Week of APRIL 7

Last week was dominated by the Trump Administration's announcement of across-the-board tariffs, overshadowing events like Euro Area inflation slowing, the RBA keeping rates unchanged, and US NFP.

The week ahead offers a lighter economic calendar with highlights including US inflation figures and FOMC minutes, as well as UK monthly GDP data.

Week in Review

The main market event was US President Donald Trump's announcement of a minimum 10% tariff on virtually every country worldwide, prompting the largest sell-off in equities since the pandemic-instigated crash five years ago. Along with the tariff announcement, the White House eliminated exemptions for low-value exports. Countries scrambled to respond, with some calling for coordinated action to pressure the US, while others tried to preempt the announcement by cutting all tariffs on products from the US. Trump said he was open to negotiating tariffs if other countries offered something "phenomenal", and he expressed satisfaction with how the tariff rollout was going. US Treasury Secretary Scott Bessent said the tariffs represented a "cap" and countries could negotiate down from that. The Nasdaq plunged over 7% in the week, paving the way for 17K.

US March ISM services fell to the lowest since 2023, with the survey showing sticky prices. March ISM manufacturing unexpectedly contracted at 49, down from 50.3 prior.

Eurozone inflation came in higher than anticipated at 2.2% compared to 2.1% expected, but lower than the prior 2.35%. However, the core rate was 2.4%, below the expectation that it would remain unchanged at 2.6%. Unemployment in the Euro Area also fell to 6.1% from 6.2% previously.

Chinese PMIs were positive, with the private measure rising to 51.2, above the 50.6 expected, suggesting resilience in the world's second-largest economy.

The RBA kept rates unchanged as widely expected, with Governor Michelle Bullock emphasising uncertainty in global markets and saying no decision had been made on the future rate trajectory, leaving the door open for easing at the next meeting.

Australia's trade surplus was less than expected, with the Aussie down around 5% on Friday towards 0.60. Canada's trade balance unexpectedly turned negative at -$1.5 billion, down from $3.1 billion a month ago. The Loonie turned around before reaching 1.40, but the chances of testing (or breaking) the 200-day average at the same level remain favourable.

In geopolitics, US Secretary of State Marco Rubio emphasised in a NATO Foreign Ministers meeting that Trump had made it clear he intended to stay in the organisation and called for increased defence spending.

Biggest Market Movers

• Gold scored new record highs leading up to the tariff announcement but backed off afterwards while holding its bullish stance above the $3000 mark.
• The dollar index cratered below the 200-week average following the tariff announcements, losing over 2% through the latter half of the week to a six-month low.
• The Swiss Franc, as a safe-haven asset, saw the strongest gains of the majors after the tariffs, gaining over 3% since the start of the week.
• Crude prices dropped more than 10% late in the week after OPEC+ confirmed it would start increasing production following the tariff announcement.

Top Events in the Week Ahead

The coming week has a relatively light economic calendar, giving more room for reaction to the latest salvo in the trade wars. Markets are likely to focus on US data, including the release of the latest CPI figures and the FOMC minutes.

US Inflation on the Docket

The consensus is that inflation in the US moderated in March but remains above target. Headline CPI is expected to decline to 2.5% from 2.8% previously, while the core rate is seen ticking down to 3.0% from 3.1% prior. Markets will likely look through the FOMC's latest minutes to better understand how the Fed could react to the effects of the larger-than-expected tariffs. With gold cooling off, fibre could steal the spotlight and head towards 1.12 and the July 2023 peak of 1.1282 unless bulls lose the 1.10 handle, increasing the odds of a deeper pullback.

UK Data Seen Stumbling

The end of the week comes with a barrage of economic data out of the UK, with monthly GDP figures expected to be the highlight. The British economy is expected to have reversed course to grow 0.1% in February compared to the -0.1% recorded in January, allowing the rolling three-month average to accelerate to 0.4% from 0.2%. Before that, Halifax house prices are expected to indicate accelerating pricing in homes as the BOE remains on an easing stance. With Footsie down below the 200-day average of 8350, all eyes turn to the 8K round support, where a potential bounce could commence. The British currency, on the other hand, must sustain the 1.30 mark for a chance at retesting 1.32.

Other Events, Earnings

Monday has the German trade balance. Tuesday sees consumer and business confidence figures from Australia, as well as Canada's Ivey PMI. Japanese consumer confidence comes out on Wednesday. China's inflation rate is expected on Thursday. Friday includes the US University of Michigan (UoM) consumer sentiment.

Corporate events remain relatively calm ahead of the unofficial start of earnings season, with names expected to report including Cal-Maine, Constellation Brands, and Delta Airlines, and the kickoff of the reporting season on Friday with major US banks such as JPMorgan, Wells Fargo, BlackRock and Bank of New York Mellon.