Market Review:
🚢 China’s exports rose sharply in March, up 12.4% year-on-year, as factories rushed to ship goods to the U.S. before the latest round of tariffs took effect. However, this export growth will be short-lived. China’s imports fell 4.3% in March, highlighting weakening domestic demand, which will challenge policymakers trying to offset the trade downturn.
⚔️ The escalating trade war between the U.S. and China has darkened the outlook for Chinese factories and economic growth. U.S. tariffs on Chinese goods have now reached a staggering 145%. The forecasts for China’s 2025 GDP growth is now around 4% based on Reuter’s report, well below the government’s 5% target, citing the damaging effects of the tariffs.
📱 President Trump said he will announce the tariff rate on imported semiconductors within the next week, indicating the exclusion of smartphones and computers from his reciprocal tariffs on China will likely be short-lived. Trump stated there would be “flexibility” with some companies in the semiconductor sector, suggesting potential exemptions, but said the goal is to “uncomplicate it” and produce more chips and electronics in the U.S. Commerce Secretary Lutnick clarified that critical technology products from China, including smartphones and computers, will face separate new duties alongside semiconductors within the next 1-2 months, outside of the reciprocal tariffs.
🤝 The White House has opened an invitation to China to negotiate, but trade adviser Navarro did not include China in a list of entities the U.S. is in talks with.
💴 Japan is gearing up for trade negotiations with the U.S. that will likely focus on currency policy, with officials bracing for Washington to pressure Tokyo to prop up the yen against the dollar. U.S. President Trump’s focus on reducing the trade deficit and past criticism of Japan’s weak yen suggest the U.S. will push for a stronger yen to benefit U.S. manufacturers.
🗣️ Japan’s Economy Minister Akazawa will visit Washington next week to meet with U.S. Trade Representative Greer and Treasury Secretary Bessent, who has a deep financial background and interest in Japan’s monetary policy. The slow pace of the Bank of Japan’s interest rate hikes from ultra-low levels could also come under scrutiny in the bilateral talks.
📈 Asian stocks saw a rebound, with MSCI’s Asia-Pacific index rising 1.6% and Japanese and Chinese equities gaining. However, the S&P 500 is still over 5% below its pre-tariff announcement levels.
🇪🇺 Today, EU trade head Maros Sefcovic will travel to Washington to meet with his counterparts in the hopes that some substantive talks would result from the temporary truce. Even lowering taxes below the current 10% may be achieved through the dialogue, as the Republican president indicated that there might be “exemptions.” However, there is no agreement on how far the european group should go with concessions or how to respond if negotiations fail. Over the weekend, ECB President Christine Lagarde instructed EU finance ministers to abstain from too critical remarks and let the commission to handle its only authority for trade.
🏭 The British government has moved to take control of British Steel, the UK’s last maker of virgin steel, in order to keep its blast furnaces open. Prime Minister Keir Starmer said the government is taking this unprecedented action to avert the imminent closure of the blast furnaces, which are operating at a loss of 700,000 pounds per day. Business minister Jonathan Reynolds acknowledged that full nationalization of British Steel remains an option. The closure of the furnaces would leave Britain as the only G7 country unable to produce virgin steel from iron ore, coke and other inputs.
🔧 The issues impacting British Steel go beyond the 25% U.S. tariffs on steel imports, though the government says it will seek to negotiate their removal. The government has already earmarked 2.5 billion pounds for the steel industry and plans to publish a strategy for the sector in spring 2025, with funding to keep the plant running coming from existing budgets. If British Steel is nationalized, it would be the biggest state rescue since banks were taken into government hands in 2008.
🎤 On Wednesday, Fed Chair Powell will also get an opportunity to share his view at the Economic Club of Chicago, where there will likely be a lot of Q&A. Markets predict a 20% likelihood of a rate decrease in May, with a nearly 80% chance in June. Although it was up around 130 basis points this time last week, easing of about 80 basis points is factored in for the year.
🌍 Geopolitics:
🇵🇰 Pakistan vs Israel: The Sindh High Court in Pakistan has banned the sale and purchase of Israeli products. The court agreed with the petitioner’s stance, stating that the sale of Israeli goods is against the national interest and the sentiments of the Pakistani people. The government of Pakistan officially labelled the government of Israel and Netanyahu as terrorists.
🇵🇦 The opposition in Panama has accused the United States of launching a “camouflaged invasion” of the country after President Trump confirmed the deployment of U.S. soldiers following a security pact signed between the two countries. The security pact allows for the deployment of U.S. troops at three former military bases in Panama. The last U.S. military bases in Panama were evacuated in 1999 as part of the Torrijos-Carter Treaties, which aimed to hand control of the Panama Canal over to Panama. The opposition leader, Ricardo Lombana, has called the agreement an “invasion without firing a shot”.
📊 Market View:
📈 Markets are trying to open the week on a bullish note after Trump’s latest statements over the weekend. Mini S&P 500 futures are opening above Friday’s close at 5,445 points. Nasdaq 100 futures are also opening above Friday’s close at close to 19,100 points.
💸 The dollar, which continues on a downward trajectory, is currently trading with its DXY index below 99.50 points. The EUR/USD remains extremely strong at 1.14 at the moment. It is important to pay close attention to the ECB’s interest rate decision this week.
📉 European markets are also opening above Friday’s close. DAX 40 futures are opening on the cusp of 21,000 points, although they are currently falling back slightly to 20,950 points. Eurostoxx 50 futures are in a very similar situation, currently trading at 4,835 points.
🛢️ The crude oil market remains relatively strong compared to the last two weeks. A barrel of Brent crude stands at $64.90.
🥇 Gold remains at record highs, trading at $3,250 an ounce after gains at the end of last week.
💻 Bitcoin, during the past week, twice fell below $75,000, but has managed to recover and is currently trading above $84,400.
