Market Update – 2nd April 2025.

On Tuesday, the FTSE 100 and European stocks saw positive gains, while US stocks fluctuated before closing marginally higher. As we expected, reports this week suggest that the tariffs announced will be the highest amount set, giving countries the opportunity to take steps to bring the tariff amount down.

Investors are therefore eagerly awaiting US President Trump’s tariff announcements this week. The markets have been in a bit of a holding pattern as we anticipate a series of tariffs set to take effect, including a 25% levy on ‘all cars that are not made in the United States’. In addition, Trump is expected to unveil his plan for reciprocal tariffs with 2 April  designated as ‘Liberation Day’. However, it’s important to recognise that these announcements are unlikely to set firm tariff levels. Instead, they are more likely a strategic move to gain leverage in ongoing trade negotiations with global partners, giving the administration leverage to secure more favourable trade terms.

Meanwhile, Europe’s annual inflation rate eased to 2.2% in March, slightly below the expected 2.3%. Despite four interest rate cuts since September by the European Central Bank, it appears as though rates are still restrictive bringing prices closer to the crucial 2% target. The Central Bank’s swift, data-driven decisions have set it apart from its Western counterparts, but the big question now is: what comes next? With inflation showing signs of improvement, the uncertain spectre of Trump’s tariffs looms large, potentially forcing policymakers to hit pause on any further rate cuts.

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China’s factory activity grew at its fastest pace in four months this March, driven by strong demand and rising export orders, though U.S. trade tensions cloud the outlook. The Caixin manufacturing PMI climbed to 51.2 from 50.8 in February, surpassing expectations and aligning with official data showing the fastest expansion in a year. New orders surged, with exports rising at their quickest pace in 11 months, partly due to U.S. importers stockpiling ahead of expected tariff hikes.

Over in Japan, the unemployment rate edged down to 2.4% in February from 2.5% the previous month, according to government data. This came in slightly better than economists’ expectations of 2.5%. Meanwhile, the jobs-to-applicants ratio also declined, slipping to 1.24 from January’s 1.26.

Still to come this week we have U.S. non-farm payrolls and unemployment rate and a speech from Fed Chair, Jerome Powell. We also have the Eurozone’s producer price index data.

Nicola Tune, Portfolio Specialist