Trump continues to sound defiant despite sending global equity prices crashing

Good morning

A stronger nonfarm payroll number Friday was partially offset by a revision lower of the previous reading, plus a higher unemployment rate of 4.2% didn’t make for great reading.  Still, it was nothing compared to the tariff driven declines in the equity markets, most US indices lost well over 5% on Friday and futures prices are pointing to further losses today.  Asian markets fell sharply on the open, with Nikkei for example down almost 8%, Hang Seng was down over 12%.  We’re expecting similar fallout from Europe.

In terms of currencies, GBPUSD is currently around 1.2920 having hit a low overnight of 1.2825, while EURUSD saw a fall to 1.0880 on the open but has since recovered to 1.1030.  GBP continues to lose ground against EUR, the pair now just a touch above 1.1700.  AUD, NZD and ZAR continue to lose ground, now approximately 2.15, 2.32 and 25.00 against GBP, while the safe havens such as JPY and CHF make gains, GBPJPY now 187.75 and GBPCHF 1.0940, the latter down from the 1.1450 area just last week.  I’d actually questioned the idea of JPY as a safe haven a while back, but it certainly looks as though it has retaken that mantle.

Trump remains defiant on his tariffs, indeed he actually seems to be doubling down by saying that he won’t negotiate unless such talks eliminate the trade deficit with that country completely, and also possibly even with repayments for previous years of deficits.  He continues to sound particularly angry over the EU although the Euro is defiantly showing signs of strength. 

I’m not convinced Trump envisaged the turmoil we are currently seeing.  It must surely hurt him to see his decisions lead to collapsing markets.  Not really a show of confidence.  This is a massive gamble on Trump’s part that could well lead to the end of trade as we know it, and also the end of the great relationships US has with Europe, Canada and other parts of the world.  There is a massive chance that the rest of the world just says to the US ‘you’re on your own’.

There is some talk that the whole market selloff was cleverly engineered by the US administration in order to make their borrowing cheaper.  Trump has said this is not the case, but I see some major banks are starting to look at more Fed rate cuts through 2025, UBS for example now see cuts of 1% this year, compared to 0.5% previously followed by another 1% of cuts in 2026.  This comes as US growth forecasts are severely downgraded and inflation forecasts are raised. 

The key question now is whether the markets stop falling and perhaps start to make gains again, or whether we are in a continuing spiral of downward moves.  OK, at some point they’ll stop but there is so much uncertainty it would be a brave man who calls the bottom of this move. 

Mind you, the markets are not the only area that are producing surprises at the moment.  Let’s look at the Premier League, where none of the top five teams registered a win over the weekend, indeed the managed just three points between them.  Spurs did get three points at the expense of Southampton who are now relegated with just ten points accrued so far this season.  Newcastle play this evening against Leicester who, if I am not mistaken, have won just one of their premier league matches this year, of course against Spurs back in January. 

No surprise that with the fine weather this weekend a great deal of my time was spent mowing the lawn and generally sorting things out in the garden.  The aches I am feeling today are a sign of just how unfit I am and how I really need to get out and be healthier.  Still, if anyone is available for a beer in the sun do let me know…..

Not the biggest week in terms of economic data this week, US CPI probably the highlight but still likely to be overshadowed by the fears over global trade.  We’ll have rate announcements from RBNZ and RBI this week, both expected to cut by 25bps but with the trade tensions we are seeing I wouldn’t be surprised if there was some speculation of larger cuts. 

Have a great week…

-  10.00 EU retail sales

-  10.45 ECBs Cipollone speaks

-  15.30 BoCs business outlook

-  23.00 NZ NZIER business confidence

-  00.01 UK BRC retail sales