THE FIRST HALF OF APRIL MARKS THE ONSET OF A GLOBAL TRADE WAR, WITH TRUMP WREAKING HAVOC ON THE GLOBAL TRADE SYSTEM.
EQUITY MARKETS
Over the past five years, equity markets have experienced two major events that have had a lasting impact on the global economy. The first was the pandemic, and the second was Russia’s invasion of Ukraine. Both events are distinct, yet each contributed to inflationary pressures — the pandemic through significant economic stimulus and supply chain disruptions, and the invasion through price shocks resulting from various sanctions on Russia, affecting key energy, metal, and soft commodity markets. Onto the third shock to the economic system – Trump’s tariffs.
Logic dictates that any additional cost will be partially borne by the consumer, meaning that Trump’s tariffs will inevitably lead to higher prices unless they are partially reversed. Trump maintains that the U.S. trade deficit is a symbol of ‘abuse’ by trade partners who, in his view, ‘exploit’ the U.S. market. While this may be rhetorically convenient within a political framework, it is far from the truth. The global expansion of U.S. businesses has been driven by two main factors: firstly, significantly lower production costs abroad due to cheaper labour and materials; and secondly, logistical advantages in delivering goods efficiently to end clients in various global markets. Indeed, it is so cost-effective to manufacture outside the United States that Apple has never produced an iPhone entirely within the country. Through free market global expansion, the United States has managed to generate profits on an unmatched scale, while also extending its influence worldwide.
ince the end of March, equity markets have been shaken by uncertainty stemming from the Trump administration’s strong tariff stance, which was eventually softened as this uncertainty spilled over into the Treasury market. Most major equity indices are deeply in the red (as global equities lost around $6.6 trillion in shareholder values since end of March), led by the MAG7 (down around 7%), followed closely by the Dow Jones (down 6.75%). In Europe, the CAC 40 recorded the steepest decline (around 6.5 per cent) weighed down by Stellantis, Airbus, Kering, and LVMH. In the United States, the Dow Jones Industrial Average was dragged lower primarily by UnitedHealth, Caterpillar, and Goldman Sachs.
The VIX index [a measure of implied volatility in the S&P 500] spiked to levels not seen in the past decade, excluding the pandemic, which brought the global economy to a sudden halt. During the first half of April, the VIX index hit 52 before softening to around 30, following Trump’s announcement of a 90-day pause on any tariff exceeding 10 per cent — except for China, which continues to face tariffs of around 145 per cent. Trump later reversed some of the tariffs on consumer electronics, reducing them to approximately 20 per cent.
Despite the heavy levies on China’s economy, the CSI 300 index fell just 2.9 per cent, significantly less than the S&P 500’s decline of 5.81 per cent. Over the same period, the Nifty 50 was among the few gainers, recording a positive return of 1.4 per cent.In company news, Shein has received preliminary approval from the UK’s Financial Conduct Authority to pursue a London IPO, moving closer to listing after its US plans were hindered. The shift comes amid escalating US-China trade tensions, including new tariffs that could severely impact Shein’s US operations and valuation. While UK regulators are satisfied with Shein’s risk disclosures, final approval still depends on both UK and Chinese authorities. The Trump administration has imposed stricter export controls on Nvidia’s AI chips to China, triggering a $5.5bn hit and a global tech stock sell-off. Nvidia’s China-focused H20 chip now requires a special licence, deepening trade tensions and casting uncertainty over future revenues. Lyft is expanding internationally with a €175mn acquisition of European taxi app FreeNow, marking its first move beyond North America. The deal aims to boost Lyft’s competitiveness against Uber by embracing a taxi-first model and expanding its reach to over 50 million riders annually. ASML reported €3.9bn in chipmaking machine orders, nearly €1bn below expectations, citing rising uncertainty from Trump’s new tariffs.
Shares fell over 6%, adding to a 16% decline this year amid concerns about trade tensions and slowing AI-driven demand. Despite the miss, ASML maintained its full-year revenue outlook and expects growth in 2025 and 2026, while closely monitoring geopolitical risks. LVMH shares fell 8% after a 5% drop in fashion and leather goods sales, missing forecasts and sparking concerns across the luxury sector. The weak Q1 results, alongside falling demand in China and the U.S., were compounded by fears over Trump’s new tariffs disrupting global consumer confidence. Analysts now expect flat or negative growth for the luxury industry in 2025, marking a sharp shift from earlier optimism. Johnson & Johnson’s CEO warned that potential U.S. tariffs on pharmaceuticals could trigger medicine shortages by disrupting global supply chains. While medical devices are already affected, J&J argues tax incentives (not tariffs) are the better path to boosting U.S. manufacturing capacity. Netflix reported strong Q1 results with rising subscriber numbers and a 24% earnings boost, defying concerns over global economic uncertainty and U.S. tariffs. Executives remain confident in the platform’s resilience, citing healthy revenue growth, price increases, and booming ad income despite broader market volatility. UnitedHealth shares plummeted 22% after the company slashed its annual profit forecast, citing unexpectedly high medical costs for older patients. The healthcare giant is also facing regulatory scrutiny and reputational challenges amid a recent executive tragedy and an ongoing antitrust investigation.
SECTOR PERFORMANCE
The first two weeks of April saw equity markets rotate heavily towards defensive sectors, as the risk-off tone pushed cyclical sectors to lower valuation levels. In the United States, the top three sector performers were Consumer Staples (+1.18%), Utilities (-1.35%), and Real Estate (-3.35%). In Europe, the same sectors led performance, albeit in a different order and with varying returns. Notably, Real Estate in Europe surged by 7.9 per cent, Utilities returned 2.46 per cent, and Consumer Staples gained 0.92 per cent.
In both the United States and Europe, Energy, Healthcare, and Consumer Discretionary were the worst-performing sectors, as tariffs fuelled significant uncertainty in global trade, with sector-specific measures further dragging down performance. In particular, the potential global economic slowdown, combined with expectations of increased oil supply from the U.S. — following Trump’s insistence on reducing oil prices and his “Drill, Baby, Drill” campaign — has weighed heavily on the energy sector. During Trump’s first term, the energy sector was also among the laggards.
Healthcare was similarly affected, as Trump has expressed a desire to relocate pharmaceutical production to the U.S., with upcoming tariffs expected to target the sector. Although supply chains within the healthcare industry are relatively opaque compared to other sectors, tariffs are still likely to exert downward pressure on margins and raise production costs. Finally, Consumer Discretionary in both the U.S. and Europe recorded the third-worst performance, as Trump’s tariffs are expected to deal a further blow to consumers, who are already showing signs of weakness in both regions.
CENTRAL BANKING, THE ECONOMY AND GEO-POLITICS
The unleashing of Trump’s tariffs has shaken the global trade system, along with the broader world order. The U.S. President has locked horns with nations across the globe in an effort to secure better deals, capitalising on the position of strength the United States holds with various trading partners. In a sense, Trump is leveraging the buying power of the American consumer to negotiate more favourable trading terms. His firm belief that tariffs are the solution to the U.S. economy’s ailing fiscal buffers has pushed long-standing relationships to the brink of collapse. Trump is attempting to renegotiate trade agreements that have been developed over many years. Will he succeed in doing a better job within a short time span?
Earlier this month, Fed Chair, Jerome Powell emphasised the importance of public understanding in effective monetary policy and reaffirmed the Fed's commitment to its dual mandate of maximum employment and price stability. He noted that while economic growth has moderated, the labour market remains balanced and inflation, though above target, has eased significantly from its peak. Powell acknowledged heightened uncertainty due to new federal policies, particularly tariffs, which are expected to raise inflation and dampen growth in the near term. He stressed that the Fed is closely monitoring the evolving economic landscape and remains cautious about adjusting policy prematurely amid ongoing risks. Ultimately, Powell reaffirmed the Fed’s commitment to anchoring inflation expectations and supporting a strong, stable economy for all Americans.
ECB President, Christine Lagarde contrasted the post-Cold War era of openness with today’s fragmented world, warning of rising protectionism, geopolitical rivalries, and threats to Europe’s economic and security stability. Lagarde urged Europe to respond by “cooperating to compete,” advocating deeper integration of capital markets and the removal of internal barriers to strengthen the Single Market. She emphasised the need for structural reform in EU decision-making, including more qualified majority voting, to ensure Europe can act as a united, strategic force. Concluding with optimism, she pointed to Ireland’s success and belief in the European project as a model for how the EU can rise to the challenges of today’s inverted world.
UK inflation fell more than expected to 2.6% in March, strengthening the case for a Bank of England rate cut in May amid easing price pressures and tariff-related uncertainty. Lower fuel and leisure goods costs helped drive the decline, while softer services inflation suggests the UK’s disinflationary trend remains intact. However, economists warn that Trump’s sweeping tariffs and global trade tensions could complicate the inflation outlook and dominate future BoE decisions.
President Trump has accepted an invitation from Italy's Prime Minister Giorgia Meloni to visit Rome and may meet EU representatives during the trip. The visit comes amid ongoing U.S.-EU trade tensions, with Meloni aiming to mediate dialogue while reaffirming her strong ties with Trump. Despite concerns from some EU members, Meloni clarified she cannot negotiate on the bloc’s behalf but stressed her goal to strengthen the West. Italy also announced plans to boost LNG imports and increase investment in the U.S., while exploring deeper space cooperation with Washington.
COMMODITIES
Global commodities declined by around 3 per cent over the past two weeks, led by a significant drop in energy prices, which averaged around -12 per cent. The uncertain global trade environment also weighed on industrial metals, which fell by approximately 6 per cent over the same period.
The sharpest decline since the beginning of April came from natural gas prices in the United States, as China halted its LNG purchases, bringing Henry Hub LNG prices down to $3.25/MMBtu from end-of-March levels of $4.12/MMBtu. China is now shifting its LNG sourcing to Russia as it continues to decouple from the United States. Russian LNG prices remain extremely low, as Europe is no longer a customer, making it an attractive option for Chinese electric utilities.
The drop in LNG prices in the United States is beneficial for European countries, which continue to source energy from both the United States and Norway. In oil markets, prices for both WTI Crude and Brent fell by as much as 9 per cent over the same period. As Trump seeks to sanction Iranian oil and its buyers to increase pressure on Iran, crude prices could experience a sudden spike as global supply tightens further. This is part of a broader strategy by Trump to undermine Chinese interests in the global oil supply chain.
On the metals front, industrial metals were mostly in decline, with copper ending the period at $9,161 per metric tonne — a steep drop of $590 or 6 per cent — due to escalating trade tensions between the U.S. and China. Precious metals, by contrast, continued to rise, posting gains of around 8 per cent amid persistent uncertainty in global trade.
CURRENCIES
The biggest loser in currency markets over the past two weeks has been the US dollar, as investors shifted their interest to other regions amid growing uncertainty surrounding the United States' medium- to long-term economic plans. The US Dollar Spot Index indicates that the greenback weakened by around 4.6 per cent against global currencies. Global investors flocked to the Swiss franc and Japanese yen in response to Trump’s tariff plans, as both currencies regained their safe-haven status within the FX space.
The euro strengthened by around 5 per cent over the past two weeks, as most currencies showed a reversal from the strong base the US dollar had held in recent years. Given the trade deficit, a weaker US dollar may be inflationary for the US economy in the short term. Major currencies have also weakened against the euro, which attracted increased investor interest during the period under review. Sterling delivered a mixed performance, showing weakness against the Swiss franc (~5%), Japanese yen (~2.5%), and euro (~2.3%), but strength against the South African rand (~5%), Brazilian real (~4.3%), and US dollar (~2.6%).
OVERALL
The first half of April marked a sharp escalation in global trade tensions, with President Trump’s sweeping tariffs disrupting markets across equities, commodities, and currencies. Investor sentiment turned defensive as volatility surged, equity indices declined, and key sectors such as energy and healthcare came under pressure. Central banks are navigating cautiously amid inflationary risks and geopolitical uncertainty. Meanwhile, European leaders, led by Meloni, are pushing for strategic unity in the face of rising protectionism. As volatility lingers and trade policy remains in flux, markets are bracing for further dislocation and potential monetary easing in the months ahead.
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