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The global trade conflict remains the defining issue

In this holiday-shortened week, investors will remain cautious about any headlines on the ongoing trade conflict, particularly regarding the relationship between the world’s two biggest economies. China said to consider tariff exemptions for certain US goods, while supporting businesses amid the trade war. Stock indices on Wall Street rebounded at the end of last week, even Trump dampened hopes of a de-escalation of the trade war with China. Meanwhile, American consumer sentiment dropped sharply in April. Equity markets in Asia started the new week with no clear directions as trade uncertainties continued to weigh. 

  • Date
  • Author Alessandro Fezzi, LGT Research Content & Publications
  • Reading time 5 minutes

Tariffs

Stock indices in the Asian-Pacific region display mixed performance on Monday. Japanese shares rose due to a significant surge in Toyota's stock. Toyota's shares jumped 5.5% following news of a potential USD 42 billion buyout of its supplier, Toyota Industries, boosting the Nikkei 225 by 0.4%. Meanwhile, US-China trade uncertainties continued to weigh on Chinese stocks, leading to muted movements in indices such as the Shanghai Composite and CSI 300. Investors are also anticipating the Bank of Japan's policy meeting later this week, where interest rates are expected to remain unchanged. The Kospi in Seoul traded unchanged at the end of the session and in Sidney, the ASX 200 gained 0.5%.

China considers tariff exemptions for US goods

China is contemplating exempting certain US goods, including medical equipment and industrial chemicals, from its 125% import tariffs, Bloomberg reported on Friday. This move aims to mitigate the economic impact of the ongoing trade war. The exemptions, which may also include plane leases, reflect similar measures taken by the US, which excluded electronics from its 145% tariffs on Chinese imports. Discussions are ongoing and may not result in actual policy changes.

China supports businesses amid trade war

China's Politburo committed to aiding struggling businesses with targeted measures due to heightened external shocks from the ongoing US trade war. The committee highlighted plans for timely reductions in interest rates and the reserve requirement ratio, alongside financial support to mitigate tariff impacts. Despite maintaining earlier policy stances, officials indicated flexibility for specific interventions, aiming to sustain the targeted GDP growth of around 5% this year.

Wall Street rebounds despite Trump’s tariff remarks

Stock indices in New York rebounded on Friday despite President Trump's comments on the ongoing tariff dispute with China, which initially caused a brief market dip. Trump stated that tariffs on China would remain unless concessions were made. The Nasdaq 100 rose by about 1.1% to 19,432.56 points, the Dow Jones Industrial increased only marginally to 40,113.50 points, and the S&P 500 climbed by 0.7% to 5525.21 points. For the week, the Nasdaq 100 gained 6.4%, the Dow 2.5%, and the S&P 500 4.6%.

US consumer sentiment drops sharply in April

The University of Michigan reported on Friday that US consumer sentiment fell by 4.8 points to 52.2 points in April, its lowest level since July 2022. This decline, driven by inflation concerns and US trade policy, was a downward revision from an initial estimate of 50.8 points. Short-term inflation expectations surged to 6.5%, the highest since 1981, while long-term expectations rose to 4.4%. The survey highlighted consumer worries about economic risks, weak income growth, and a pessimistic labour market outlook.

Trump accelerates deep-sea mining

US President Donald Trump signed an executive order on Thursday to fast-track deep-sea mining for critical minerals like nickel, copper, and rare earth elements. The initiative aims to reduce reliance on China for these resources, despite concerns from environmental groups and global regulators.

ECB warns of tariff risks to growth

European Central Bank (ECB) President Christine Lagarde highlighted progress on inflation this week but warned of significant risks from tariffs. The future monetary policy will heavily depend on forthcoming data and political decisions regarding tariffs. Meanwhile, the International Monetary Fund (IMF) emphasized that US tariffs and the resulting uncertainty are straining the European economy, which is also facing structural changes such as an ageing population and rising energy costs. The IMF has revised its euro-area growth forecast, predicting a decline to 0.8% this year and 1.2% next year.

Corporate news in focus: Quarterly figures from Deutsche Boerse, Hitachi, Schneider Electric.

Economic data in focus: Spanish unemployment rate and retail sales (09:00), Austrian Purchasing Managers’ Index (10:00), Dallas Fed Manufacturing Index (16:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.