The relief rally in global stocks continued on Wednesday, albeit with diminishing conviction. There was no significant news or social media updates from President Trump to alter the market's outlook. The rally has primarily been driven by optimism for a more flexible approach from the administration, but uncertainty looms as April 2 approaches without clear indications of what actions will be taken.
As is well known, markets typically respond poorly to uncertainty. MSCI's index of world equities started the week with a 1.2% gain, which shrank to a 0.3% rise by Tuesday, just managing to stay above water early in the latest session. Japan's Nikkei began positively with a 1% increase, but those gains were reduced by midday. Similarly, Hong Kong's Hang Seng initially climbed over 1%, only to rise just 0.3% shortly after noon. U.S. equity futures shifted from small gains to small losses.
Currently, pan-European STOXX 50 futures are indicating a 0.1% rise. On Monday, Trump indicated that not all the tariffs he's threatened would take effect on April 2, suggesting that "a lot of countries" might receive exemptions, though he provided no further details. Simultaneously, the announcement of 25% tariffs on buyers of Venezuelan oil and gas served as a reminder of the unpredictability of the trade situation.
Given that Trump has designated next Wednesday as "Liberation Day," many expected at least some noteworthy developments. For markets, this day could prove crucial, either indicating a more flexible approach to tariffs or confirming a hardline stance, underscoring the difficulty in interpreting Trump's intentions.
On the European data calendar, UK CPI will be closely monitored, especially with the outlook for Bank of England interest rate cuts increasingly influenced by Trump's trade war. British Finance Minister Rachel Reeves is scheduled to present a fiscal update to parliament, which includes an announcement of an additional £2.2 billion ($2.84 billion) for defense spending. France will release consumer confidence and employment figures, and Bank of France Governor François Villeroy de Galhau will be questioned about the economy by the lower house's finance committee.
In the U.S., Minneapolis Fed President Neel Kashkari and St. Louis Fed President Alberto Musalem have public speaking engagements. Key developments that could shape markets on Wednesday include:
- UK CPI (February) - France consumer confidence (March), employment figures (February) - UK fiscal update - Minneapolis Fed's Kashkari, St. Louis Fed's Musalem speaking at separate venues