Markets have lacked clear direction this week, as a period of relative calm settled over the economic data landscape. With fewer surprises on that front, investor focus shifted toward upcoming earnings from major corporations and the release of key economic indicators that’s kept them cautious so far. That caution has also been fuelled by a growing trend among companies most exposed to tariffs: several have begun lowering or suspending forward guidance, adding to uncertainty around the near-term outlook for profits.
On Tuesday, media speculation abounded that President Trump may be considering easing the tariff burden on imported automobiles and parts. The proposal could include exempting affected companies from additional tariffs—such as those on steel and aluminium—and potentially reimbursing firms for duties they’ve already paid on those materials. If these rumours prove accurate, the move would likely lift investor sentiment, signalling a significant reversal from President Trump’s earlier, more aggressive tariff stance and easing concerns of escalating trade tensions. It may also provide a notable boost to automotive stocks.
Speculation continued as Trump claimed trade talks with China had resumed after a call with President Xi—an assertion swiftly denied by Beijing. However, Beijing has reportedly shown some willingness to negotiate with the U.S. by quietly easing some of its retaliatory tariffs, allowing certain U.S.-made pharmaceuticals to bypass the steep 125% duties it had introduced earlier this month in response to President Trump’s 145% tariffs on Chinese goods – the exact sort of gesture markets will be hoping to see.
Still, the economic picture remains clouded by trade-related disruption, with economists cautioning that gauging the full impact of tariffs will take time. Indeed, recent U.S. economic reports offer mixed signals. The trade deficit in goods ballooned to a record high in March, a sign that companies may be accelerating imports ahead of future tariff increases. At the same time, consumer sentiment dipped, even as the labour market continued to show signs of resilience through stable job openings.
As markets wavered amid shifting signals on tariffs, economic confidence in the Eurozone also faltered in April, with the sentiment index falling to 93.6 from 95, as tariff uncertainty weighed on all major sectors despite recent market gains.
Still to come this week we have an interest rate decision from the Bank of Japan, where investors are of the consensus that policymakers will keep rates steady. The decision will come hot on the heels of the economy’s latest retail sales data, which jumped by 3.1% in March from a downwardly revised 1.3% in February. Investors also eagerly await the US’ latest GDP reading as well as PCE data and key earnings reports from the likes of Amazon, Meta and Apple (due from today ).
Nicola Tune, Portfolio Specialist
