2025-04-03 11:33

Central Europe among EU's most trade-reliant regions Tariffs could dent region's growth prospects, S&P says Poland, Czechs say ready to retaliate against tariffs Trump-supporter Hungary blames EU officials for fallout PRAGUE/BUDAPEST, April 3 (Reuters) - Leaders in the Czech Republic and Poland signalled a readiness on Thursday to retaliate to new U.S. tariffs, while Hungary blamed Brussels for tensions with Washington, as central Europe began counting the likely costs of a trade war. Central European countries are among the European Union member states most reliant on trade, with goods exports as a share of output ranging from 76.6% in Slovakia to 39.4% in Poland - all above a 34.2% average for the whole EU. Sign up here. European Commission President Ursula von der Leyen described U.S. President Donald Trump's universal tariffs as a major blow to the world economy and said the 27-member bloc was prepared to respond with countermeasures if talks with Washington failed. Trump's announcements sent central Europe's stock markets and currencies to weaker levels, with the Czech crown taking the biggest hit, falling past the key 25 per euro mark in early trade before paring its losses. "The best tariffs are no tariffs. But there must be two parties who have the will to agree. Europe is prepared to negotiate with the U.S., but at the same time it is prepared to clearly respond," Czech Prime Minister Petr Fiala wrote on social media platform X. Polish Prime Minister Donald Tusk, whose country is less exposed to risk due to its large domestic market and lower dependence on car exports, said the U.S. decision would slow economic growth, adding that "adequate decisions" were needed on reciprocal tariffs. "According to a preliminary assessment, new U.S. tariffs may reduce Polish GDP by 0.4%, or to put it conservatively, losses will exceed 10 billion zlotys ($2.63 billion)," he wrote on X. Central Europe's trade links are particularly strong in the automotive sector, with the region sending 20% to 30% of its exports to Germany. S&P Global has said the U.S. tariffs could dent growth prospects in central Europe. While the Czech Republic's direct exposure to U.S. sales is low, its export-oriented car industry could still take a hit, the Czech Automotive Industry Association said last month. "The announced increase in tariffs will nevertheless have a significant impact on a number of Czech suppliers of parts and services, especially those supplied to German customers, and will thus mean a significant reduction in export opportunities and loss of orders for them," it said. The tariff hit for Slovakia could be even bigger, Erste Group economists said, putting the combined negative impact at 1.5 percentage points of gross domestic product (GDP) over three years. "The announced expansion to include all goods subject to tariffs, along with expected reciprocal measures from the EU, could double this negative effect, depending on the scope and strictness of the measures," the analysts said. Czech bank CSOB also estimated a 1.0-1.5% hit to the Czech economy in 2025-2026 when adding up also the hit to confidence and investor sentiment. German fiscal stimulus could dampen some of the impact from mid-2026, it said. Foreign Minister Peter Szijjarto of Hungary, whose right-wing, eurosceptic government has forged good ties with the Trump administration, blamed the fallout on EU officials. "The European economy and ultimately European people are paying for the incompetence of politicians in Brussels," Szijjarto said in a Facebook post. https://www.reuters.com/markets/europe/export-reliant-central-europe-weighs-repercussions-trump-tariffs-2025-04-03/

2025-04-03 11:28

April 3 (Reuters) - Sterling climbed to a six-month high against the dollar on Thursday as traders abandoned the U.S. currency after President Donald Trump's expansive trade barriers stoked fears of a global slowdown in economic growth. Trump said on Wednesday he would impose a 10% baseline tariff on all imports to the United States and higher duties on some of the country's biggest trading partners, such as the European Union, China, India and Vietnam. Sign up here. Britain, which was handed the least severe U.S. import tariff of 10%, said it believed a trade deal with the United States was close as it sought to soften the impact of Trump's tariffs which threaten an escalating global trade war that would hurt its open economy. British cars as well as steel and aluminium still face higher tariffs of 25% each. The pound rallied 1.31% to $1.3181 , hitting levels last seen in early October. Against the euro, however, the British currency fell to 84.04 pence per euro. The dollar weakened across the board, with the index measuring it against six major peers dropping 1.8% at 101.94. "We do share the optimism that the UK is probably closer to potentially agreeing a deal sooner with the U.S. to potentially lower that tariff rate further. So that's certainly a positive potential catalyst for the pound," said Lee Hardman, senior currency analyst at MUFG. He added, however, that the pound tends to underperform during periods of risk. "So that would be kind of a caveat which would kind of caution against basically building up long pound positions on the back of the potential for lower tariffs for the UK." Nicholas Rees, Head Of Macro Research at Monex Europe, also cautioned about British finance minister Rachel Reeves's fiscal headroom becoming more constrained which could weigh on sterling. "We think that all the fiscal headroom she (Reeves) rebuilt at the spring statement has now disappeared. We think she's going to have to come back in the autumn and announce another set of either tax rises or spending cuts," Rees said. https://www.reuters.com/markets/currencies/sterling-soars-six-month-high-traders-dump-dollars-2025-04-03/

2025-04-03 11:27

April 3 (Reuters) - Foreign investors withdrew the largest amount of money from Asian equities in about 15 years in the quarter to March ahead of U.S. President Donald Trump's major tariffannouncement - and some say the region may see more selling as investors head for safe-haven assets. Overseas investors divested stocks worth a net $43.73 billion in India, Taiwan, South Korea, Thailand, Indonesia, Vietnam, and the Philippines in the quarter - the largest quarterly net sales since at least March 2010, LSEG data showed. Sign up here. On Wednesday, Trump introduced sweeping reciprocal tariffs on his country's trading partners, escalating a trade war that has heightened fears of a global economic slowdown, with particularly severe impacts on regional growth. "Asia bears the brunt of these tariffs, with China, South Korea, and Taiwan seeing significant increases compared to lower rates for LATAM. Specifically, China will face a 34% tariff on top of the existing 20%, resulting in an effective tariff rate of 54%, which is close to the 60% rate pledged during Trump's campaign," said Ray Sharma-Ong, head of multi-asset investment solutions, at Aberdeen Investments. In March alone foreigners offloaded a net $17.51 billion worth of the region's equities, the biggest net sales for a month since June 2022. Taiwan stocks witnessed a net $14.13 billion worth of monthly cross-border outflows last month, the highest since at least January 2008. South Korean stocks remained out of favor for an eighth successive month as foreigners divested local stocks worth a net $1.46 billion. Meanwhile, monthly foreign outflows from Indian equity markets cooled to a three-month low of $401 million last month. Foreign investors also sold Thai, Indonesian and Vietnamese stocks worth $647 million, $491 million and $426 million, respectively in the last month. "The hardest-hit regions, including China, South Korea, and Taiwan, are expected to experience further de-risking as investors move towards safe haven assets such as U.S. Treasuries, yen, and gold," said Aberdeen's Sharma-Ong. https://www.reuters.com/markets/trumps-trade-policies-triggered-largest-asian-equity-outflows-least-15-years-q1-2025-04-03/

2025-04-03 10:55

LONDON, April 3 (Reuters) - What matters in U.S. and global markets today By Mike Dolan , opens new tab, Editor-At-Large, Financial Industry and Financial Markets Sign up here. If you thought a global trade war was already priced into world markets, Thursday's reaction to the U.S. tariff sweep will be sobering. I'll get into all the details below and explain why this is just the beginning of what could be a very difficult ride. Today's Market Minute * President Donald Trump's move to impose sweeping tariffs on U.S. imports from allies and rivals alike sparked threats of retaliation on Thursday. * Markets are reeling after the new tariffs sent shockwaves through the financial world, with the dollar and U.S. stocks among the hardest hit on fears that a broadening trade war will unleash a recession. * "All this work for nothing." Trump's global tariffs are creating an all-round blockade that is hurting Chinese businesses, large and small. * This latest round of tariffs will sap yet more vigor from a world economy that has barely recovered from the post-pandemic inflation surge and is weighed down by record-high debt and unnerved by geopolitical strife. * He calls it "Liberation Day", but Trump's gamble on global tariffs could cause political headwinds for his party and economic pain for his constituents if his promises to recast the economy do not work out. Trepidation Day Some thought Wall Street would embrace the much-hoped for clarity offered by Trump's tariff announcement, but they were wrong. Wall Street stock futures have plummeted more than 3% overnight on the combination of a 10% universal tariff on all U.S. imports and reciprocal tariffs on top of that for many countries, heavily concentrated in China and Asia. China now faces a combined 54% tariff rate when factoring in earlier moves. European Union imports are set to be hit with 20% tariffs, with 24% planned for Japan and 10% for Britain. Canada and Mexico are not currently subject to reciprocal tariffs because Trump's prior 25% fentanyl and immigration-related tariffs will stay in place. The moves appear to have been decided using relatively crude calculations of goods trade deficits with the United States, something that rankled many investors given the amount of time taken to construct the plan. Countries affected around the world said they would now examine retaliatory measures, with the EU proposing its own tariffs. There are also reports suggesting the bloc is considering additional fiscal supports for the worst-affected sectors. Overall, Deutsche Bank estimates the average tariff rate on U.S. imports could now rise to 25-30% - the highest in more than 100 years and above most expectations. Stock and bond markets reflected investor concerns about the tariffs' potentially damaging impact on U.S. and world growth. S&P futures were down 3.1% ahead of Thursday's open, with futures on the Russell 2000 down over 4%, worse than the 2.7% hit in Tokyo (.N225) , opens new tab and the losses of more than 1% in Europe (.STOXXE) , opens new tab and Hong Kong (.HSI) , opens new tab. The VIX (.VIX) , opens new tab 'fear index' of Wall Street stock volatility climbed three points to 26, back to levels seen a month ago when U.S. stocks were falling sharply. Treasury yields plummeted, with the 10-year down about 15 basis points to 6-month lows, testing 4% at one point. But currency moves were less intuitive, with the dollar (.DXY) , opens new tab tracking Treasury yields to slide to its lowest since October. It eyed its biggest one-day hit since 2023. This was somewhat surprising given that tariffs were expected by many to be more damaging to overseas economies, which would typically lift the dollar. Several reasons have been suggested for this move. One is that the American economy may feel a bigger initial hit than the rest of the world due to the scale of the new average U.S. trade barriers, especially if fiscal measures abroad kick in alongside retaliatory tariffs. That's lifted the euro . Another is a dash for the yen's 'safe haven' status. And Canada's dollar and Mexico's peso also rose on the assumption that they have escaped the worst-case scenario for now. China's yuan was weaker, but that was limited by state bank buying and officials setting the onshore reference rate higher. The dollar's losses may also simply be due to the fact that foreign investors in U.S. assets are resuming their exit from America's markets, which we saw in the first quarter. In other news, Tesla's stock (TSLA.O) , opens new tab overnight lost most of Wednesday's 5% gains that were based on reports that its boss Elon Musk would soon step back from his government advisory role, reports Musk and the White House dismissed. I'll now turn back to today's main story and discuss why the much-heralded "Liberation Day" announcement has liberated no one from uncertainty. The real tariff uncertainty starts now Whatever you make of the sweeping tariff plan U.S. President Donald Trump dropped on Wednesday, remember that the real uncertainty about the potential economic damage only starts now. Relief at getting some clarity on Wednesday was understandable. But we still have no hard evidence of just how these measures will directly affect corporate and household decision-making, or exactly how countries will retaliate. And Trump's tariff strategy is clearly to keep everyone guessing about the eventual targets, the size of the levies and the duration. Indeed, the White House has already factored in more uncertainty, with Trump and his officials acknowledging that the road ahead will be bumpy. So the idea that the fog will all dissipate in weeks or even months seems hopeful at best. While there aren't many overarching measures of "uncertainty" per se, the ones that relate to U.S. trade are off the charts. Before Wednesday's big reveal, there was a huge spike in the U.S. trade component of the Economic Policy Uncertainty Index, which is based on the news sentiment model devised by Baker, Bloom and Davis. It is currently reflecting the discombobulation many CEOs, business leaders and families are feeling when planning large purchases. The measure was already at a record high in February, exceeding the peaks of the first Trump term. But the March reading saw it more than double over the month - to more than twice the 2019 peak and almost 30 times the level recorded just before last November's election. The market fallout has been slightly less hyperbolic, but still saw Wall Street's worst start to the year since the pandemic. It's possible the trade uncertainty gauge might drop a bit now that details of Trump's plans have emerged. But so much is still unknown that it's hard to see the index returning to normal levels anytime soon. Because even if you think Trump's goals are a long-term positive, by wringing trade concessions overseas and returning factory jobs to America, it could take years to achieve that and painful adjustments in the interim. What investors are now trying to do is gauge the immediate impact, any potentially offsetting U.S. policy actions and the reactions of governments abroad. BADLY DRAWN For many U.S.-based money managers, including long-bruised 'value' investing funds that have enjoyed a rare cheer this year, not much draws them back to U.S. stocks as Trump pushes ahead with plans to reorder the global trade landscape. The latest investment letter from Boston-based GMO's Ben Inker and John Pease was scathing about the tariff policy. They remained fretful about the outlook for expensive U.S. stocks, while showing particular disdain for corporate 'junk' debt that's still offering historically low risk premia. They also developed a rule-of-thumb that the dollar should appreciate by about a third of the overall tariff increases, absent overseas retaliation. "While it might seem like the current period of uncertainty should end quickly once the administration finalizes their proposals, the poorly designed nature of many of these policies makes it hard to have confidence that they will last in their current form," they wrote. They cited copper tariffs as an example of how the whole scheme could rebound and potentially crater U.S. returns and investment without achieving the mooted goals. "Taking the goal of increased domestic production of copper as a given, imposing a large tariff on imported copper now seems an inefficient and costly way to achieve it," they said. Copper mines take years to develop before they can produce any metal. In the meantime, all that happens is that the cost of copper in America rises substantially higher than elsewhere in the world. They acknowledged that substantial tariffs on copper imports may incentivize investment in U.S. copper mines, but only if those tariffs are expected to last. A mine could run for decades, so uncertainty about the duration of the tariffs will reduce the incentive to invest today, they said. Another disincentive would be the risk that a future administration removes the tariff or perhaps offers subsidies instead. "A big part of the problem with badly designed policies is that they are less likely to stick even when enacted with great fanfare." Overall, Inker and Pease see rough times ahead for U.S. markets, arguing that the combined impact of tariffs, a stronger dollar, and weaker consumption is a net negative for the average U.S. stock. "Tariff risk, piled on top of the notoriously high valuations of U.S. companies, makes the American stock market a hard pitch," they concluded. "And yet you could do worse. All you would have to do is buy some U.S. corporate credit." So much for American exceptionalism. Chart of the day The heat map of where the Trump tariff sweep will hit is clearly hottest in Asia. Not only does China face a combined levy on its goods of 54% - close to the 60% Trump promised in his election campaign - but many so-called "China+1" countries, who had benefited from re-routed Chinese trade to America, are now being heavily hit as well. Vietnam faces 46% levies, Thailand 36%, South Korea 25% and India 26%. Importantly, many U.S. firms also manufacture goods in these countries. For example, Nike produced 50% of its footwear and 28% of its apparel in Vietnam in its 2024 financial year. Today's events to watch * U.S. March layoffs, weekly jobless claims, February international trade balance, March service sector surveys from ISM and S&P Global; Canada February trade balance * Federal Reserve Vice Chair Philip Jefferson and Fed Board Governor Lisa Cook speak; European Central Bank Vice President Luis de Guindos speaks * U.S. corporate earnings: Exxon Mobil, Lamb Weston, Conagra Brands Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles , opens new tab, is committed to integrity, independence, and freedom from bias. https://www.reuters.com/markets/us/global-markets-view-usa-2025-04-03/

2025-04-03 10:52

S&P 500, Dow register biggest daily pct declines since June 2020 Dollar down against euro, yen Safe-haven bonds rally; oil down more than 6% NEW YORK, April 3 (Reuters) - Major U.S. stock indexes registered their biggest daily percentage drops since 2020 on Thursday and the dollar weakened as U.S. President Donald Trump's drastic trade tariffs stoked fears of a global recession and led investors to seek safe-haven assets like bonds and the yen. S&P 500 companies lost a combined $2.4 trillion in stock market value, their biggest one-day loss since the coronavirus pandemic hit global markets on March 16, 2020. Sign up here. The Nasdaq Composite Index led declines on Wall Street, ending the day down 5.97% in its biggest daily fall since March 2020, while the S&P 500 and Dow Jones Industrial Average posted their biggest daily percentage declines since June 2020. Traders were rattled by the severity of a new baseline 10% tariff on imported goods and some eye-watering reciprocal tariffs on dozens of countries that Trump said had unfair trade barriers. Investors fear a full-blown trade dispute could trigger a sharp global economic slowdown and drive up inflation, with the latest round of U.S. trade tariffs hitting a world economy barely recovered from the post-pandemic inflation surge and dealing with geopolitical strife. "Markets plummeted today, and I kind of view it as a near-complete reset of what investors are thinking going forward," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "Any expectation for revenues and earnings for most companies in the U.S. - and globally for that matter - are going to be lowered. The market is reflecting reduced growth, reduced earnings, reduced revenue." Shares of Apple (AAPL.O) , opens new tab fell 9.2%, hit by the tariffs on China, the base for much of its manufacturing. Amazon.com (AMZN.O) , opens new tab dropped 9%, Microsoft (MSFT.O) , opens new tab fell 2.4%, and Nvidia (NVDA.O) , opens new tab declined 7.8%. The S&P 500 technology index (.SPLRCT) , opens new tab fell 6.9%. The S&P 500 energy sector (.SPNY) , opens new tab sank 7.5%, with oil prices falling more than 6% on the day. The CBOE Volatility index (.VIX) , opens new tab, known as Wall Street's fear gauge, rose to 30.02, its highest closing level since August 5, 2024. The Dow (.DJI) , opens new tab fell 1,679.39 points, or 3.98%, to 40,545.93, the S&P 500 (.SPX) , opens new tab dropped 274.45 points, or 4.84%, to 5,396.52 and the Nasdaq Composite (.IXIC) , opens new tab sank 1,050.44 points, or 5.97%, to 16,550.61. MSCI's gauge of stocks across the globe (.MIWD00000PUS) , opens new tab fell 28.47 points, or 3.41%, to 807.64, set for its biggest daily percentage fall since June 2022. The U.S. dollar also weakened sharply. The euro hit a six-month high against the dollar and was last up 1.74% at $1.1037 , while the dollar fell 1.95% against the Japanese yen to 146.445 yen , and sank 2.35% on the Swiss franc to 0.8608 franc . RECIPROCAL LEVY In Europe, the 27-country EU bloc now faces a 20% reciprocal levy. The pan-European STOXX 600 (.STOXX) , opens new tab index fell 2.57%. Trump's levies impacted Asia particularly hard. China was hit with a 34% reciprocal tariff, Japan 24%, South Korea 25% and Vietnam 46%. "This is how you sabotage the world's economic engine while claiming to supercharge it," said Nigel Green, CEO of global financial advisory deVere Group. The scramble for ultra-safe government bonds that provide a guaranteed income drove down U.S. Treasury yields. The benchmark U.S. 10-year Treasury note yield tumbled 14.6 basis points to 4.049% after falling to a 4.004%, its lowest since November 25. The yield on the note was on track for its biggest daily drop since August 2. Euro area government bond yields dropped, with Germany's 10-year yield , the euro area's benchmark, hitting its lowest since March 4. If the tariffs trigger recessions, central banks around the world are likely to slash interest rates, which benefit bonds. Credit rating agency Fitch warned they were a "game-changer" for the U.S. and global economy, while Deutsche Bank called them a "once in a lifetime" moment that could knock 1%-1.5% off U.S. growth this year. Oil prices dropped after OPEC+ agreed to a surprise increase in output, the day after Trump announced his new tariffs. Brent futures settled at $70.14 a barrel, down $4.81, or 6.42%. U.S. West Texas Intermediate crude futures finished at $66.95 a barrel, down $4.76, or 6.64%. Gold hit a record high above $3,160 an ounce before running out of steam. Spot gold was last down 0.85% at $3,106.99 an ounce. https://www.reuters.com/markets/global-markets-pix-2025-04-03/

2025-04-03 10:50

NAIROBI, April 3 (Reuters) - The Kenyan, Nigerian, Ghanaian and Zambian currencies are forecast to remain broadly steady against the dollar in the next week to Thursday, while Uganda's shilling is expected to strengthen, traders said. KENYA Kenya's shilling is expected to be stable, with importer dollar demand low, traders said. Sign up here. Commercial banks quoted the shilling at 129.00/50 per dollar, compared with last Thursday's close of 129.10/129/60. NIGERIA Nigeria's naira is seen holding steady against the dollar in the coming week, buoyed by central bank dollar sales and investor confidence. The naira was quoted around 1,530 to the dollar in intraday trading on Thursday, compared with a closing quote of 1,540 naira a week earlier. The unit was sold at 1,550 naira to the dollar in street trading on Thursday. "We see the naira's relative stability continuing, especially after the central bank reported a positive net reserve position, which has significantly boosted market confidence," one trader said. GHANA Ghana's cedi is expected to hold largely steady at current levels next week on matched demand and supply of dollars on the interbank market. LSEG data showed the cedi trading at 15.45 per dollar on Thursday, the same as last Thursday's close. "Cedi remained stable against the US dollar this week, showing no significant movement as demand and supply remained well-balanced. This stability reflects the effectiveness of current market dynamics and interventions," Chris Nettey, head of trading at Stanbic Bank Ghana, said. Sedem Dornoo, a senior trader at Absa Bank Ghana, said given the current strong liquidity to meet corporate demands, the cedi could gain as some traders increase their shorts. UGANDA The Ugandan shilling is expected to strengthen, helped by dollar inflows from coffee exports and weak importer demand. Commercial banks quoted the shilling at 3,639/3,649 Thursday, compared with last Thursday's close of 3,660/3,670. "Coffee is bringing in quite a large amount of inflows because of the high international prices," said an independent foreign exchange trader. Uganda's earnings from coffee exports have been soaring on high international prices. ZAMBIA Zambia's kwacha is expected to hold steady against the dollar next week supported by companies preparing to pay taxes. On Thursday, the currency of Africa’s second largest copper producer was quoted at 27.98 per dollar from 28.75 a week ago. "We have Pay As You Earn due next week and this is a huge tax," one financial analyst said. https://www.reuters.com/markets/currencies/africa-fx-most-african-currencies-seen-stable-ugandas-shilling-firm-2025-04-03/