General Market Analysis – 27/03/25

US Markets Hit as Trump Adds More Tariffs – Nasdaq Down 2%

A risk-off tone hit U.S. equities in trading yesterday as tech took a beating, with President Trump advising of more tariffs to come in the auto industry. The Nasdaq finished down 2.04%, leading the decline, while the S&P lost 1.12% and the Dow slipped 0.31%. Rising treasury yields added pressure to the stock move, with the 2-year up 2.3 bps to 4.017% and the benchmark 10-year climbing 3.9 bps to 4.352%. The USD firmed again, up 0.43% to 104.62, riding higher yields. Oil found some support as supply concerns increased with regard to Venezuela and a fall in U.S. inventories, with Brent up 1.42% to $74.06 and WTI rising 0.94% to $69.65. Gold drifted lower, down 0.18% to $3,016.85, but still remains at relatively elevated levels.

Tariff Impact Again Changing Dynamic

There is no doubt that the threat and implementation of trade tariffs from President Trump and the new U.S. administration have had a significant impact on financial markets over the past couple of quarters. However, the impact has changed over this period, and there seems to have been another subtle change in market reaction over the last couple of days. Initially, tariffs were seen as inflationary for the U.S. economy, leading to higher yields and a stronger dollar, but were also viewed as a positive for U.S. stocks. However, over the last couple of months, the negative impact on global trade has been factored in, and stocks have been hit on fresh tariff news, as well as yields and the greenback. But there seems to have been a subtle change again over the last few sessions, with tariff news being sidelined for the dollar and yields, which have gained ground mainly on the back of Fed members’ inflation concerns. FX and bond traders are continuing to monitor the correlation closely and are expecting more volatility, not less, in the coming days.

Quiet Calendar Day Ahead

It’s a relatively quiet calendar day ahead for financial markets, but that does not necessarily mean that traders will have a quiet day. There is little in the way of major economic data updates due out in the first two trading sessions of the day. However, we are scheduled to hear from President Trump again during the Asian session, and this is likely to lead to some strong moves, especially if he talks about tariffs. There is some key data due out of the U.S., and traders will be paying close attention to both the Final GDP number and the Weekly Unemployment Claims update early in the session, and then the Pending Home Sales numbers a while later. However, once again, market participants are expecting geopolitical updates to dominate sentiment.

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