The still ongoing tariff-inspired rout on Wall Street and in stock markets around the world centres heavily on the once 'Magnificent Seven' megacap U.S. tech stocks, which are now likely in the front line of the global trade war.
Thursday saw the biggest one-day losses for U.S. equity indexes since the pandemic shocks of 2020, with drops of 4-7%. Popular funds tracking the 'Mag 7' tumbled in time, losing 7% on the day and clocking a 25% drop from December's record highs. The group is now in a technical bear market for the first time since it emerged two years ago.
The 'Mag 7' epitomized the "U.S. exceptionalism" theme for investors around the world, so many suspect this rapid reversal may be emblematic of how the trade shock will unfold. Europe, for one, sees Big Tech as a legitimate target in likely tariff retaliation, as the U.S. runs a trade surplus in services and digital-related trade with the region.
French President Emmanuel Macron called on European firms to suspend U.S. investments until negotiations get underway.
With U.S. President Donald Trump claiming his trade plans are "going well", U.S. and global recession fears are mounting. In a note entitled "There will be Blood", JPMorgan on Thursday raised its chances of a worldwide economic recession this year to 60% from 40%.
Trade-related downturn fears were further reinforced by slowing service sector readings from ISM's March survey on Thursday.
U.S. stock futures show no sign of recovery early on Friday and look set to extend losses by another 1% before the week is out, as the VIX 'fear index' rises above 30 for the first time since last August's yen-related volatility explosion.
Recession worries also pummelled bank stocks around the world, with Japanese banks hit by up to 10% on Friday.
In turn, futures markets are now pricing in four Federal Reserve interest rate cuts this year. Ten-year Treasury yields fell below 4% for the first time in six months, with U.S. corporate 'junk' spreads rising above 400 basis points for the first time since 2023.
Hit by global demand fears and OPEC production hikes, U.S. crude oil saw prices fall to their lowest since 2023.
The dollar's plunge this week is perhaps the most startling of all the big moves as it normally gets a 'safe haven' boost in times of stress. The break with this pattern suggests foreign investors might be fleeing from U.S. assets at large. The greenback did perk up somewhat from the year's lows on Friday, however.
All eyes will be on Fed Chair Jerome Powell when he speaks on Friday. Currently, Fed officials still appear to see no urgency to cut rates, as the jobs market remains firm and the inflation picture continues to be murky due to tariffs.
Friday's March payrolls are being released today, but like so many upcoming economic releases, they will not be overly useful because they will not capture the implications of this week's tariff shock. Profit warnings and guidance cuts from the first-quarter corporate earnings season starting next week will probably be more significant.
0 comentários:
Postar um comentário