Week Ahead: Quiet calendar, awaiting more tariff news

Markets remain in thrall to President Trump’s tariff plans, and how policymakers and most importantly, the Fed will react to the broad, negative economic impact. Fed Chair Powell doesn’t look like he is coming to the rescue with a rate cut any time soon. But certainly, the 10% universal tariff and sectoral charges will take their toll on the global economy. Even with the 90-day pause, the current escalation would bring global tariffs back to levels last seen in the early 1930s – the last episode of a global trade war initiated by a US president with the Smoot-Hawley Act. And we know how that ended.

The dollar is down in the dumps after suffering five straight weeks of selling. It is now sat on a crucial level of support from lows last seen in July 2023. With a quieter data calendar, aside from megacap tech earnings, markets will be watching for any bilateral trade deals with the UK and Japan near the top of the list (though weekend report suggest a deal for the latter has not been occurred just yet). News on specific sectors like tech and pharma could be coming soon. This all likely means the ongoing debate about the end of US exceptionalism will continue. The uncertainty will likely continue to plague the dollar, though it is oversold on several indicators, in what’s being termed the “US revulsion” phase.

April flash PMIs should give us a glimpse of the first hit from Trump’s tariff chaos. Remember that these business surveys tell us whether things are getting better or worse, and not by how much. At big turning points, the tendency is for the data to exaggerate shifts in economic activity. A key focus will be the prices index, which could point to the inflationary impact of tariffs. It has already signalled the fastest rate of input price rises in the nearly two years in the US.

Elon Musk’s electric vehicle maker is the first of the “Magnificent Seven” companies to report quarterly results, with the stock down close to 40% year-to-date. Consensus expects earnings per share (EPS) of $0.43, on revenues of $21.8bln, both lower than the prior quarter. Softening demand and production disruptions are hurting the stock price, along with increasing competition and brand damage due to CEO Musk’s involvement with the Trump administration. Options markets expect a stock price move post-earnings of nearly 9%. In five of the past 10 reporting periods, TSLA stock has moved at least 11% the next day. There is a major support zone around $217.

In Brief: major data releases of the week

Wednesday, 23 April 2025

– Global PMIs: The composite readings in the eurozone and UK may flirt with the expansion/contraction 50 mark. Input and output prices will be keenly watched to signs of where price may go due to tariffs and policy uncertainty.

Friday, 25 April 2025

– Tokyo CPI: Inflation in Tokyo is seen as a forerunner to the nationwide figures. It is expected to reaccelerate in April as surveys point to companies planning to raise prices, though fresh food prices are forecast to ease. The BoJ is likely to keep rates steady next week amid high uncertainty over US trade policy.

– UK Retail Sales: Solid sales activity was expected to continue after much stronger than expected February data. But trade issues and recent announcements may mean this release is slightly stale. 

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