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It was a quieter day on the tariff front, though there was a concerning report highlighting a lack of progress between the US and EU on tariffs.

Closing changes:

• S&P 500 -0.2%
• Nasdaq Comp flat
• DJIA -0.4%
• Russell 2000 +0.1%
• Toronto TSX Comp +0.75%

After hours, shares of United Airlines are up 8% after reporting earnings. The company forecast a midpoint of $12.50 in EPS in a continued growth scenario and $8 in a recession.

This article was written by Adam Button at www.forexlive.com.

The latest Bank of America fund manager’s survey is out and this is the headline-grabbing chart. It’s a survey of global investors asking them if they plan to cut their weighing of US equities and it shows that 65% want to be underweight.

Now that may turn out to be a contra indicator as it’s been US equities that have driven global markets higher for the past five years, largely due to tech companies. But those companies are richly valued and are vulnerable to tariffs and potential retaliation from trade partners. Global equities are also much cheaper and that provides some downside protection in a slowing global economy.

More importantly, the survey may highlight a newfound determination to leave or lighten up on USD assets.

Deutsche Bank today highlights the vulnerability:

• Foreigners own
  $7 trillion of American fixed income and $18 trillion of American equities
• The value of equity ownership has risen 6x since 2010
• European portfolio holdings of US equities have risen from 5% to 20% since 2010
• They note that unhedged FX exporse to US assets is very high

The more benign interpretation of our analysis is that
foreigners have merely passively tracked rising aggregate valuations of US
equities and issuance of US bonds. The more worrying interpretation is that
this has left foreigners – especially Europeans – with a huge overweight in
their portfolios relative to history, especially in US equity markets which
tend to be currency unhedged.

This article was written by Adam Button at www.forexlive.com.

• More than 15 trade deal proposals are being actively considered
• We believe that we can announce some very soon
• The President has not made a determination on raising the corporate tax rate

The top thing I’m watching for in trade deals when they are announced is whether or not the US will drop the 10% baseline tariff.

More:

• The ball is in China’s court
• Trump is open to a deal with China

This article was written by Adam Button at www.forexlive.com.

The S&P 500 is at the lows of the day, down 10 points or 0.2%, to 5397.

The index has tried to rally several times but has carved out a series of lower highs over the two trading days this week. That’s a red flag headed into the final hours of trading.

Yesterday’s low of 3585 is a spot to watch.

This article was written by Adam Button at www.forexlive.com.

The European equity indices closed higher on the day. For the German Dax it rose despite weaker than expected German Dax indices. The ZEW Economic Sentiment Index for Germany fell sharply to -14.0 in April, down from 51.6 in March and well below the market expectation of 9.5. This marks a significant deterioration in forward-looking investor confidence.

However, the assessment of current conditions showed modest improvement, with the index rising to -81.2 from -87.6 in the previous month, slightly better than the forecast of -86.8.

Concerns about the tariff situation was also ignored. EU officials were reportedly saying that they expect tariffs to remain as talks with the US are making little progress.

A look at the closing levels:

• German Dax +1.43%
• France’s CAC +0.86%
• UKs FTSE 100 +1.41%
• Spain’s Ibex + 2.14%
• Italys FTSE MIB +2.39%

For each of the major indices they moved above and closed above their 100 hour MAs.

• German Dax closed at 21253.71 above the 100-hour MA at 20947.96
• France’s CAC closed at 7138.41 above the 100-hour MA at 7318.99
• UK FTSE 100 closed at 8349.11 above the 100- hour MA at 8137.74
• Spain’s Ibex closed at 12879.30 above the 100-hour MA at 12543
• Italy’s FTSE MIB closed at 35843.81 above the 100 hour MA at 35247.62

This article was written by Greg Michalowski at www.forexlive.com.

Yesterday I wrote about a forecast for a plunge in US port volumes that would start to hit in May and now Vizion is out with some real-time data showing that ocean bookings for US imports crashed in the week after ‘Liberation Day’ compared to the week before.

In general, a shipment from Shanghai to Los Angeles take 20-30 days, adding another 15 days for transit through the Panama canal to New York.

A report in Sourcing Journal cited Kyle Henderson, CEO and co-founder of Vizion, who highlights a sharp drop in bookings of apparel shipments.

“A low-margin, high-volume Asia-origin business like apparel is
extremely susceptible to the tariff whiplash,” Henderson said. “You can
see the rationale of pause or hold all shipments, because if anything
starts arriving in the country and these tariffs are active, a brand
might now financially be in a tough spot because they now owe a pile of
cash that they’re not prepared to pay.”

This article was written by Adam Button at www.forexlive.com.

The world is facing a dollar confidence crisis as the
repercussions of “Liberation Day” continue to reverberate, Deutsche Bank says.

The German bank is out with its latest forecasts for the US economy and is increasingly tilting towards a stagflationary scenario.

• 2025 US growth forecast cut to 0.9% (q4/q4), hit by
  tariffs, policy uncertainty and tighter financial
  conditions.
• Labor market still resilient but cracks emerging;
  unemployment to rise to 4.6% this year (4.1% currently)
• Tariffs look set to lead a resurgence in inflation
  pressures this year. Core PCE inflation now
  seen ~3.75% end 2025 (~1pp above prior
  view); risks remain skewed higher.
• Critically, they see US CPI at 3.2% in 2026, endangering rate cuts but forecast a Dec cut and two more in Q1 2026
• China GDP forecast now revised down to 4.5% for 2025, assumes 145% tariffs
• They believe that Xi’s “whatever it takes” fiscal boost will
  be announced before mid-year.
• Eurozone growth downgraded to 0.5% for 2025
• UK GDP seen at +0.8% vs +1.0% prior, expect Q2 contraction on inventory unwind
• Global growth expected at 2.9% in
  2025 (vs 3.2%) and 3.0% in 2026 (vs 3.3%)

Deutsche Bank writes:

This potentially marks the largest shock to the
world’s financial and trading system since the collapse of Bretton Woods in
1971. Although Trump’s 90-day tariff reprieve and subsequent exceptions have
lessened the impact, much damage has already been done thanks to extreme levels
of uncertainty around the credibility and direction of policymaking. The US’s
exorbitant privilege of being able to comfortably fund its twin deficits is
perhaps the largest consequence of recent events, and may ultimately determine
how far the US administration is able to continue this policy.

I worry that we are underestimating supply chain impacts from a China-US decoupling and launching a repeat of covid-style inflation.

In terms of FX, Deutsche Bank sees EUR/USD rising to 1.15 by year end.

This article was written by Adam Button at www.forexlive.com.

The world is facing a dollar confidence crisis as the
repercussions of “Liberation Day” continue to reverberate, Deutsche Bank says.

The German bank is out with its latest forecasts for the US economy and is increasingly tilting towards a stagflationary scenario.

• 2025 US growth forecast cut to 0.9% (q4/q4), hit by
  tariffs, policy uncertainty and tighter financial
  conditions.
• Labor market still resilient but cracks emerging;
  unemployment to rise to 4.6% this year (4.1% currently)
• Tariffs look set to lead a resurgence in inflation
  pressures this year. Core PCE inflation now
  seen ~3.75% end 2025 (~1pp above prior
  view); risks remain skewed higher.
• Critically, they see US CPI at 3.2% in 2026, endangering rate cuts but forecast a Dec cut and two more in Q1 2026
• China GDP forecast now revised down to 4.5% for 2025, assumes 145% tariffs
• They believe that Xi’s “whatever it takes” fiscal boost will
  be announced before mid-year.
• Eurozone growth downgraded to 0.5% for 2025
• UK GDP seen at +0.8% vs +1.0% prior, expect Q2 contraction on inventory unwind
• Global growth expected at 2.9% in
  2025 (vs 3.2%) and 3.0% in 2026 (vs 3.3%)

Deutsche Bank writes:

This potentially marks the largest shock to the
world’s financial and trading system since the collapse of Bretton Woods in
1971. Although Trump’s 90-day tariff reprieve and subsequent exceptions have
lessened the impact, much damage has already been done thanks to extreme levels
of uncertainty around the credibility and direction of policymaking. The US’s
exorbitant privilege of being able to comfortably fund its twin deficits is
perhaps the largest consequence of recent events, and may ultimately determine
how far the US administration is able to continue this policy.

I worry that we are underestimating supply chain impacts from a China-US decoupling and launching a repeat of covid-style inflation.

In terms of FX, Deutsche Bank sees EUR/USD rising to 1.15 by year end.

This article was written by Adam Button at www.forexlive.com.

• Consumer spending hasn’t slowed yet, but I use the word ‘yet’ because it could with job losses
• Consumer spending consistent with 2% growth
• I worry that trade war could be more concerning if it shifts to services
• We should be highly interested in making sure the US can export services
• Deposits have performed better than we thought
• We’re prepared for times of stress

That’s a positive take from Moynihan on CNBC.

Shares of Bank of America are up 3.6% today following earnings but are still down sharply since November.

This article was written by Adam Button at www.forexlive.com.

The euro has fallen on this headline. The report said:

• After a two-hour meeting, EU trade chief Maros Sefcovic left unclear on US goals.
• US officials signaled most tariffs will stay.

The EU had proposed to the US a regime of reciprocal zero tariffs on autos and industrial goods but that evidently didn’t gain any traction with the US. That’s evidently been rejected, though the US did hint at a way forward with Europe buying more US goods.

There is also a report from earlier suggesting the US was asking for Europe to isolate China in return for lower tariffs.

In any case, the picture isn’t looking good.

The S&P 500 has also turned negative a short time after hitting a session high of +0.8%.

This article was written by Adam Button at www.forexlive.com.

I spoke with BNNBloomberg yesterday about the weakness in the US dollar so far this year and what’s driving it.

I highlighted six main points that I also wrote about yesterday.

1. Tariff troubles sparking supply chain fears beyond simple inflation math, with markets nervous about potential cascading disruptions similar to COVID experience
2. Growth agenda taking backseat to protectionism as tax cut extensions offer limited upside while policy uncertainty creates business headwinds
3. Deficit spending alarming bond markets with 7% GDP gap during full employment; Congress pushing toward potential 10% deficit with promised spending package
4. Institutional foundations of USD dominance (NATO, WTO, rule of law) eroding at pace that threatens reserve currency status; IP rights now potential vulnerability
5. Immigration crackdown threatening key labor forces in inflation-controlling sectors like agriculture and hospitality; no coherent policy emerging despite recent rhetoric
6. Fed independence potentially at risk after court allows agency firings, creating tail risk that could undermine fundamental dollar credibility if Supreme Court upholds

This article was written by Adam Button at www.forexlive.com.

Canadian housing starts fell to an annualized rate of 214.2K in March compared to 242.5K expected. That continues an ongoing slide form 267.3K in November and is like to extend further as the Toronto condo boom goes bust.

The March reading is an 11.6% decline from a year ago with Vancouver starts down 59% and Toronto starts down 65%. In contrast, Montreal starts were up 138% y/y.

I’ve been closely watching Toronto real estate for signs of broader weakness beyond condos. Here is a good chart from Robert Marsiglio showing active homes for sale in the Toronto area excluding condos. Inventory is up 65% y/y and this week the broke above the peak from last year. Seasonally, this should continue to rise through summer.

This article was written by Adam Button at www.forexlive.com.