Week Ahead: Trade war news front and centre encore

The next few days will see us back to watching tariff news and potentially “headline havoc” after President Trump lashed out at the EU on Friday. He threatened to impose a 50% tariff on EU goods by 1 June, reigniting fears of a transatlantic trade war. The VIX, Wall Street’s fear gauge, spiked up to 24, stocks and the dollar slid while gold and sovereign debt rallied. Recently, there had been more focus on the US deficit but the broad macro picture is still very much dependent on the current trade ructions.

Economists say that if fully implemented, 50% US tariffs on European products would shave off some 0.6% of GDP growth and bring the eurozone economy close to recession territory. Across the pond, it would also increase stagflationary pressures in the US again. Of course, we have seen this Trump tactic before with China – “escalate to de-escalate” – which is probably why we saw some of the moves turn around into the US close late last week. But the dollar especially, looks weak as bearish momentum recently picked up with the greenback closing on its weekly lows.

Last week, the S&P 500 traded back down to its 200-day simple moving average which currently sits at 5,773. The 100-day SMA is just below at 5,766. As well as trade war headlines, stocks will also have to contend with Nvidia’s results, released after the US close on Wednesday. Q1 EPS is expected at $0.92 with revenue printing at $43.09bn, and next quarter’s revenue is seen at $46.59bn with EPS of $1.01. All eyes will be on commentary around the US tightening of China chip export controls, plus what is said on any continued supply constraints. The options market implies a move in Nvidia’s share price (on the day after reporting) of -/+7.2%. If that move is realised, in isolation, it will impact the Nasdaq 100 index by around -/+0.5%. Interestingly, over the past eight quarters, the stock has recorded just above an 8% move on earnings.

In Brief: major data releases of the week

Wednesday, 28 May 2025

– Australia CPI: April monthly inflation is forecast to print one-tenth lower than the prior 2.3%. The first month of the second quarter provides an update on quarterly goods prices. The next quarterly CPI figures for Q2 may be more important when they arrive on July 29 in between the next RBA rate decisions on July 8 and August 12.

– RBNZ Meeting: Expectations are for a 25bps rate cut, which would take the cash rate to 3.25%. The OCR profile is also predicted to be revised lower. A data dependent stance appears likely economists says, with debate lively among the MPC and external developments a key concern.

– FOMC Minutes: The minutes to the early May meeting are expected to reinforce Chair Powell’s main message that officials will adopt a “wait-and-see” stance as it assesses the trade war and tariff impact on its dual mandate of price stability and full employment.

Friday, 30 May 2025

– Tokyo CPI: Inflationary pressures in Tokyo are forecast to remain strong and broad-based, with core figures possibly falling back but staying elevated. Key will be if momentum is maintained on a m/m basis.  The BoJ currently faces increasing policy complications due to sticky inflation and weakening industrial output, the latter pressured by recent US auto tariffs.

– US Core PCE: The Fed’s favoured inflation gauge is likely to cool after softer than expected CPI and PPI components that feed into this data. Both core and headline readings are expected to rise 0.1% m/m, and 2.5% and 2.1% respectively.

Disclaimer: The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our client. No representation or warranty is given as to the accuracy or completeness of this information and therefore it shouldn’t be relied upon as such. Any research provided does not have regard to specific financial situations, needs or investment objectives. Vantage accepts no responsibility for any use that may be made of these comments and for any consequences that result. Consequently, any person acting on it does so entirely at their own risk. We advise any readers of this material to seek professional advice where necessary. Without the approval of Vantage, reproduction or redistribution of this information isn’t permitted.