US stock futures faded earlier gains, but were also off session lows after a tariff-driven selloff in equities on Wednesday which hit the Mag7 names. Futures on the S&P 500 are flat after Trump announced 25% uniform tariffs on auto imports, while Nasdaq futures dropped 0.3% amid a reversal of the Monday price action as investors seem to be back to the recession playbook ahead of April 2 announcement. Mag 7, Cyclicals and High Short Interest are among the worst performing baskets, while Defensives outperformed. AI and data center names faced a slew of negative catalysts so far this week, including NVDA’s China environmental curbs, sell-side report on MSFT lease cancellation, BABA’s comments earlier this week: NVDA-5.7%; JPM's Data Center basket -3.0%. Commodities are higher led by oil and base metals. Outside the US, China ADRs outperformed US domestics with KWEB up 54bps today as China PBOC adviser promised (once again) that China will ramp up stimulus if growth falters.
In premarket trading, shares of US automakers and auto-parts suppliers dropped with peers in Europe also declining following Trump’s tariff announcement. Gamestop fell as the company said it plans to offer convertible bonds to buy Bitcoin. Nvidia slips, leading Mag7 declines and extending losses into a third straight session amid growing concerns over the outlook for spending on AI (Alphabet -0.3%, Amazon -0.3%, Apple -0.4%, Microsoft -0.1%, Meta -0.5%, Nvidia -1.7% and Tesla +0.5%). Automaker stocks fall after President Donald Trump hit auto imports with a 25% tariff starting next week. Analysts say Ford and General Motors are set to see the biggest impact, while Stellantis and Tesla are in a better position (General Motors -6%, Ford -0.7%, Stellantis’s US-listed shares -1.6%; Auto-parts firms: Autoliv -3%, Magna -1.8, BorgWarner -0.7%). Here are some other notable premarket movers:
Worries over President Donald Trump’s tariffs hit markets again on Wednesday, with the S&P 500 halting a three-day win streak to close down 1.1%. Trump implemented a 25% levy on auto imports, while threatening further duties on the EU and Canada. The S&P 500 fell 10% between February and March over concern that harsher tariffs will lead to slower economic growth and higher inflation. The index then staged a mild recovery since hitting a low on March 13, but now all eyes are on the so-called reciprocal tariffs, with details due on April 2, the so-called "Liberation Day."
“Tariffs are front and center on people’s minds,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management. “We all know that tariffs are stagflationary and markets have been trying to price that to different extents. What we don’t know yet is what’s the ultimate lasting impact.”
The tariff drama is also casting doubt over European equities’ recent outperformance against US peers. Pictet’s Sai has downgraded his view on Europe, citing an inevitable hit to economic growth and earnings. Over at BlackRock Investment Institute, managers expect US stocks to soon regain their edge.
“We have been overweight global equities over fixed income for many, many quarters – even as valuations looked increasingly stretched. But for the first time in years, we find ourselves genuinely worried about risk assets,” said Ajay Rajadhyaksha, global chairman for research at Barclays. “Cash allocations should be higher until policy clarity stages at least a mild comeback.”
Technology stocks have come under heavier pressure in recent sessions, as investors question how much longer will the artificial intelligence boom cycle last. Such anxiety resurfaced on Wednesday after a team of TD Cowen analysts said Microsoft Corp. has walked away from new data center projects in the US and Europe.
European stocks also fell as the US pushed ahead with harsh tariffs on automakers and threatened more sweeping trade levies, reinforcing investor concern about the hit to global economic growth. The Stoxx 600 slid 0.5%. Stellantis NV, which makes the Jeep Compass SUV in Mexico, and Mercedes-Benz Group AG fell about 3%. Traders also sold US auto shares, with General Motors Co. tumbling 6% in pre-market trading. Here are some of the biggest movers on Thursday:
Asian equities edged lower as President Donald Trump’s auto tariffs and threat of more levies on Europe and Canada weighed on sentiment. Chinese shares advanced. The MSCI Asia Pacific Index fell as much as 0.6% before paring the loss, with benchmarks in South Korea and Taiwan underperforming. Toyota Motor slumped following Trump’s decision to slap 25% tariffs on all cars that aren’t manufactured in the US. TSMC was the biggest drag on the gauge after a report that China’s energy rules for advanced chips could dent Nvidia’s sales. Asian equities have been range-bound recently as traders brace for Trump’s renewed tariff offensive to land on April 2. For the month, the MSCI Asia benchmark has gained nearly 3% and is headed for its best monthly performance since September. Benchmarks on Chinese and Hong Kong stocks rallied before ending the day with modest gains of around 0.3%. Optimism over China’s AI breakthrough and supportive macro policy has helped the market beat peers this year.
In FX, the dollar slipped as investors weighed the possibility that President Trump’s latest tariffs could limit the country’s growth potential, although the realty is that the tariffs will lead to a recession elsewhere much faster. The Bloomberg Dollar Spot Index slipped 0.1%, reversing the previous day’s 0.3% gain. JPY and CAD are the weakest performers in G-10 FX, while GBP and NZD are outperforming. Trump “could be recognizing that his trade policies might be having a ricocheting effect on the US consumers and business owners,” said Fiona Lim, a senior strategist at Malayan Banking Bhd in Singapore. “That makes US dollar gains susceptible to reversal." USD/JPY rose 0.3% to 150.97, outperforming as the Trump’s latest announcement to slap a 25% tax on Japanese auto imports hit home the prospect that the Japanese economy will suffer from tariffs, keeping the Bank of Japan cautious on raising interest rates. Earlier, the Norwegian krone recovered losses versus the euro after Norges Bank delayed a cut in borrowing costs until later this year as inflation picked up. Elsewhere in Asia, Indian stocks rose ahead of the expiry of monthly derivative contracts. The Nifty 50 Index is on pace for its biggest monthly advance since at least June 2024.
In rates, the 10-year Treasury yield rose 4bps to 4.39% after St Louis Fed President Musalem stuck to the central bank’s position that it is in no hurry to keep cutting rates, while voicing concerns that trade levies will fan inflation. Musalem said it’s not clear the impact of tariffs will prove temporary, and cautioned that secondary effects could prompt officials to hold interest rates steady for longer. Euro-area bond yields slipped as expectations grew that the central bank will cut interest rates to cushion the fallout from trade-related shocks; German 10-year yields have nearly erased their drop and are at 2.78%. UK bonds slumped across the curve, underperforming US Treasuries and German bunds, amid lingering concerns over the government’s fiscal position. UK 10-year yields are up 7 basis points to 4.80%, and at the highest since January. Focal points of US session include $44 billion 7-year note auction at 1pm New York time and economic data slate including weekly jobless claims and final 4Q GDP revision.
In commodities, WTI crude is trading within Wednesday’s range, falling 0.1% to around $69.56. Spot gold is up roughly $35 to near $3,055/oz. Gold has been benefiting from haven demand. Goldman Sachs Group Inc. ramped up its forecast to $3,300 an ounce by year-end, the latest in a series of banks to up their prediction. Bitcoin has risen to above $87,000.
The US economic calendar includes 4Q GDP revision, February wholesale inventories, and weekly jobless claims (8:30am), February pending home sales (10am) and March Kansas City Fed manufacturing activity (11am). Fed speaker slate includes Barkin and Collins (both 4:30pm)
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A more detailed look at global markets courtesy of Newsquawk
APAC stocks were ultimately mixed with cautiousness seen after Trump's latest tariff salvo in which he announced the US is to impose 25% tariffs on all cars made outside of the US effective on April 2nd and reiterated that reciprocal tariffs are also set for next week but stated they will be lenient, and in many cases, tariffs will be less than the tariffs charged on the US. ASX 200 declined with the index dragged lower by underperformance in tech, real estate and financials but with further downside stemmed by resilience in utilities and the commodity-related sectors. Nikkei 225 slipped back beneath the 38,000 level with automakers among the worst hit following Trump's 25% auto tariff announcement. Hang Seng and Shanghai Comp kept afloat with outperformance in Hong Kong amid a slew of earnings releases and after US President Trump also suggested he may give China a little reduction in tariffs to get a TikTok deal done, while China's Vice Premier vowed to push forward reforms to help high-quality economic growth in a speech at the Boao Forum.
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European bourses were primed for a softer open with losses accelerating modestly thereafter given the latest US tariff rhetoric, Euro Stoxx 50 -0.5%. Auto names lag given the focus of Trump's commentary with marked pressure in names across the board though they are off lows. H3C says NVIDIA (NVDA) H20 chip stocks are nearly depleted, new shipments are due Mid April, according to a client notice; H3C will distribute the chips based on profit margins. Microsoft (MSFT) mulls developing own high-end generative AI, according to Nikkei citing Microsoft CEO Nadella; CEO added that having its proprietary platform will make it easier to provide services optimised for its business software.
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DB's Jim Reid concludes the overnight wrap
Shortly after the US market close last night, President Trump announced additional 25% tariffs on all cars not made in the US, which will start to be collected from April 3. President Trump framed the tariffs as “permanent”, and the tariffs will apply not just to fully assembled cars, but also to key auto parts, including engines, transmissions and electrical components with the tariffs on auto parts set to take effect no later than May 3. President Trump separately said that reciprocal tariffs were still coming on April 2, although he later added that these will be “very lenient”, while also mentioning upcoming tariffs on pharmaceuticals and lumber. President Trump also said that Republicans in Congress would work on approving tax deductions on car interest rate payments.
The announcement on auto tariffs came after the US close, but the shares of automakers lost ground in after-hours trading as a result. For instance, General Motors was down -6.26%, whilst Ford fell -4.66%. That’s been echoed in Asian markets overnight, with Toyota down -2.72%, making it one of the weaker performers in the Nikkei, which itself has fallen -0.96%. Looking forward, DAX futures have also slumped another -0.75% overnight, reflecting the number of automakers in the index and Germany’s dependence on trade. However, US equities have showed signs of stabilising this morning, with S&P 500 futures up +0.11%.
Before the tariff announcement, equities had shown some signs of bottoming out, which followed a WSJ story that President Trump and his trade team were considering a narrower tariff regime than they once envisaged. But a negative tone still dominated overall, as reports had already come out that President Trump was preparing an announcement on auto tariffs (before any specifics came out) leading to a clear risk-off mood, which also wasn’t helped by an FT report claiming that EU Trade Commissioner Maroš Šefčovič expected US tariffs “in the realm of 20%”. Unsurprisingly, the most-exposed sectors took a particular hit, and Europe’s STOXX Automobiles and Parts Index ended the session down -2.56%. The moves also meant the German DAX (-1.17%) underperformed, and US automakers also lost ground, with GM down -3.12% in the main session, before the subsequent -6.26% decline after-hours.
That tariff hit was evident more broadly among global equities. In the US, the Magnificent 7 (-3.00%) saw a particularly large slump, reversing course after its strongest 3-day performance since the US election. In turn, that dragged down the S&P 500 (-1.12%), which fell back even though a narrow majority of the index’s components actually moved higher on the day, which just goes to show how much influence the Mag 7 still have. Some of the more defensive sectors including consumer staples (+1.42%) and utilities (+0.70%) put in a solid performance, but Nvidia (-5.74%) and Tesla (-5.58%) led the declines, ending the session as the 5th and 7th worst performers in the S&P 500, respectively. There was also a team of equity analysts who said Microsoft (-1.31%) had walked away from more data centre projects. Their note last month, that first discussed this trend, was part of the reason the Mag-7 sell-off gathered some momentum in February. Earlier in the, week Alibaba chairman Joe Tsai warned of a potential bubble in data centres. So one to continue to watch. Back in Europe, there was also a slump across the board led by tech and auto stocks, with the STOXX 600 (-0.70%) posting its biggest daily decline in two weeks.
Elsewhere, the tariff news also saw copper futures (+0.64%) rise to a record high, which followed Bloomberg’s report that US copper tariffs could happen within several weeks, which would be much sooner than the 270-day deadline for the investigation launched last month. So that added to fears about inflationary pressures, pushing the 10yr Treasury yield (+3.9bps) up to a one-month closing high of 4.35%. Matters also weren’t helped by a fresh rise in oil prices, with Brent crude (+1.05%) up to its highest level so far this month, at $73.79/bbl. So by the close, the US 1yr inflation swap was up +3.5bps to 3.02%, only just beneath its recent closing peak of 3.05% last month. Higher yields and the risk-off tone helped the dollar index (+0.33%) rise to its highest in three weeks.
Whilst tariffs were the main global news story yesterday, there were several economic headlines from the UK too, as the government announced fresh spending cuts at their Spring Statement. The context is that without the cuts, the government would have risked breaching their fiscal rules, thanks to a combination of growth downgrades and higher bond yields since their Budget in October. So if they hadn’t done anything, their margin against the rules would have been cut from £9.9bn in October to -£4.1bn today. However, the latest measures have now restored that headroom back to £9.9bn, which include benefit changes and reforms to public services. Nevertheless, it’s still quite a narrow margin by historical standards, and the OBR judged that the probability of meeting the fiscal mandate (for the current budget to balance in 2029-30) is only 54%. So the risk is that further fiscal tightening might be required later in the year if growth keeps surprising on the downside or bond yields creep higher.
Against that backdrop, UK gilts outperformed yesterday, with a big boost after the UK Debt Management Office said they’d sell £299.2bn of gilts in the 2025-26 fiscal year, a bit beneath the £302bn expected by the consensus. That gilt rally also got further support from the softer-than-expected CPI print for February, with headline CPI down to +2.8% (vs. +3.0% expected). So that led investors to dial up the likelihood of another rate cut at the Bank of England’s next meeting in May, with the probability up from 61% on Tuesday to 77% by yesterday’s close. In turn, that saw gilts rally across the curve, with the 2yr yield (-2.4bps) and the 10yr yield (-3.1bps) both falling.
Elsewhere in Europe, bond yields were fairly steady, with those on 10yr bunds (-0.2bps), OATs (+0.6bps) and BTPs (+0.4bps) not seeing much movement in either direction. There was a bit of ECB commentary, with Austria’s Holzmann (a hawk) saying that there was “a need to be cautious in reducing the interest rate too much.” But France’s Villeroy said they “still have room to cut pragmatically”, and investors moved to price in a growing likelihood that we’d still get another rate cut at the next meeting in April. In fact, overnight index swaps raised the probability of another cut to 76%.
Overnight in Asia, that negative market reaction has continued following the auto tariff announcement from President Trump. The Nikkei (-0.96%) and the KOSPI (-1.35%) are leading the losses, with Australia’s S&P/ASX/200 also down -0.37%. However, it hasn’t all been bad news, with the Hang Seng (+0.90%) posting a strong performance this morning, whilst the CSI 300 (+0.32%) and the Shanghai Comp (+0.22%) are also in positive territory.
To the day ahead now, and US data releases include the third estimate of Q4 GDP, the weekly initial jobless claims, and pending home sales for February. We’ll also get the Euro Area M3 money supply for February. Otherwise, central bank speakers include ECB Vice President de Guindos, the ECB’s Villeroy, Wunsch, Escriva and Schnabel, the Fed’s Barkin and Collins, and the BoE’s Dhingra.