(Reuters) – The global trade war might have been reduced to a battle between Beijing and Washington for now, but a bruising week for markets has left policymakers at the ECB and in emerging economies facing a very different backdrop when they meet in days to come.
Also ahead is a raft of Chinese data and U.S. consumer numbers and earnings, providing fodder for investors who fear the sound of recession alarm bells ringing.
Here is a look at the week ahead from Kevin Buckland in Tokyo, Lewis Krauskopf in New York, Yoruk Bahceli, Amanda Cooper and Karin Strohecker in London.
1/HIGH-SPEED CRISIS
Trump’s tariffs and subsequent reversal have whipped up volatility across markets and – although there have been bigger absolute moves in stocks, bonds and currencies in past crises – very few have been this fast.
With volatility, it’s the speed of a move, not the size, that can set alarm bells off. April’s market swings have played out with similar intensity to the 2020 COVID crisis and near that of the 2008 financial crisis, but in a fraction of the time.
U.S. assets are the focus of the selling at the moment, with Treasuries, stocks and the dollar shooting higher only to drop just as fast. In 2020, the acute stage of the COVID crisis for markets lasted roughly 24 trading days.
In 2008, it lasted some 78 days. This time, it’s been just ten days.
2/BEIJING BATTLE
Donald Trump’s campaign of global tariffs now seems very much a trade war with China.
Not only was China omitted from the 90-day reprieve on “Liberation Day” levies that POTUS gave most U.S.
trading partners, he ramped them up to effectively 145% when taking earlier imposed levies into account.
Beijing has just upped its levy on U.S. shipments to 125 from 84%, and could go higher as the tit-for-tat spat ratchets higher.
But it feels academic, since current levels mean trade is pretty much dead.
A China data dump, including trade, factory production and retail sales figures, is due in days to come.
3/THE ONLY WAY IS DOWN
How tariff chaos will change policymakers’ thinking on rate cuts ahead will be the focus when the European Central Bank meets on Thursday.
Traders now fully price in another 25 basis-point cut bringing the bank’s key rate to 2.25%, a move they had seen as a coin toss when the ECB last met.
And they predict two more moves after that – a sharp increase from March.
That speaks to the threat facing the European economy, which is still hit by a broad 10% tariff during Trump’s 90-day pause, not to mention higher tariffs on steel, aluminium and cars.
From April 11, EU finance ministers will meet in Warsaw to discuss the bloc’s response to Trump’s measures.
Italy’s Prime Minister Giorgia Meloni will then meet POTUS on Thursday.
4/EYE ON THE CONSUMER The latest test of whether economic and tariff uncertainty is weighing on U.S. consumer behaviour comes with the April 16 release of the monthly U.S.
retail sales data. Despite Washington’s reprieve on some tariffs, March retail sales numbers will offer a view into how much economic anxiety may be impacting consumer spending already. February saw only a marginal rebound as consumers curbed discretionary spending while consumer confidence indicators have been battered.
Corporate earnings reports also pick up steam in the coming week, with markets expecting profit warnings ahead.
Streaming giant Netflix is among the companies set to report, with its results due on Thursday; investors are eager to see if companies are able to forecast despite the changing tariff backdrop.
5/SHIFTING SANDS
The Trump tariff markets rout has shifted all sorts of tectonic plates in emerging markets: Higher-yielding, lower-rated countries have suffered a disproportionate hit to their bonds and borrowing costs compared to higher-rated peers.
Asia – dominated by its regional behemoth China – has found itself at the centre of the fallout from tariff wars, while Latin America is in a more sheltered place.
The new trade world order will pose fresh challenges to a number of policy makers who have to navigate prospects of slowing growth and likely rising inflation pressures.
Thursday is a big day for emerging central banks. Turkey is expected to hold its benchmark rate, and questions are rising on how much room Egypt’s policy makers have left to cut rates against the backdrop of increased volatility.
South Korea’s central bank may be forced to bring forward or deepen interest rate cuts this year faced with the risk of recession.
(Compiled by Karin Strohecker, Graphics by Prinz Magtulis,; Editing by Philippa Fletcher)
