Please see below, an article from Brooks Macdonald analysing the key factors currently affecting global investment markets. Received today – 10/04/2025
What has happened?
Yesterday saw equity markets move from despair to euphoria. While European equity markets had already closed down for the day trapped under fears of ever-escalating tariff wars, the later-trading US equity markets rocketed when the announcement came at 6.18pm UK-time from US President Trump on his ‘Truth Social’ social media network that he was immediately pausing reciprocal tariffs above a 10% baseline for 90-days for most countries excluding China (while separate Canada and Mexico tariffs would be left unchanged). The US S&P500 equity index notched up its fifth day in a row of intraday moves over 5%, with yesterday’s intraday range at over 10%, as the index jumped from losses at the start of the session, to finish up +9.52%, its biggest one-day gain since 2008. The US Nasdaq technology equity index finished up +12.15% to post its biggest one-day gain since 2001, all in local currency price return terms.
A 90-day Trump partial tariff pause fires up markets, but US-China trade war escalates
While Trump’s 90-day tariff pause news fired up markets, the US-China trade war has ratcheted up another notch. After a rapid tit-for-tat trade war escalation over the past week, where we now stand is that the US is levying 125% tariffs on Chinese goods coming into the US, while China is levying 84% tariffs on US goods going the other way. Even here, though, Trump offered some hope that the stand-off between the world’s two biggest economies might yet get resolved. Signalling that the US President was open to a conversation with Chinese President Xi Jinping, Trump said yesterday that “we will get a phone call at some point and then it’s off to the races.”
Bank of England warns of “the probability of adverse events”
Yesterday saw a warning from the Bank of England’s (BoE) Financial Policy Committee about second-order market impacts following Trump’s tariffs over the past week. In minutes released across two meetings held on 4th and 8th April, the BoE warned that “the risk of further sharp corrections remains high”, and that “the probability of adverse events, and the potential severity of their impact, has risen. The BoE went on to warn that “heightened global uncertainty and perceived higher economic risk could translate into tightened financing conditions”, while “vulnerabilities [such as leverage and credit market interconnections] could amplify shocks.”
What does Brooks Macdonald think?
A 90-day pause of the worst parts of Trump’s reciprocal tariffs is a huge relief for markets, but we are not out of the woods. While major US bank Goldman Sachs has overnight dropped its call for a US recession, this might be premature: the pause in some tariffs is still only a delay and not a cancellation, the blanket 10% tariffs are still in force, and the US-China tariff war looks worse not better, for now at least. The longer that Trump’s tariffs (whether in force or paused) remain, the greater the risk that something might ‘break’ in global financial markets, which could in turn impact economies more broadly. Over the past 24-hours, Trump has once again proved his proclivity for changing his mind on policy but with the tariff genie out of the bottle, restoring the confidence of businesses to invest or consumers to spend could be a lot harder to turn-around.
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Alex Kitteringham
10th April 2025