Trump continues to sound defiant despite sending global equity prices crashing

Good morning

A stronger nonfarm payroll number Friday was partially offset by a revision lower of the previous reading, plus a higher unemployment rate of 4.2% didn’t make for great reading.  Still, it was nothing compared to the tariff driven declines in the equity markets, most US indices lost well over 5% on Friday and futures prices are pointing to further losses today.  Asian markets fell sharply on the open, with Nikkei for example down almost 8%, Hang Seng was down over 12%.  We’re expecting similar fallout from Europe.

In terms of currencies, GBPUSD is currently around 1.2920 having hit a low overnight of 1.2825, while EURUSD saw a fall to 1.0880 on the open but has since recovered to 1.1030.  GBP continues to lose ground against EUR, the pair now just a touch above 1.1700.  AUD, NZD and ZAR continue to lose ground, now approximately 2.15, 2.32 and 25.00 against GBP, while the safe havens such as JPY and CHF make gains, GBPJPY now 187.75 and GBPCHF 1.0940, the latter down from the 1.1450 area just last week.  I’d actually questioned the idea of JPY as a safe haven a while back, but it certainly looks as though it has retaken that mantle.

Trump remains defiant on his tariffs, indeed he actually seems to be doubling down by saying that he won’t negotiate unless such talks eliminate the trade deficit with that country completely, and also possibly even with repayments for previous years of deficits.  He continues to sound particularly angry over the EU although the Euro is defiantly showing signs of strength. 

I’m not convinced Trump envisaged the turmoil we are currently seeing.  It must surely hurt him to see his decisions lead to collapsing markets.  Not really a show of confidence.  This is a massive gamble on Trump’s part that could well lead to the end of trade as we know it, and also the end of the great relationships US has with Europe, Canada and other parts of the world.  There is a massive chance that the rest of the world just says to the US ‘you’re on your own’.

There is some talk that the whole market selloff was cleverly engineered by the US administration in order to make their borrowing cheaper.  Trump has said this is not the case, but I see some major banks are starting to look at more Fed rate cuts through 2025, UBS for example now see cuts of 1% this year, compared to 0.5% previously followed by another 1% of cuts in 2026.  This comes as US growth forecasts are severely downgraded and inflation forecasts are raised. 

The key question now is whether the markets stop falling and perhaps start to make gains again, or whether we are in a continuing spiral of downward moves.  OK, at some point they’ll stop but there is so much uncertainty it would be a brave man who calls the bottom of this move. 

Mind you, the markets are not the only area that are producing surprises at the moment.  Let’s look at the Premier League, where none of the top five teams registered a win over the weekend, indeed the managed just three points between them.  Spurs did get three points at the expense of Southampton who are now relegated with just ten points accrued so far this season.  Newcastle play this evening against Leicester who, if I am not mistaken, have won just one of their premier league matches this year, of course against Spurs back in January. 

No surprise that with the fine weather this weekend a great deal of my time was spent mowing the lawn and generally sorting things out in the garden.  The aches I am feeling today are a sign of just how unfit I am and how I really need to get out and be healthier.  Still, if anyone is available for a beer in the sun do let me know…..

Not the biggest week in terms of economic data this week, US CPI probably the highlight but still likely to be overshadowed by the fears over global trade.  We’ll have rate announcements from RBNZ and RBI this week, both expected to cut by 25bps but with the trade tensions we are seeing I wouldn’t be surprised if there was some speculation of larger cuts. 

Have a great week…

-  10.00 EU retail sales

-  10.45 ECBs Cipollone speaks

-  15.30 BoCs business outlook

-  23.00 NZ NZIER business confidence

-  00.01 UK BRC retail sales

Liberation or Obliteration

Good morning

US equities responded badly to Trump’s war on global trade.  The Dow Jones was down 4%, S&P down 5% and Nasdaq was down 6%.  This was despite Trump himself saying markets would ‘boom’ as a result of the tariffs.  Weaker than expected US data yesterday did nothing to help the rout, ISM services PMI was 50.8 vs an expected 53, while Challenger job cuts soared to 275k from an expected 172k, most of which was attributable to DOGE.  What this means for today nonfarm payrolls remains to be seen, markets are looking for something in the +135k region with an unchanged unemployment rate of 4.1%.

The chances of a US recession this year have grown and inflation must surely push higher.  There is a growing feeling that countries impacted by the higher tariffs will not only retaliate but be pushed to seek trade relationships elsewhere, leaving the US very much on its own.  EU have already looked at a South America trade deal to offset the US tariffs.  Those losses in the equity markets yesterday added to losses already seen since Trump’s Presidency, they are down around 10% since he took the helm.  Liberation Day has been renamed as Obliteration Day by some.  Wish I’d thought of that. 

The US dollar has weakened pretty much across the board although is off its lows.  EURUSD hit a high of 1.1145 yesterday, now 1.1050, GBPUSD touched 1.3200 but has fallen back sharply to 1.3050, which has dragged GBPEUR to within a whisker of 1.1800, pretty much the Jan 25 lows.  We have to go back to Aug 24 to see levels below 1.1800.  I’m looking for answers as to why GBP has been hit so hard, I wonder whether it is Trumps comments about pharmaceuticals being next in line for tariffs, given UK’s exports t the US in this sector.  

AUD continues to struggle as the market prices in more RBA rate cuts, now 0.6225 against USD and around 2.1000 vs GBP.  NZDUSD is 0.5700, GBPNZD around 2.2900, both pairs at multi-year highs.  CAD remains strong having avoided the recent tariffs, USDCAD now 1.4145, GBPCAD 1.8425.  ZAR continues to trade on the weak side, USDZAR is up at 19 while GBPZAR is 24.75 having knocked on the door of 25.00 briefly yesterday afternoon.  Jan 2016 was the last time we were up at these levels,

In sport, Spurs lost 1-0 to Chelsea last night, a result that came as no surprise other than the fact I’d thought it may have been a bigger goal margin.  Spurs next couple of premier league matches are against Southampton and Wolves, which may off the chance of some much needed points before they face Forest and Liverpool in late April.  In between we do have the small matter of the Europa league, next week brings the quarter finals.  Could Spurs win a trophy after the shocking league performances?

The pick of the premier league action this weekend could well be Forest v Villa, although the Manchester derby could throw up some excitement as well.  Arsenal and Liverpool will both be hoping to take all three points in their matches against Everton and Fulham respectively.  The weekend also bring the Japanese F1 grand prix, tomorrow also brings the Grand National, always difficult to pick a winner and none of the names are really jumping out at me other than the favourite, I Am Maximus at 8-1.

While todays nonfarm payrolls is certainly the main event, much focus will be on Feds Powell who speaks later in the day.  We’ll be interested to hear his take on the tariffs, global trade and a possible US recession.  Also watch for any signs of Trump backtracking on tariffs, he’s already talking about making deals with countries who offer better terms.   

Have a great day and a great weekend if we do not speak before

-  09.00 ECBs de Guindos speaks

-  13.30 US nonfarm payrolls

-  13.30 CAD employment

-  16.25 Feds Powell speaks

-  17.00 Feds Barr speaks

-  17.45 Feds Waller speaks

Trump upsets global trade, eyes now on negotiation or retaliation

Good morning

It was a another calm day in the markets yesterday, we got a bit of USD weakness into the London close with GBPUSD up to 1.2970, an area that had pretty much capped the upside for the past couple of weeks, while EURUSD reached as high as 1.0870, again broadly around the last two week highs.  USDJPY bucked the weaker US move, pushing up 100 points from 149.15 to 150.15. 

And then Trump spoke.  I watched it and I have to say it was pretty painful.  The problem is, I can’t work out if Trump is right or wrong when he says trade with other countries is so unfair.  It is surely only reasonable to level the playing field.  But why do I have a sinking feeling about this?  It’s a massive gamble from Trump, one that if it pays off it would be great for the US, but it will be American consumers hit hardest by the higher prices in the short term and the positive effects, if they arise, won’t be seen for much longer. 

Mind you, some US firms are already looking to lure US customers.  Ford has apparently said they’ll offer their employee discount to all customers which should surely be enough to encourage buyers to purchase ‘American’.  That’s if they purchase at all of course.  Could be worth watching the success of this latest campaign by Ford as a litmus test for the ‘buy American’ idea.

USD is lower since Trump spoke despite the growing risk of US inflation and the potential for rates there to remain on hold for some time.  The fear of a slower US economy with higher inflation and higher interest rates is a very real concern.  GBPUSD is now 1.3100 which means 2025 has already seen a 10 big figure range and EURUSD is 1.0950.  These are the highest levels in both pairs since Oct 2024 and neither show any sign of stopping as yet. 

USDJPY is lower at 147.00, with the March lows around 146.60 not too far away as Yen is bought as a safe haven.  CHF is also higher against USD, now 0.8680 from 0.8850 yesterday.  Gold, another safe haven, saw a new record high of $3,167.

GBP has actually performed well since the tariff announcements, no surprise given UK was hit with a figure of 10%, considerably lower than many other countries.  GBP is up at 2.0815, 2.2750 against AUD and NZD.  AUD was hit particularly hard by Trump when he singled out their restrictions on US beef imports.  I see that their trade surplus released overnight was well down on expectations at AUD3bn against AUD5.6bn expected.

CAD has pushed higher against USD and is pretty stable now at 1.4180, while GBPCAD is only a touch higher than pre-Trump levels at 1.8605, demonstrating how well CAD has held after the tariff implementation.  No surprise given that both Mexico and Canada have avoided Trumps reciprocal tariff regime.

ZAR has been a big mover over the past couple of days, perhaps it is Trump tariffs or perhaps the mention of possible sanctions on countries who purchase Russian energy is to blame.  USDZAR is up at 19.00 while GBPZAR is up at 24.85, the highest we’ve seen since Jan 2016.    

One piece of news I feel very bad for not mentioning yesterday was the sad passing of Val Kilmer.  I know he’d been in many films but of course for me the main one was Topgun where he played Iceman, and I’m pleased he managed to make an appearance in the sequel, Topgun Maverick despite being pretty poorly at the time.  Still , other than Top Secret in the 80’s and Batman Forever in the 90’s I’m not sure I’ve seen many of his other films.  Perhaps that gives me something to work through, rather than a new box set.

In football, Liverpool beat Everton to extend their lead at the top of the table.  Ipswich caused an upset by beating Bournemouth and Villa had a comfortable win over Brighton to boost their chances of European football next year.   Next up, Spurs v Chelsea this evening, fair to say that neither team is really firing on all cylinders but at least Chelsea look like they are down a couple from what should be a V8, while Spurs are still spluttering along with a couple of cylinders at best.  Part of me thinks we’re capable but realistically I can’t say I am at all confident.  Chelsea could do with the points after both Man City and Newcastle won last night to knock Chelsea down into sixth place. 

US ISM PMIs are likely to be the highlight today, jobs data in the form of challenger cuts and initial claims are unlikely to offer any really insightful clues as to tomorrows nonfarms. 

Of course, the key now will be the global response to Trump’s tariffs, whether that is negotiation or retaliation.  EU have prepared countermeasures if negotiations fail, China have said they will retaliate if tariffs are not lifted.  Either way, it is unlikely we’ll see no action from those hit by increased tariffs.  Global trade will be hit, that’s for sure and global equities are lower as a result.  Its going to be a long and rocky ride and we could well be seeing changes that bring around a new era of trade relationships.

Have a great day…

-  09.00 EU composite PMI

-  10.00 EU PPI

-  11.00 ECBs Schnabel speaks

-  12.30 ECB minutes

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  14.45 US S&P composite PMI

-  15.00 US ISM services PMI