Stocks showed little movement on Tuesday as investors braced for the effects of the trade war on earnings and economic data. The U.S. dollar, meanwhile, continued its downward trend, heading toward its largest monthly decline in years.
President Donald Trump’s tariffs have undermined confidence in U.S. assets. Although the S&P 500 has recovered much of its losses from early April, the dollar has only managed to stabilize without a significant rebound.
The dollar weakened overnight after U.S. Treasury Secretary Scott Bessent told CNBC that it was “up to China to de-escalate” tariffs, which currently stand at 125% for most U.S. exports to China.
A public holiday in Japan led to thinner currency trading in the Asia session, keeping most currency pairs stable. However, the euro reached $1.1409, gaining 5% in April, on track for its biggest monthly rise against the dollar in almost 15 years. Meanwhile, the dollar dropped 7% against the Swiss franc, marking its largest decline in a decade.
Futures for the Nikkei and S&P 500 saw slight gains, with some optimism over potential relief in automotive tariffs. However, investors are holding out for more substantial action on the hefty 145% U.S. tariffs on China.
China has made some tariff exemptions but has not yet introduced stimulus, betting that the U.S. will act first. China’s foreign ministry also contradicted U.S. President Trump’s comments, stating that President Xi Jinping had not spoken to Trump recently, nor were the two countries working on a tariff deal.
Hong Kong’s Hang Seng index rose 0.3% in early trade, while the mainland blue-chip index dropped 0.2%.
With first-quarter GDP and April jobs data expected later in the week, analysts from J.P. Morgan noted that front-loaded purchases to avoid new taxes could help boost the numbers. However, a sharp drop in China’s shipments suggests the economic impact may soon be felt. J.P. Morgan analysts warned that a “worrying decoupling of U.S.-China trade” could be underway, with consequences for supply chains if the decline continues.
Beyond U.S. data, investors are also watching Canada’s upcoming election, which is expected to see the Liberals returned to power. Additionally, inflation readings are expected from Spain and Belgium later on Tuesday.
In other news, power was restored to parts of the Iberian Peninsula on Monday after a large-scale outage brought much of Spain and Portugal to a halt.
Several major companies are reporting quarterly earnings on Tuesday, including HSBC, big Chinese lenders, BP, Deutsche Bank, Adidas, Coca-Cola, General Motors, and Visa. Tech giants like Apple, Microsoft, Amazon, and Meta Platforms will report later in the week.
The weaker dollar has boosted gold, which reached $3,333 an ounce on Tuesday, up nearly 7% for the month and almost 27% year-to-date. Brent crude prices weakened slightly to $65.68 per barrel.
Treasury markets were quiet in Asia due to Japan’s holiday, with benchmark 10-year yields holding steady at 4.206%. Futures also remained largely unchanged.
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