This week in the United States brought both turbulence and resilience in equity markets as trade policy developments weighed heavily on sentiment.
Initially, U.S. stocks declined sharply in anticipation of the Trump administration’s latest round of tariffs, creating an uneasy start to the week.
However, a midweek announcement that higher reciprocal tariffs would be paused for 90 days for most countries sparked a dramatic rebound, with the Nasdaq Composite notching a historic single-day gain.
Despite this upswing, the exclusion of China from the pause and subsequent tariff escalations between the world’s two largest economies tempered enthusiasm.
Ultimately, the S&P 500 ended the week up by 5.70%, the Nasdaq rose by 7.29%, and the Russell 2000 posted a modest 1.82% gain.
The Federal Reserve’s March meeting minutes revealed a cautious stance, emphasizing increased uncertainty around economic growth, inflation, and employment.
Policymakers indicated that ongoing trade tensions could complicate their approach to monetary policy.
Meanwhile, consumer price data for March offered slight relief, showing core inflation rose only 0.1% month over month. Nonetheless, consumer sentiment continued its downward trend, reaching its lowest level in nearly three years. Treasury yields broadly surged—particularly at the longer end of the curve—reflecting heightened caution as bond prices fell amid the week’s renewed concerns about trade policies.
European equities navigated volatile conditions driven by escalating trade tensions and countermeasures. The pan-European STOXX Europe 600 Index fell 1.92% in local currency terms, though losses eased slightly after news that the U.S. would delay higher tariffs for most partners. Germany’s DAX slipped 1.30%, Italy’s FTSE MIB lost 1.79%, and France’s CAC 40 declined 2.34%. The UK’s FTSE 100 gave up 1.13%. Trade uncertainty weighed heavily on investor confidence, especially as potential spillover effects could impede broader economic recovery.
In response, several central banks heightened their vigilance. The European Central Bank urged banks to more frequently assess their funding positions, while the Bank of England requested updated information about market liquidity. The BoE also postponed several long-dated gilt auctions, acknowledging the need for flexibility amid ongoing volatility. Furthermore, the BoE’s Financial Policy Committee cautioned that financial stability could be challenged if global trade remains fragmented and financial markets grow more stressed.
Recent economic indicators hinted at softer industrial activity in key regions. German industrial output declined by 1.3% in February, owing to weakness in construction and energy. Meanwhile, Italy’s industrial production dropped 0.9%, adding to concerns that growth might lag expectations. Italy also faces potential tariffs on significant trade flows with the U.S.
Japanese stocks faltered as tariff fears sparked a worldwide flight to safety. Both the Nikkei 225 and TOPIX Index slipped around 0.6% for the week, weighed down by anxiety over new U.S. levies. Some relief arrived when the tariff rate for most U.S. trading partners was lowered to 10% for 90 days, although Japan’s automotive exports remained subject to higher rates. The yen strengthened as investors sought safe-haven assets, and Japanese authorities emphasized the importance of global cooperation to manage the trade fallout.
In China, markets posted weekly declines but found some support on hopes of fresh government stimulus to counter U.S. tariff pressures. The CSI 300 and Shanghai Composite indices suffered moderate losses, while the Hang Seng in Hong Kong tumbled more sharply. Despite announcing an increase in tariffs on U.S. goods to 125%, Chinese officials downplayed the significance of the ongoing “numbers game.” Analysts predict that tariff measures could reduce China’s gross domestic product by as much as 1% to 2%, though policymakers appear ready to offset any downturn through additional fiscal actions. Their aim is to bolster domestic consumption and maintain economic stability, reflecting Beijing’s long-term strategy of reducing external vulnerabilities while sustaining growth momentum.
While uncertainty lingers, ongoing vigilance and adaptive policies around the world will remain key to navigating the challenges in the weeks ahead.
