Global Markets React to Trade Tensions and Rate Decisions

Asia-Pacific markets mostly rose on Thursday despite a sharp decline in Wall Street after U.S. Federal Reserve Chair Jerome Powell cautioned that ongoing trade tensions could impact the central bank's goals. Hong Kong's Hang Seng Index increased 1.65%, Japan's Nikkei 225 rose 0.85%, and Australia's S&P/ASX 200 gained 0.57%. In contrast, India's benchmark Nifty 50 and BSE Sensex fell 0.49% and 0.1%, respectively. South Korea's Kospi index was up 0.68%, while Taiwan's Taiex index fell 0.2%. U.S. futures rose amid the mixed Asian market performance. Hong Kong tech giants climbed despite a tech sell-off on Wall Street, with the Hang Seng Tech index surging 2.3%. Asian chip-related stocks traded mixed following Nvidia's 6.9% plunge. Meanwhile, Australia's job additions in March fell short of estimates, and the Korean won depreciated against the dollar after the Bank of Korea held interest rates at 2.75%. Singapore's non-oil domestic exports increased 5.4% year-on-year in March, missing estimates.

Markets were hit by renewed trade jitters as the World Trade Organization warned that the global trade outlook has "deteriorated sharply" due to rising tariffs and trade policy uncertainty. The S&P 500, Dow Jones, and Nasdaq Composite all fell, with chip stocks declining amid reports of new U.S. licensing requirements. U.S. Federal Reserve Chair Jerome Powell expressed concern over the tension between keeping inflation down and employment up. Freight ships from China are canceling trips, which will affect the U.S. economy, with 80 blank sailings recorded. The WTO forecasts a 0.2% decline in global merchandise trade in 2025.

The European Central Bank (ECB) cut its key interest rate by 25 basis points to 2.25% on Thursday, citing rising trade tensions and uncertainty surrounding the euro zone's economic growth. The decision was widely anticipated, with a 94% chance of a rate cut priced in ahead of the announcement. The ECB stated that the "outlook for growth has deteriorated owing to rising trade tensions" and that "increased uncertainty is likely to reduce confidence among households and firms." ECB President Christine Lagarde said the economic outlook is "clouded by exceptional uncertainty" and that the central bank will follow a "data-dependent and meeting-by-meeting" approach to determining its monetary policy stance. Economists expect further rate cuts, with some predicting a terminal rate of 1.5% by year-end.

CNBC's Jim Cramer stated that consumer-oriented companies will likely need to lower prices despite looming tariffs, as high prices are already deterring consumers. He cited examples such as LVMH's unexpected sales decline and pessimistic sentiment around snack sales due to high prices. Cramer believes companies are hesitant to lower prices due to concerns about gross margin decline, but thinks one will "break the buck" this year, as there are limited opportunities for further cost-cutting. An alternative could be mergers, which create new cost-cutting opportunities to prevent margin decline.

Sen. Elizabeth Warren warned that US markets will "crash" if President Donald Trump can fire Federal Reserve Chair Jerome Powell, as it would undermine the central bank's independence from politics. Warren made the comment after Trump said Powell's "termination cannot come fast enough" on social media, although a White House official later downplayed the remark as not being a threat to fire Powell.

US stock futures rose on Thursday following a sharp decline in the previous session. Futures tied to the Dow Jones Industrial Average added 265 points, or 0.66%, S&P 500 futures advanced 0.75%, and Nasdaq 100 futures climbed 0.81%. Major stock indexes sank on Wednesday due to a significant decline in technology stocks and concerns over mounting tariffs, with the Dow Jones Industrial Average losing 1.7%, the S&P 500 dropping 2.2%, and the Nasdaq Composite declining 3.1%. The decline was triggered by comments from Federal Reserve Chair Jerome Powell that tariffs could drive up inflation and move the US further away from its economic goals. Investors remain concerned about the economic impact of tariffs as earnings season ramps up. The S&P 500 and Nasdaq have dropped around 6% and 5.7% this month, respectively. Major US indexes are heading for a weekly decline, with the S&P 500 down 1.63%, the Nasdaq Composite down 2.5%, and the Dow down 1.35%. Tariffs are also beginning to drive cancellations of Chinese freight ships, with freight company HLS Group recording 80 canceled sailings out of China.

The S&P 500 rose 0.13% to 5,282.70 on Thursday, while the Nasdaq Composite fell 0.13% to 16,286.45, and the Dow Jones Industrial Average dropped 1.33% to 39,142.23, weighed down by a 22% decline in UnitedHealth. The major averages finished lower for the week, with the Dow and Nasdaq each losing over 2%, and the S&P 500 sliding 1.5%. Stocks were impacted by concerns over tariffs and their potential to drive up inflation, with President Donald Trump's comments on trade deals providing a brief boost. The market has been volatile since Trump's announcement of "reciprocal" tariffs on April 2, with the S&P 500 dropping nearly 7%.

Major market movers on Thursday are expected to be influenced by gold, semiconductor stocks, freight stocks, earnings reports, and cryptocurrency. Gold is up 22% since Inauguration Day and 6% since Trump's tariff announcement on April 2. The VanEck Gold Miners ETF (GDX) is up 41% in three months. Semiconductor stocks fell on news of potential export restrictions to China, with the VanEck Semiconductor ETF (SMH) down 4.2%. Freight stocks are also under pressure, with Matson down 23% in April. Earnings reports from American Express, Netflix, and UnitedHealth are on the docket, while regional banks Fifth Third, KeyCorp, Truist Financial, and Huntington Bancshares report before the bell. Bitcoin is approaching $85,000, and stocks like Cleanspark and Microstrategy are up in April.

Turkey's central bank unexpectedly raised its key interest rate by 350 basis points to 46%, ending its easing cycle that began in December, amid high inflation and economic disruption caused by US tariffs and political unrest. The move comes after annual inflation in Turkey rose to 38.1% in March and the central bank spent $25 billion to defend the lira following the arrest of opposition leader Ekrem Imamoglu. The bank's Monetary Policy Committee stated that it will maintain a tight monetary stance until price stability is achieved.

The Supreme Court is set to decide whether President Donald Trump can fire senior officials at independent agencies, a case that could have implications for the Federal Reserve and its chair, Jerome Powell. Trump has called for Powell's "termination," sparking concerns that a ruling in his favor could allow him to assert control over the central bank. The case centers on Trump's firing of officials at two labor agencies, who argue that if Trump wins, it will give him power to overhaul the Federal Reserve. The Supreme Court's conservative majority has shown skepticism towards "for-cause" protections for executive branch officials, and a ruling in Trump's favor could give him immense power to fire officials at independent agencies.

A Trump supporter in South Dakota expressed uncertainty about the President's policies, particularly tariffs, stating "Now I don't know" when discussing what she was hoping to see from him, according to an interview with CNN's Elle Reeve.