Donald Trump paused tariffs imposed on Canadian and Mexican imports two days after imposing 25% levies on its biggest trade partners’ products amid sanguine market reaction and resistance from trade partners. Beyond the politicians who refused to surrender, Walmart’s Chinese suppliers reportedly refused to take on a 10% price cut on their products while Europe is looking to replace Elon Musk’s Starlink in Ukraine by a European alternative, the French satellite operator Eutelsat, to make sure not to give the communication capabilities into the hands of a no-ally-anymore. Eutelsat’s stock price gained more than 500% in just a week. The European defense stocks consolidate gains near ATH levels as the European countries agreed to spend EUR 800bn for strengthening their defense and security – matching the amount Mario Draghi had suggested around last September to improve the continent’s tech, defense and green transition. On top, the European Central Bank (ECB) delivered another 25bp cut at yesterday’s meeting, as expected, but hinted that the rate cutting cycle could gently be coming to an end after six rate cuts as inflation is approaching their 2% policy target. Interestingly, the bank’s latest inflation and growth forecasts didn’t include the impact of the upcoming massive government spending – which should be balanced out by stricter-than-otherwise monetary policy to keep the price stability in check. The EURUSD advanced past the 61.8% Fibonacci retracement on the Trump selloff. The pair is now in a bullish trend with support to the latest rebound seen at 1.0725, the 200-DMA, 1.0678 – the minor 23.6% retracement and 1.0593 – the major 38.2% retracement above which the bullish trend will remain in play. On the equities front, the Stoxx 600 index closed yesterday near flat.
Across the Atlantic
Major US indices extended losses. The S&P500 lost 1.78%, tipped a toe below the 200-DMA and closed near this level, while the tech-heavy Nasdaq 100 slipped and closed below its own 200-DMA.. Is it a coincidence that Trump rolled back tariffs when the two major indices fell below their 200-DMA? Either way, the S&P500 is the worse performer among the world indices since his inauguration. Inside the US, the low volatility stocks amass capital, like Invesco’s QQLV ETF which includes names as Coca-Cola, Mondelez and AstraZeneca. The US dollar is on course for the biggest weekly drop in two years. The latest revision to Atlanta Fed’s GDPNow points at a 2.4% contraction in the US economy in Q1, and the recession bets are rising by the day. Polymarket now assigns a nearly 40% chance of a US recession this year, up from below 20% before Trump took office. Meanwhile, the Federal Reserve (Fed) is expected to cut rates more than previously expected to support the economy—as long as inflation allows. Will inflation allow? It’ll depend on tariffs.
Anyway, this morning, the market mood is a little bit better for the US equity futures. Broadcom jumped nearly 13% in the afterhours trading after announcing better-than-expected quarterly results and after giving a strong forecast. The announcement couldn’t come at a better time. The company’s stock price retreated to the 200-DMA yesterday on the back of a broad-based risk selloff that also pulled Nvidia to the lowest levels since September.
In China, Alibaba extended gains this week on claims that its new QwQ-32B model performs better than DeepSeek with less data. JD.com posted the biggest revenue growth in almost 3 years. And China announced the creation of a new bond platform to help the tech firms to issue onshore debt in a move to facilitate these firms access to capital. The CSI 300 is preparing the close the week on a positive note despite the tariff jitters.
Jobs day
Investors will be closely watching the US jobs data this Friday. The data is expected to print 159K new nonfarm job additions in February, with slowing wages growth on a monthly basis and a stable unemployment rate at 4%. But the risks are tilted to the downside due to the mass firing at the federal agencies and their implications for the broader economy. A set of softer-than-expected jobs figures could further weigh on the US dollar, while the worse-case-scenario for the markets would be a lower-than-expected NFP print combined with higher-than-expected wages growth – a combination that would leave the Fed facing a slowing economy with limited room to give support.
