Stocks resumed their slide and Treasury yields held near one-month lows with just hours to go before President Trump’s tariffs tariff announcement, amid swirling speculation over the details of the proposed trade action. As of 8:00am, S&P futures traded 0.5% lower; tech underperformed sending Nasdaq futs down 0.7% with Mag 7 all lower with TSLA (-1.0%) and NVDA (-0.6%) being the biggest laggards; Newsmax dropped 25%, pausing a blinding IPO rally that briefly pushed the company above Fox Corp. European and Asian stocks both slumped. The Dollar sank and the yield on 10-year Treasuries was steady after falling on Tuesday to the lowest since early-March. Commodities are mixed: base metals are lower, while precious metals are mostly higher (silver +1.0%) and gold just shy of its record high. All eyes on the Rose Garden event “Make American Wealthy Again” at 4PM with Trump delivering his announcement on tariffs. On today's data calendar, we get ADP (exp. 120k) and Factory Orders (0.5%, ex trans 0.4%).
In premarket trading, Tesla is leading losses among the Mag 7 (Alphabet -0.5%, Amazon -0.9%, Apple -0.4%, Microsoft -0.5%, Meta -0.9%, Nvidia -1.6% and Tesla -2.6%). Edgewise Therapeutics (EWTX) tumbles 29% after posting top-line data in its phase 2 study of EDG-7500. Newsmax (NMAX) drops 20% as the conservative media outlet pauses its blinding IPO rally which saw shares surge 2,230% since its debut this week. Here are some other notable premarket movers:
Trump is due to reveal his tariff plans in the White House Rose Garden just as US markets close at 4 p.m. Several proposals are said to be under consideration, including a tiered tariff system with a set of flat rates for countries, as well as a more customized reciprocal plan. Bloomberg reports that the size and scope of tariffs have still to be finalized. The White House has said the tariffs would take immediate effect, but that Trump was open to subsequent negotiation. The lack of clarity doesn’t bode well for risk sentiment heading into the event, scheduled for 4pm ET. Central bankers are also expressing caution. Richmond Fed chief Barkin said tariffs could raise both inflation and unemployment in a “cage match” between consumers and businesses. Chicago Fed chief Goolsbee said that if tariffs lead to lower consumer spending, “that would be a bit of a mess.” Sure enough, according to Goldman's Prime Brokerage, hedge funds reduced exposure to global equities in March, with the most net selling in 12 years.
“There isn’t anywhere to purely hide, because of the huge uncertainty that is in the market at the moment,” said Helen Jewell, chief investment officer of fundamental equities EMEA at BlackRock. Jewell does not expect the confusion to dissipate after Trump’s announcement. “It is very much the opposite,” she said. “It just keeps that risk in the market and it kicks that risk can down the road.”
Meanwhile, China took steps to restrict local companies from investing in the US, Bloomberg reported; that comes a day after the European Commission vowed to retaliate against US tariff moves.
“Perhaps the most important question is whether this announcement will tip the scales toward a global recession,” said Oliver Blackbourn, portfolio manager at Janus Henderson Investors.
A quiet earnings week continues. Uniform maker UniFirst (UNF US) reports premarket and may offer clues on the impact from DOGE job cuts. Tesla 1Q deliveries are also due. Analysts expect Musk’s company to have delivered around 390,000 cars, potentially its worst quarter in a year.
Europe's Stoxx 600 fell 0.7% ahead of Trump’s tariffs announcement, with healthcare stocks among the biggest losers as mass layoffs at the US Department of Health sowed uncertainty over the outlook for vaccines and gene therapies. Among single stocks, Mercedes-Benz Group AG fell after Bloomberg reported the automaker could withdraw its least expensive cars from the US if tariffs make their sales unfeasible. Here are the biggest movers Wednesday:
Earlier in the session, Asian equities also fell as investor sentiment remained volatile. The MSCI Asia Pacific Index declined 0.1%, reversing from a 0.8% gain in the previous day. Xiaomi, Sony Group and Mitsubishi UFJ Financial weighed the most on the gauge, while Recruit Holdings and Fast Retailing provided the biggest boosts. Performances in the region were mixed, with markets in the Philippines and Malaysia gaining the most, while South Korean shares underperformed. The country’s small-cap index Kosdaq lost 1%. Japan’s benchmark Topix also slid 0.4%. Indonesia’s market was shut for a holiday.
“Investors are very anxious, and markets are waiting with bated breath to see what he will say and do later today,” Vasu Menon, managing director of investment strategy at OCBC, wrote in a note. “The best strategy at this juncture is not to panic, but instead to focus on the medium term and manage risk by keeping a diversified portfolio and time-diversifying fresh investments via dollar cost averaging.”
In FX, the Bloomberg Dollar Spot Index slips 0.1%, down a second day as antipodean currencies outperform, with the kiwi dollar up 0.8% against the greenback. EUR/USD climbs 0.1% to 1.0800; Governing Council member Olli Rehn reiterated that the ECB isn’t pre-committing to any particular path on interest rates. Aussie and kiwi advanced in part on buying from exporters hedging out of US dollars on the premise that reciprocal tariffs will be more centered than harsh, according to Asia-based FX traders. Low engagement from the leveraged community ahead of the announcement remains the main theme in the major currencies, according to traders in Europe and Asia. Traders undecided on what’s next for the G-4 space also seen through price action unfolding lately close to 21-DMAs.
In rates, treasuries extend gains into the early US session, leaving futures near the highs of the day and yields lower by up to 3bp across the belly of the curve, which leads gains on the day. US yields are richer by 1bp to 3bp across the curve, with 5s30s spread sitting near highs of the day and steeper by 1.5bp, unwinding a portion of a sharp two-day flattening move seen so far this week; US 10-year yields trade near lows at around 4.15%, remain inside Tuesday’s range. Bunds are little changed while Gilts underperform as UK 10-year yields climb 2 bps.
In commodities, spot gold rises $17 to $3,130/oz. Bitcoin pared an earlier fall to trade little changed near $85,000. WTI is steady around $71 a barrel.
The US economic calendar includes March ADP employment change (8:15am), February factory orders and durable goods orders (10am). Fed speaker slate includes Kugler at 4:30pm
Market Snapshot
Top Overnight News
Tariffs/Trade
APAC stocks were mostly positive but with the major indices stuck within narrow parameters as participants awaited US President Trump's 'Liberation Day' tariff announcement scheduled later today. ASX 200 eked modest gains as strength in the real estate, tech and consumer discretionary sectors just about atoned for the losses in mining, resources and materials, while Building Approvals data from Australia printed better-than-feared. Nikkei 225 traded indecisively and wiped out most of its early gains as Japanese exporters braced for incoming US tariffs. Hang Seng and Shanghai Comp were mixed amid tariff uncertainty with China among the countries anticipated to announce an immediate retaliation to Trump's incoming tariffs, while China also awaits details regarding the US review of the 'Phase One' deal.
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European bourses (STOXX 600 -0.9%) opened lower, despite a mostly positive picture in APAC trade and as traders remain focused on the looming reciprocal tariff announcements on “Liberation Day”. Price action has really only been downwards today, with a more pronounced bout of pressure appearing mid-morning though this has since stabilised a touch. European sectors hold a strong negative bias, in-fitting with the risk tone. Healthcare is the clear underperformer today, but with no clear stock driving the losses; the pressure is seemingly in tandem with the downside seen across US peers in the prior session, and perhaps some fears regarding potential pharmaceutical tariffs.
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FX
Fixed Income
Commodities
Geopolitics: Middle East
Geopolitics: Ukraine
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US Event Calendar
DB's Jim Reid concludes the overnight wrap
The centre of the universe today will be the White House Rose Garden where we will finally hear about reciprocal tariffs. The announcements are due to take place at 4pm Eastern Time (9pm London), with the White House press secretary saying yesterday that the measures would be effective immediately. We clearly don’t know any of the details, including which countries will be targeted and at what rate, with reporting yesterday suggesting that a final decision was still to be made. The Washington Post reported that White House aides had proposed tariffs of around 20% on most imports. And despite speculation it might just affect 10-15 key trading partners, President Trump said over the weekend that “You’d start with all countries, so let’s see what happens”, which pointed towards a broader focus. Meanwhile, the WSJ reported last night that other options under consideration include a more targeted reciprocal plan as well as an across-the-board tariff on a subset of nations. And, according to Bloomberg, a tiered tariff system option could see countries face levies of either 10% or 20% depending on their barriers on US goods. In related news, Treasury Secretary Scott Bessent yesterday said that the tariffs announced today would be a cap and that countries would be able to bring them down. This hints at there being routes for negotiation in his eyes. A reminder that my AI summary of Bessent and Lutnick's recent podcast appearances can be found here. These were a fascinating insight into how this administration is thinking about the world.
Back to tariffs, and obviously, the prospect of broad-based tariffs would represent a huge shock to the global trading system, and would have some pretty seismic ramifications for the world economy. Last week, our US economists published a note (link here) where they ran through various possibilities. And significantly, they think that in a worst-case scenario where reciprocal tariffs include the entirety of each country’s VAT, that would see US GDP growth down 100-120bps this year relative to their current forecast of +2.3% (Q4/Q4), with core PCE inflation up 90-120bps. Meanwhile for the EU, our economists have estimated (link here) that a 20% tariff rate on all goods (on top of the 25% auto tariffs announced) would lead to a 0.3-0.6% shock for GDP.
The other big unknown from here is how other countries might retaliate, even though we have a pretty good sense that they’re likely to do so. After all, EU Commission President Ursula von der Leyen said yesterday that “If necessary, we have a strong plan to retaliate and will use it.” Over in Canada, Prime Minister Carney said that “We will not disadvantage Canadian producers and Canadian workers relative to American workers”. Moreover, President Trump has already said that any retaliation could be met by further US tariffs, so a key downside risk from here is that this kicks off an escalatory spiral of higher tariffs.
Ahead of today’s announcement, fears about stagflation in financial markets continued to mount even if markets had a pretty positive day yesterday. The stagflation fears were exacerbated by the latest batch of US data, where the ISM manufacturing print fell back into contractionary territory with a 49.0 print (vs. 49.5 expected). Moreover, the new orders component fell to a 22-month low of 45.2, whilst the prices paid component surged to 69.4, which is the highest it’s been since June 2022. The weaker ISM release saw the Atlanta Fed’s GDPNow Q1 estimate (adjusting for trade in gold) fall to a new low of -1.4%, while the model’s estimate of real private domestic final sales, which are much less distorted by trade volatility, fell to a still positive but weak +0.4%.
The data is continuing to support the narrative of weaker growth and higher inflation, with market-based inflation expectations continuing to rise. The US 1yr inflation swap (+0.6bps) moved higher for a seventh session in a row to another two-year high of 3.25%, though it did retreat after trading +5.0bps intra-day. The reversal during the afternoon session may have reflected emergent reporting that more modest tariff options were still in play, which also helped gold prices (-0.17%) post a modest decline after touching an new record high of $3,149/oz intra-day. As a reminder, gold saw its strongest quarterly performance since 1986 in Q1. This was among the notable highlights from Henry's Q1 performance review (link here).
For equities, it was another topsy-turvy session, with the S&P 500 recovering from an intraday low of -0.95% to end the day up +0.38%. So a very similar move to Monday. The Magnificent 7 (+1.63%) were the main driver of the rebound, ending a run of 4 consecutive declines, with Tesla (+3.59%) leading the way. Outside of tech, it was a pretty neutral day, with the Dow Jones (-0.03%) and the Russell 2000 (+0.02%) little changed. Meanwhile in Europe, there were even stronger moves, with the STOXX 600 (+1.07%) and the DAX (+1.70%) posting their strongest performances in over two weeks.
Elsewhere, US Treasuries continued to rally as ongoing growth fears helped yields to grind lower. For instance, the 2yr yield (-0.2bps) inched down to 3.88%, its lowest level since October, whilst the 10yr yield (-3.7bps) fell back to 4.17%. The fact investors were fearful about growth was evident from the ongoing decline in real yields, with the 2yr real yield (-1.3bps) down to its lowest since August 2022, at 0.59%.
Over in Europe, sovereign bonds also rallied after the latest Euro Area inflation data was seen as paving the way for more ECB rate cuts. For instance, CPI fell back to +2.2% in March on the flash reading, in line with expectations. And in more dovish news, the core CPI reading fell to +2.4% (vs. +2.5% expected), which is the lowest it’s been since January 2022. So that helped yields to move lower across the continent, with those on 10yr bunds (-5.2bps), OATs (-5.3bps) and BTPs (-7.7bps) all falling.
Asian equity markets are pretty quiet ahead of today's big announcement. As I check my screens, the Hang Seng (+0.06%), CSI (+0.15%), Shanghai Composite (+0.23%), Nikkei (+0.15%) and the S&P/ASX 200 (+0.10%) are all edging higher. The KOSPI (-0.62%) is bucking the trend but S&P 500 (-0.13%) and NASDAQ 100 (-0.14%) futures are also slightly lower.
Early morning data showed that South Korea’s inflation unexpectedly rose to +2.1% y/y in March (vs +1.9% market consensus) as against a +2.0% increase the previous month, thus complicating the Bank of Korea’s rate cut cycle.
Finally, we got a few other data releases yesterday, including the US JOLTS report for February. That showed job openings were down to 7.568m (vs. 7.658m expected), which meant the ratio of vacancies per unemployed individuals fell to 1.07, the lowest since September. Otherwise, the quits rate remained steady at 2.0%, as did the hires rate at 3.4%. Separately in the Euro Area, the February unemployment rate came in at 6.1% (vs. 6.2% expected), which is the lowest rate since the single currency’s formation. We also got the final manufacturing PMI for March, which was revised down a tenth from the flash reading to 48.6.
To the day ahead now, and data releases from the US include the ADP’s report of private payrolls for March, and factory orders for February. Central bank speakers include the ECB’s Schnabel, Escriva, Holzmann and Lane, along with the Fed’s Kugler.