Global equity markets remained near their highest levels in over three weeks on Monday. This reflected some hope that the worst of tariff pain was over. Confusion over U.S. trade policy lingered and trapped the dollar.
European shares opened higher. U.S. stock futures were mixed, and Asia made fractional gains. This marked the start of an earnings-heavy week. The week also sees the release of key U.S. jobs data and is bookended with elections in Canada and Australia. U.S. President Donald Trump looms large in both elections.
Trade tensions remained a key focus.
Trump has claimed progress is being made on trade with China and many other countries, but evidence is lacking. Treasury Secretary Scott Bessent failed on Sunday to back Trump’s assertion that tariff talks with China were underway.
Mike Kelly, global head of multi-asset at PineBridge Investments, said, “The fact that we are going through a de-escalation in trade tensions doesn’t mean that we won’t still get a growth slowdown.”
The often confusing rollout of tariffs is expected to inflict lasting damage on the global economy. Uncertainty weighs on business and consumer confidence, slowing investment and spending.
Kelly added, “Uncertainty is not just about a one-off event but its duration.”
MSCI’s world stock index hovered near its highest levels since April 3. April 3 was the day after Trump unveiled his reciprocal tariffs that roiled markets.
Japan’s Nikkei rose 0.4%. Chinese blue chips were little changed. Officials stuck with their economic growth projections, despite the drag from tariffs.
European shares opened broadly firmer. S&P 500 futures dipped 0.25%, and Nasdaq futures eased 0.3%. The S&P has bounced almost 12% from an April 8 trough, but remains 10% below its peak.
Corporate earnings have been generally supportive, with gains of more than 9%. BofA noted 64% of companies had beaten earnings per share (EPS) guidance, compared to 71% the previous quarter.
Rory McPherson, chief investment officer at Wren Sterling, said, “Despite having played second fiddle to geopolitics of late, the U.S. earnings season is moving along well and is on track for its seventh consecutive quarter of positive earnings’ growth.”
About 180 S&P 500 companies, representing over 40% of the index’s market value, report this week. These include mega-caps Apple, Microsoft, Amazon, and Meta Platforms.
DOLLAR STRUGGLING
In currency markets, the dollar was mostly steady but struggling to make headway. Trade wariness lingered.
At 143.81 yen and $1.1345 per euro, the greenback has, for now, found a footing. It is staying on course for its largest monthly fall in nearly 2-1/2 years. Trump has rattled confidence in the dependability of U.S. assets.
It is down more than 4% on both the euro and the yen in April. It bounced at the end of last week on a conciliatory shift in the tone of U.S.-China relations.
A solid U.S. jobs report on Friday could aid the dollar’s bounce. It could dampen Federal Reserve rate cut expectations.
Money markets imply a roughly 65% chance of a rate cut in June and 85 basis points of easing by year-end.
Jonas Goltermann, deputy chief markets economist at Capital Economics, said, “The greenback is still hostage to the (U.S.) administration’s whims.”
Inflation numbers for Germany and the euro zone are due this week. They are expected to show a further dip in headline inflation. This adds to expectations the European Central Bank will cut rates again at its June meeting.
The Bank of Japan meets this week. It is considered certain to hold rates at 0.5%. The economic and trade uncertainty caused by U.S. tariffs argues against another hike.
Treasuries have also steadied in the wake of Trump’s assurance he would not try to fire Fed Chair Jerome Powell. This left 10-year yields at around 4.25%, compared to the April top of 4.592%.
Former Federal Reserve Governor Kevin Warsh, with whom Trump is reported to have discussed firing Powell and installing him in his place, on Friday unleashed a barrage of criticism of the Fed. He argued for fundamental changes to how it operates.
A tentative improvement in risk sentiment saw gold slip 0.8% to $3,290 an ounce. This was from its all-time peak of $3,500.
Oil prices were little changed. Brent was flat around $67 a barrel, while U.S. crude added 0.25% to $63.16 per barrel.
Click here to read more on Finance and Investing.