Shaw and Partners

On Wednesday President Trump outlined the latest tariffs, in what he dubbed “Liberation Day”; however the tariffs were applied to a broader range of countries and at higher rates than had been expected, prompting a sharp market reaction. A wide number of countries will be subject to a 10% baseline tariff , and amongst notable specific country rates, China will face an additional 34% levy on its goods, Japan imports will face a 24% tariff and 20% for the European Union. The new measures sparked concerns about stoking inflation and potential recession. In response Wall Street sold off heavily, losing $6.6tn over Thursday and Friday, the largest ever two-day pullback. For the week the S&P 500 fell 9.1% and the Dow Jones Industrial Average lost 7.9%. The tech-heavy Nasdaq Composite shed 10% and is now down more than 20% from its record high, entering a bear market.

Economic data for the week was mixed with ISM’s Manufacturing Purchasing Managers’ Index dropping into contraction in March. Meanwhile the usually hotly anticipated non-farm payrolls data, which was largely overshadowed by the tariff fall-out, came in stronger-than-expected. The heightened economic uncertainty prompted traders to up their bets over the number of interest rate cuts from the Federal Reserve this year. On Friday Fed chairman Jerome Powell noted that “uncertainty is high and downside risks have risen”. Investors looked for safety in government bonds, pushing yields lower. The 10-year Treasury yield fell below 4% for the first time since October and saw its biggest weekly decline since August.

European equity markets also tumbled in response to the tariffs. The pan-European STOXX 600 index experienced a 5.1% loss on Friday, its biggest daily drop since 2020. For the week the index lost 8.4% and is down almost 12% from its record high logged just a month earlier, entering correction territory. Germany’s DAX index also entered correction territory on Friday, down 8.1% for the week. Meanwhile European government bond yields were sharply lower. Markets also ramped up bets that the European Central Bank would action more rate cuts this year.

It was a similar story in Japan where the yield on Japanese government bonds declined, with the 10-year ending at 1.18%. This pressured Japanese bank stocks which were some of the steepest fallers of the week, as well as automakers remaining under pressure following the previous announcement of tariffs imposed on non-US autos. Japan’s Nikkei 225 shed 9%. Losses in China were less severe, although markets were closed on Friday. The Hang Seng index fell 2.5% while the Shanghai Composite lost just 0.3%. Beijing announced a 34% retaliatory tariff on Friday.

Earlier in the week gold had continued to climb to fresh highs however it later slipped and was down 1.3% for the week. With increased odds of a global slowdown oil prices plunged to their lowest levels in nearly four years. Brent crude lost 10% for the week.

Weekly macro highlights

US labour market improves in March

US non-farm payroll employment rose by 228,000 in March, according to data published by the Bureau of Labor Statistics. The figure was above market expectations and the revised 117,000 rise recorded in February. Following the downward revisions for January and February, the combined employment level was 48,000 lower than previously reported. Employment gains in the month spanned across several sectors. March registered increases of 54,000 in health care, 24,000 in both social assistance and retail trade, and 23,000 in transportation and warehousing. Federal government employment declined by 4,000, following an 11,000 fall in February, showing little evidence of progress made by the Department of Government Efficiency to downsize government employment. Average hourly earnings rose 0.3% month-on-month, bringing the year-on-year increase to 3.8%. The unemployment rate rose from 4.1% to 4.2%, with the number of unemployed persons rising to 7.1 million. Overall, the data indicates continued strength in the US labour market.

Eurozone inflation eases in March

Eurozone harmonised index of consumer prices (HICP) inflation marginally eased from 2.3% year-on-year (YoY) in February to 2.2% YoY in March, according to flash estimates published by Eurostat. The deceleration in headline inflation was largely driven by a sharper contraction in energy prices, which declined 0.7% YoY in March, following a 0.2% YoY increase in February. Services inflation, the largest component of euro area inflation, eased from 3.7% to 3.4% YoY. In contrast, food, alcohol and tobacco inflation rose to 2.9% YoY in March, from 2.7% in February, while non-energy industrial goods inflation was unchanged at 0.6% YoY. Although core inflation, which excludes energy and unprocessed food, is not published as part of the flash release, it is implied to have eased due to the decline in services inflation. March marks the second consecutive month of moderation in eurozone inflation, supporting expectations of further policy easing by the European Central Bank.

China’s manufacturing activity strengthens in March

China’s Caixin General Manufacturing Purchasing Managers’ Index rose from 50.8 in February to 51.2 in March, marking the fastest pace of expansion since November 2024. The Output sub-component picked up in the month to 53.8 — its highest level since May 2021 — as firms responded to stronger domestic and external demand. Total new orders remained in growth territory at 51.5, while export orders rose to 50.6, the strongest in nearly a year, despite continued US tariff pressures. Manufacturers added to headcount for the first time since August 2024, with the employment measure rising modestly to 50.1. Input costs declined for the first time in six months, driven by lower raw material prices and supplier discounts, enabling firms to cut selling prices further. Overall, the March data points to continued momentum in the manufacturing sector, although the sentiment remains cautious, with business confidence still slightly below average amid ongoing global trade uncertainty.