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Consumer Confidence Hits Lowest Level Since Mid-2022 Amid Trade Escalations
United States
Trade Developments Spur Market Volatility
Despite a turbulent week influenced by trade policy news, U.S. equity markets closed higher. Stocks plunged at the start of the week due to tariff concerns, but rallied strongly midweek when President Trump announced a 90-day suspension on reciprocal tariff increases for most countries. The Nasdaq Composite soared more than 12%, notching its second-best daily gain on record. However, China was excluded from this reprieve, as the U.S. imposed tariffs as high as 145% on Chinese goods. China responded with countermeasures of up to 125%. This escalation dampened enthusiasm, and markets retreated slightly on Thursday. By Friday, the S&P 500 advanced 5.70%, the Nasdaq rose 7.29%, and the Russell 2000 increased 1.82%.
Federal Reserve Highlights Growing Economic Risks
Minutes from the Federal Reserve’s March meeting revealed concerns over inflationary pressures and weakening growth. Policymakers signaled a cautious stance, acknowledging the challenge of addressing persistent inflation amid softening employment prospects.
Inflation Moderates, but Consumer Outlook Declines Sharply
March core CPI rose just 0.1%, the lowest monthly gain in nine months. Year-over-year, the increase was 2.8%, the smallest since March 2021. Despite easing inflation, the University of Michigan’s sentiment index fell to 50.8 in April, an 11% monthly drop and the weakest since June 2022. Inflation expectations surged to 6.7%, the highest in over four decades.
Bond Yields Rise Amid Trade Uncertainty
Yields climbed across all maturities, led by long-term bonds. The 10-year Treasury yield topped 4.5% by week’s end. Investment-grade corporate bonds underperformed, though issuance remained solid. High yield bonds rallied on Wednesday but weakened later as sentiment turned.
Key Index Performance
- Dow Jones Industrial Average: 40,212.71 (+1,897.85, YTD -5.48%)
- S&P 500: 5,363.36 (+289.28, YTD -8.81%)
- Nasdaq Composite: 16,724.46 (+1,136.67, YTD -13.39%)
- S&P MidCap 400: 2,722.55 (+74.01, YTD -12.77%)
- Russell 2000: 1,860.20 (+33.17, YTD -16.59%)
*Source of data: Yahoo! Finance and Bloomberg
Europe
Stock Markets Slide, Then Recover on Tariff News
The STOXX Europe 600 lost 1.92% amid global trade concerns, though losses narrowed after Trump’s tariff postponement. Germany’s DAX declined 1.30%, Italy’s FTSE MIB fell 1.79%, France’s CAC 40 dropped 2.34%, and the UK’s FTSE 100 slipped 1.13%.
Central Banks on Alert
Increased market instability led the ECB and BoE to boost monitoring of financial systems. The BoE postponed bond auctions and warned that trade fragmentation could pose systemic risks.
Industrial Output Weakens; Italy Misses Growth Targets
Germany’s output shrank 1.3% in February, offsetting January’s 2% rise, with construction and energy sectors particularly affected. Italy’s February industrial production fell 0.9%, and 2024 GDP growth was revised to 0.6% from 1.2%, below the earlier 1.0% forecast.
UK Economy Surprises on the Upside
UK GDP expanded 0.5% in February, far exceeding the 0.1% consensus. On a yearly basis, growth hit 1.4%, though markets still anticipate faster rate cuts.
Japan
Equities Dip on Tariff Concerns, Then Recover Partially
Both the Nikkei 225 and TOPIX indices lost around 0.6% as global trade tensions drove risk aversion. Stocks rebounded late in the week as tariff reductions were announced for most U.S. partners—though Japan’s auto exports remained affected.
Yen Strengthens as Investors Seek Safety
Flight-to-safety sentiment lifted the yen to the high JPY 142 range. The 10-year JGB yield climbed to 1.36%. While BoJ rate hikes may be delayed, steady service-sector inflation supports policy normalization.
China
Markets Decline But Rebound on Stimulus Hopes
The CSI 300 and Shanghai Composite fell 2.87% and 3.11%, while Hong Kong’s Hang Seng plunged 8.42%. Later gains followed reports of planned stimulus measures. China raised tariffs on U.S. goods to 125% in retaliation for U.S. hikes to 145%, which it dismissed as symbolic.
Economists at T. Rowe Price estimate a 1%–2% potential GDP hit but expect offsetting stimulus measures, citing improved fiscal space and a domestic consumption focus.
Other Markets
Hungary
Inflation dropped to 4.7% in March, aided by muted service price growth. With global trade and FX volatility increasing, Hungary’s central bank is expected to maintain current interest rates.
Latin America
Limited Direct Impact, but Broader Risks Remain
Tariffs were generally set at 10% for the region, sparing most countries from harsher penalties. Energy and metal exporters like Colombia, Ecuador, Chile, and Peru may benefit, but they remain vulnerable to commodity downturns. Agricultural powerhouses like Brazil and Argentina may fare better.
However, weaker U.S. growth could hurt Mexico and countries dependent on remittances. Nations with constrained fiscal space such as Panama and Ecuador face heightened risks, though some could benefit from IMF programs or political alignment with Washington.
