A global equity rally faltered on Thursday as investors reacted to conflicting messages from the Trump administration regarding its trade stance with China, dampening risk appetite. European stocks declined after U.S. Treasury Secretary Scott Bessent cast doubt on the possibility of a swift resolution to the U.S.-China trade war. Meanwhile, U.S. futures slipped, and Asian markets ended a five-day winning streak.
The U.S. dollar weakened as uncertainty surrounding White House policy drove demand for traditional safe havens, including the Swiss franc, Japanese yen, and gold. Treasury bonds edged higher as risk sentiment soured.
Mixed Earnings Reports and Trade Concerns Shake Market Confidence
European markets were also under pressure as investors processed a wave of corporate earnings reports. Unilever saw a boost in its stock after its sales exceeded expectations, while Nestlé shares fell. BNP Paribas also saw a decline, with profits dipping.
Thursday’s market pullback reversed some of the previous day’s gains, which had been driven by optimism that President Donald Trump might reconsider some of the most aggressive elements of his trade and Federal Reserve policies. However, the volatile nature of White House rhetoric and frequent back-and-forth on tariffs left investors uncertain about the future.
Brent Schutte, Chief Investment Officer at Northwestern Mutual Wealth Management, cautioned against reacting too quickly to headlines. “The danger of trading off the headlines is that the commentary changes on a daily basis and later on there could be a different narrative,” Schutte explained. “You have to look at when you actually see the impact start hitting U.S. shores.”
Trump Signals Potential Tariff Changes, Uncertainty Remains
In a late Wednesday announcement, President Trump suggested that the U.S. may introduce a new tariff rate on China in the next two to three weeks. There is also ongoing discussion about whether to reduce tariffs on the auto industry, which have raised concerns from carmakers about potential damage to profits and jobs.
Despite these signals, Bessent emphasized that Trump has not offered to unilaterally reduce U.S. tariffs on China. “Not at all,” he said, addressing the possibility of de-escalation. The Treasury Secretary also stated that the administration is looking at various factors beyond tariffs, such as non-tariff barriers and government subsidies, and that a complete trade rebalancing could take two to three years.
Global Diversification Recommended Amid Market Volatility
As markets continue to navigate these uncertainties, investors are being advised to diversify their portfolios. According to the global head of equity strategy at Jefferies Financial Group, investors should consider adding assets from China, India, and Europe to balance their exposure, as U.S. stocks may be nearing a peak and further corrections in equities, Treasury bonds, and the dollar are likely.
Schutte echoed this sentiment, warning against over-concentration in U.S. markets. “I would use any uptick to tell anybody who’s overly concentrated in the U.S. market to make sure that they’re diversified and have exposure across the globe,” he advised.
Commodities and Currency Market Reactions
In commodities, oil prices held steady after recent declines, with investors weighing the potential for increased OPEC+ supply amid continued trade tensions.
Notable market movements included:
Stocks:
- The Stoxx Europe 600 fell by 0.3%
- S&P 500 futures dropped by 0.2%
- Nasdaq 100 futures declined by 0.4%
- Dow Jones futures slid by 0.4%
- MSCI Asia Pacific Index fell by 0.3%
- MSCI Emerging Markets Index decreased by 0.6%
Currencies:
- The Bloomberg Dollar Spot Index fell by 0.2%
- The euro gained 0.5%, rising to $1.1367
- The Japanese yen strengthened by 0.5%, reaching 142.74 per dollar
- The British pound rose 0.2%, reaching $1.3284
Cryptocurrencies:
- Bitcoin dropped by 1.3%, falling to $92,439.25
- Ether fell by 1.6%, dropping to $1,767.15
Bonds:
- The yield on 10-year U.S. Treasuries declined by two basis points to 4.37%
- Germany’s 10-year yield fell by one basis point to 2.48%
- Britain’s 10-year yield was little changed at 4.56%
Commodities:
- Brent crude rose by 0.9%, reaching $66.70 per barrel
- Spot gold increased by 1.2%, reaching $3,327.98 per ounce
As investors continue to grapple with uncertainty, the outlook for global markets remains fraught with risks tied to trade tensions, policy shifts, and economic fundamentals.
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