Asian and European stock markets advanced on Tuesday, clawing back some of the recent hefty losses, as traders hoped for greater clarity ahead of impending US tariffs.
In a sign of market uncertainty, safe-haven gold reached a fresh record high of $3,149 an ounce.
Investors are bracing for a fresh onslaught of tariffs on US President Donald Trump’s “Liberation Day” due Wednesday, expected to see him impose levies on “all countries”.
“Markets are hoping for a clean decision, that allows traders to move on from tariffs,” said Kathleen Brooks, research director at trading group XTB.
“Hopes are that a recovery rally could take hold if Trump’s tariff announcements are seen as the final move from the White House in its trade war,” she added.
But she warned that “the downside risk for stocks could emerge once more if Trump suggests that even more tariffs could be coming down the line”.
Trump said Monday he would be “very kind” when he unveils the tariffs.
But the lack of details on who will be hit with what has stoked market unease and fears of a recession in the world’s largest economy.
In Europe, Paris and Frankfurt extended the morning’s gains after data showed inflation in the eurozone slowed closer toward the European Central Bank’s two-percent target in March.
London also rose, even as Prime Minister Keir Starmer said Britain is likely to suffer from US tariffs and despite making progress over a post-Brexit trade deal.
“While countries such as the UK might stand in a good position to strike a deal, there is a risk that tomorrow marks the beginning of a tit-for-tat trade war that brings yet more uncertainty and concern for markets,” said Joshua Mahony, chief market analyst at Scope Markets.
“The expected retaliation from Canada, the eurozone, China, Japan, and Korea does signal that it could get worse before it gets better,” he added.
On Tuesday, Vietnam said it would slash duties on a range of goods including cars, liquefied gas and some agricultural products, while the European Union and Taiwan indicated they had plans to deal with the announcement.
“Some on Wall Street are already talking about how ‘April 2’ may very well be lighter-than-feared, producing a snap-back rally in risk assets,” said Jose Torres, a senior economist at Interactive Brokers.
“But others worry that this economy can’t handle a stress test of this magnitude and point to households increasingly unable to sustain expenditure patterns in light of mounting headwinds.” The Tokyo stock market, which has borne the brunt of the pain owing to hefty selling of car giants including Toyota and Honda on tariff plans, closed flat while Hong Kong and Shanghai advanced.
The rebound was as fragile as that seen in New York, where the S&P 500 rose on Monday but closed its worst quarter since 2022.
Factory activity showed early signs of a meaningful recovery in the Eurozone in March but mostly weakened around Asia as an intensifying US tariff war and slowing global demand hurt business sentiment, darkening the outlook, surveys showed.
US President Donald Trump is set to announce a comprehensive tariff proposal on what he’s called “Liberation Day” on Wednesday, after implementing levies on aluminium, steel, and automobiles, along with increased tariffs on all goods from China.
Still, the euro zone’s long-suffering manufacturing industry showed initial signs of a meaningful recovery last month as output rose for the first time in two years, its PMI showed, but the upswing could be hurt by the trade tariffs.
HCOB’s final Eurozone manufacturing Purchasing Managers’ Index, compiled by S&P Global, bounced to 48.6 in March, just below a preliminary estimate for 48.7 yet much closer to the 50 mark separating growth from contraction. The index has been below that line since mid-2022.
A measure of output, which feeds into a composite PMI due on Thursday, jumped to 50.5 from 48.9.
“Things are looking up. The PMI has increased for the third month in a row and the output index even surpassed the threshold for growth,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
“A significant part of this movement may have to do with the frontloading of orders from the US ahead of the tariffs, which means some backlash is to be expected in the coming months.” Inflation in the region eased as expected last month and a key measure of underlying price pressures also fell, likely adding to already widespread expectations for another European Central Bank interest rate cut later in April, official data showed.
“March’s big decline in Eurozone services inflation strengthens the case for the ECB to cut interest rates at the meeting on April 17,” said Jack Allen-Reynolds at Capital Economics.
In Germany, Europe’s largest economy, there were also signs of recovery with its first production increase in nearly two years, while the downturn eased in France.
But British manufacturers endured a torrid March as the tariff threat and impending tax increases contributed to a plunge in new orders and ebbing optimism.
Agencies
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