Market Report.
📉 China’s official Manufacturing Purchasing Managers’ Index (PMI) fell to 49.0 in April, the lowest reading since December 2023 and the fastest contraction in 16 months. This contrasts with Chinese officials’ confidence that the economy can withstand the impact of U.S. tariffs, suggesting domestic demand remains weak as factories struggle to find alternative buyers.
📊 This indicates China’s economy is coming under pressure as external demand cools due the US tariffs. The U.S.-China trade war is starting to take a toll on China’s manufacturing sector and broader economy, despite Beijing’s efforts to boost domestic demand and provide policy support.
🇪🇺 But China is not the only one to notice this impact: European manufacturers and service providers are alerting that Trump’s trade tariffs are severely impacting their operations, with companies like Porsche experiencing squeezed profits and being forced to consider costly production shifts to the US.
📉 In the U.S., consumer confidence slumped to a nearly 5-year low in April, with the Conference Board’s consumer confidence index dropping 7.9 points to 86.0. This highlights how the Trump administration’s tariff policies are weighing heavily on the economic outlook and consumer sentiment in the U.S.
📅 Today we will have important data coming, including inflation and GDP figures from Europe as well as U.S. GDP and core PCE price index. In the U.S., expectations are for GDP growth of only 0.3% in Q1. Goldman Sachs now forecasting a 0.8% contraction and JPMorgan a 1.75% decline. This is a steep reversal from the 2.4% growth seen in Q4.
📈 Paradoxically, this could lead to further rises in the stock markets, given that the Federal Reserve will eventually need to resume cutting interest rates this year to support the economy, despite near-term inflation pressures from tariffs and supply chain disruptions.
⚖️ U.S Trade Balance: The widening trade deficit suggests trade was a significant drag on growth. The truth is that, knowing that reciprocal tariffs will be applied very soon, imports of early products to avoid these tariffs have skyrocketed, increasing the trade deficit beyond the usual levels.
📉 However, U.S. job openings dropped sharply in March, decreasing by 288,000 to 7.192 million open positions. This was a larger decline than the 7.480 million openings economists had forecast. Hiring rose just 41,000 to 5.411 million, indicating businesses are reluctant to increase headcount as they navigate the Trump administration’s tariff policies.
🚫 Hiring freeze and mass firings of federal workers as part of the Trump administration’s efforts to downsize the government are also expected to undercut the labor market’s resilience.
📜 While trade agreements that could give the US economy a new boost are awaited, tariffs will boost prices, disrupt supply chains, and have a negative impact on the labor market in the coming months.
🤝 Howard Lutnick, the secretary of commerce, claimed to have made one agreement with a foreign power.
🇮🇳 President Trump stated that trade negotiations with India are “coming along great” and he thinks the U.S. will strike a trade deal with the country: Treasury Secretary Bessent said the U.S. is “very close on India” and has also held “substantial talks” with Japan over a possible trade deal.
📈 Vice President Vance met with Indian Prime Minister Modi last week and they “made some very good progress”, suggesting potential announcements on India could be forthcoming.
🌏 India could benefit greatly if it can negotiate tariffs to a much lower level, which could make the country more attractive for companies. During Trump’s previous administration, initial trade tensions with China led India to strengthen its trade relations with the US and Europe.
🚗 President Trump has signed an executive order to soften some of the automotive tariffs his administration had previously put in place: The 25% tariffs on imported vehicles into the U.S. will continue, but the order aims to reduce the “stacking” effect of multiple tariffs on top of each other. It provides potential reimbursements to automakers for the 25% tariffs on auto parts, equal to 3.75% of the value of a U.S.-assembled vehicle in the first year, and 2.5% in the second year.
⚙️ The administration is aiming to create a more “pro-growth and regulatory climate” for the U.S. auto industry. Companies like GM, Ford, and Stellantis have expressed appreciation for the tariff relief, though they still face significant cost increases.
📞 President Trump personally called Amazon founder Jeff Bezos to complain about a reported plan by Amazon to display the costs of U.S. tariffs on its product listings. The White House press secretary called Amazon’s reported plan a “hostile and political act”, questioning why they didn’t do this when the Biden administration raised inflation. Amazon initially said the plan was only being considered for its budget-focused “Amazon Haul” section, but later clarified the plan was “never approved” and “not going to happen.”
🇪🇺 In Europe, two European Central Bank policymakers warned that a trade war with the United States could extinguish the euro zone’s fledgling economic recovery and cause the bloc to struggle under tariffs, uncertainty, and waning confidence. ECB Vice President Luis de Guindos, and Finnish central bank chief Olli Rehn said a trade war could weigh on prices and slow inflation, which is already nearing the ECB’s 2% target. Trade barriers could lower energy prices and push up the euro’s value, creating a drag on inflation. Additionally, China may export some of its goods to the euro region that aren’t available in the US, which would further reduce inflation.
⛽ The U.S. is working to replenish the depleted Strategic Petroleum Reserve (SPR), depleted during the Biden administration in 2022, a process Energy Secretary Chris Wright says could take years. Criticizing Biden’s “irresponsible” 2022 release, Wright noted damage to storage facilities, with only two of four salt caverns operational. The Department of Energy plans to spend $20 billion on crude, pending Congressional approval, aiming to restore the SPR as a critical supply buffer.
Geopolitics:
☢️ Dmitry Medvedev, deputy chairman of Russia’s Security Council, claims the West is exaggerating the nuclear threat from Russia in order to maintain public support for sanctions and continued military aid to Ukraine.
🕊️ Ukrainian President Volodymyr Zelensky has rejected Russian President Vladimir Putin’s proposal for a 72-hour ceasefire around Victory Day, calling it a “manipulation attempt”. Zelensky demanded an immediate 30-day ceasefire instead, accusing Russia of “constantly rejecting” Ukraine’s efforts to “establish peace and guarantee security”.
🇬🇧 The UK was planning to deploy troops to Ukraine to “rebuild” the Ukrainian armed forces after a ceasefire, though the UK defense chief said the goal would be to help Ukraine “regenerate” its forces rather than conduct combat operations.
⚠️ However, the UK has reportedly backed away from plans to deploy a large military contingent, favoring a more limited training mission instead due to concerns over the risks and inadequate forces.
💥 The Kremlin has warned that the presence of Western troops in Ukraine could lead to a direct confrontation with NATO and potential nuclear escalation.
Market View:
📊 Prices remain stable in the markets as investors await inflation and growth data from both Europe and the United States. Mini S&P 500 futures have shown minimal fluctuations since yesterday, although we continue to see signs of a bullish pattern that could be triggered if today’s data is favourable.
📈 Currently, Mini S&P 500 futures are at 5,565 points, while Mini Nasdaq 100 futures are at 19,565 points.
📈 In Europe, as usual, equities are trading with greater confidence, which is somewhat paradoxical given the economic situation in the region. DAX 40 futures continue to rise, standing at 22,625 points, approaching their all-time highs. Meanwhile, Eurostoxx 50 futures remain more cautious, trading at similar levels to yesterday, around 5,120 points.
💵 The dollar index continues to seek strength after Monday’s brief weakening, currently trading at 99.20 points. This keeps the euro-dollar pair close to the 1.14 zone, with a current value of 1.1385.
🛢️ The price of crude oil is falling, with Brent crude approaching $62.50 per barrel, possibly affected by weak macroeconomic data from the United States and China, which would indicate a slowdown in commercial activity and, therefore, in fuel consumption.
🥇 Gold, on the other hand, remains stable in the $3,315 area, probably awaiting inflation data from the United States.
💰 Finally, Bitcoin is increasingly focused on the $95,000 area, making it the next key resistance level. It currently stands at $94,885.
