Sentiment remains fragile on conflicting comments

The first half of the week was full of fear and hope. Trump’s frustration with the Federal Reserve (Fed) President Powell and the threat of Powell being removed from his role weighed on sentiment at the start of the week. Meanwhile, the IMF lowered its world growth forecasts sharply pointing at hectic and harmful US trade policy. Equities fell and the US dollar weakened. Gold hit the $3500 mark. Then, mood improved as Trump said he wouldn’t remove Powell from his role and that the triple-digit tariffs on Chinese imports will be pulled ‘substantially’ lower. Equities rallied, the China-sensitive stocks cheered the news more than the others. Apple, for example, jumped nearly 10% from the week low to yesterday’s high point and the dollar index rebounded from the lowest levels in more than three years and the US 10-year yield eased after spiking above the 4.40% mark. Then, Bessent said that there are no plans to lower the Chinese tariffs unilaterally. Concretely, the Trump show continues, optimism is too fragile to call the end of the equity selloff. Futures this morning are pointing at a negative start, the selling pressure is stronger for the US indices than the European peers while the Chinese CSI 300 is flat and the Nikkei is down 1%, testing the 35000 psychological support to the downside as the USJPY trades a touch below 143 after an early attempt to clear the 140 support this week.

Across the pond, the Stoxx 600 remained relatively stable this week compared to the American peers, and the index jumped 1.80% yesterday on potential improvement in trade situation. On the earnings front, the luxury-good makers didn’t have a strong Q1 but SAP, the most valuable European company by market cap, announced a 58% increase to its profit last quarter with a 26% jump to its revenue from cloud products. The share price jumped more than 10% yesterday. Overall, the preference for the European companies continues as the US exceptionalism trade fades. The same is true for the euro. The EURUSD eased this week after trading above the 1.15 level. Yesterday’s softer-than-expected PMI figures certainly weighed on expectations that the massive government spending would boost growth across the euro area, but they also fuelled expectations that the European Central Bank (ECB) will continue to provide support to the underlying economies. Price pullbacks remain interesting opportunities to strengthen long positions in favour of the single currency with the next major target for the bulls standing at the 1.20 mark.

In energy, crude oil’s positive momentum was hit yesterday by the IMF’s sharp downside revisions to global growth forecasts. The outlook remains negative on higher supply and lower demand prospects. Expect solid resistance to the latest rebound approaching the $66.70/67pb range, including the major 38.2% retracement on the first quarter decline and the 50-DMA. Below this price range, crude oil remains in the bearish trend with the possibility of a sustained decline below the $60pb level.