Weekly Wrap: Ripple Effect - Week Ending April 17

Market Movers

• Precarious balance. After a volatile two weeks marked by extreme daily returns and a VIX spike above 60, the S&P 500 closed the shortened week down 1.3% at 5295, while the Nasdaq fell 2.6% to 16293, with volatility receding to around 30. There is some lingering optimism surrounding initial trade discussions between the US and Japan. Additionally, Q1 bank earnings surpassed expectations, leading to a 0.54% gain in the financial sector index.

• Finding a new equilibrium. Despite the rally in US equities from last week's lows, the US dollar weakened further amid the ongoing global trade war, with the Dollar Spot Index decreasing -0.56% to 99.55. Concerns continue to grow that investors might be stepping away from US assets like Treasuries and the dollar amid trade upheaval. Gold hit another all-time high at 3343.12, ending the week up +4.6% at 3323.5. Year-end economic forecasts for gold continue to rise, now reaching $3,700 per troy ounce (up from $3,300) due to strong central bank demand and ETF inflows driven by recession risk. OPEC reduced its 2025/2026 oil demand forecasts in response to the trade war. West Texas Intermediate crude oil rebounded off the 59.58 lows, ending the week +4.8% at 64.44.

• Balancing act. Federal Reserve Chair Jerome Powell stated that President Trump's unexpectedly large tariff increases would likely slow growth and raise inflation. He also indicated that if the Fed's employment and price stability goals conflict, they would prioritize long-term price stability to ensure sustained strong labor market conditions.10-year US Treasury yields ended the week down -16 basis points (bps) at 4.33%. The market is pricing in a 71% chance of a Fed rate cut in June, with a total of 87bps in cuts expected by year-end.

Macro

• Potential headwinds. The Philadelphia Fed Manufacturing Index showed a large decline, with new orders and shipments contracting and employment nearing contraction territory. Housing starts fell below consensus, particularly in single-family homes. March US retail sales were in line with expectations at 1.4%— the highest in two years— with gains in 11 out of 13 categories, possibly reflecting sales pulled forward due to tariffs. Overall, the data suggests that potential economic headwinds are building.

• Seventh cut. The European Central Bank cut interest rates for the seventh time since last summer, by 0.25% to 2.25%, in response to heightened economic uncertainty— particularly from trade policy— and fears of a recession driven by suppressed investment and spending. The euro is ending the week unchanged -0.09% at 1.134.

• Down for now. In March, UK inflation decreased to 2.6%, down from 2.8% in February, driven by cheaper computer games and falling fuel prices—providing some relief before household bills increased. Despite this easing, basic household costs are expected to rise by £600, potentially pushing inflation above 3% by the summer. The Bank of England is weighing domestic price pressures and a cooling labor market against global economic uncertainty, which has led to growing market expectations for interest rate cuts.

• Front footed. China's first quarter 2025 gross domestic product (GDP) grew by 5.4%, exceeding expectations due to consumer subsidies and front-loaded export shipments ahead of tariffs. Despite the positive start, analysts predict a slowdown due to trade war impacts, leading to lowered growth forecasts around 4%. Policymakers are considering stimulus measures like interest rate cuts and increased fiscal spending to offset potential export declines and bolster domestic demand.

Micro

• Chips blocked. Nvidia warned that President Trump’s administration has barred the company from selling its H20 chip in China — an escalation of Washington’s tech battle with Beijing — which resulted in a $5.5 billion write-down during the current quarter. Similarly, ASML reported bookings that missed estimates for the first quarter, citing uncertainty due to recent tariff announcements. Semiconductor stocks were down -2.86% week-to-date.

• Lofty goals. Netflix aims to achieve a $1 trillion market capitalization and double its revenue by 2030. Executives were optimistic about the company’s growth prospects at the streamer’s annual business review meeting. Executives have told staff they plan to focus on increasing subscribers overseas, particularly in markets with high broadband participation. Mega-cap tech stocks ended the week down 2.68%.

• Tariff reprieve. Phone, computer, and other hardware stocks rose in premarket trading on Monday after President Trump’s administration exempted electronics from reciprocal tariffs. However, President Trump later pledged that he would still apply tariffs to these electronics, making the reprieve short-lived. Apple is ramping up production of key products in India and Vietnam to take advantage of a 90-day grace period. Hardware stocks are up +0.19% week-to-date. 

Checklist for the Next Two Weeks

• Major economic events in the US include: Initial Jobless Claims; U of Mich Sentiment; Durable Goods Orders; Leading Index; MBA Mortgage Applications; S&P Global Manufacturing PMI; New Home Sales

• Major economic events around the world include: France Manufacturing PMI; Germany IFO Business Climate; Singapore CPI; Japan Manufacturing PMI; Eurozone Manufacturing PMI; Tawain Exports YoY