction in long US yields.
