Markets were in high spirits even as they headed into the Asia opening. Fears about baby’s bathwater levels of U.S.-Mexico trade relations, coupled with economic harbingers from the spreading pandemic, soon triggered a jarring reverse. Traders greeted the positive news with extreme enthusiasm. These ranged from former President Donald Trump’s effect on commodity forecasts and the state of international trade deals to key economic indicators coming out of other countries.
In a yesterday Truth Social post, Trump predicted a big increase in natural gas stocks. He estimated the increase to be between 50 billion cubic feet (BCF) and 52 BCF. This announcement ignited a firestorm of debate over the future of energy markets. Last week, U.S. White House National Economic Council Director Kevin Hassett declared that two of the four major trade accords are “nearly finished.” If true, this development would portend a huge change in the trade landscape.
Trade Deals and Global Negotiations
International trade couldn’t be hotter right now. So, it’s an exciting time, with nearly 20 countries actively submitting bids across a wide spectrum of transactions. This is a promising sign of strong demand, not just interest, for creating new economic connections. Hassett’s comments on the nearing completion of two trade deals resonate with the broader narrative of ongoing negotiations aimed at enhancing global trade relationships.
The European Union is actively engaging in negotiations, as evidenced by Commission President Ursula von der Leyen’s confirmation of a 90-day delay for countermeasure tariffs originally set for April 15. The EU seems very keen to see these negotiations play out, underlining that “nothing is off the table.” This new strategy signals an ongoing desire to stay away from inflammatory trade tensions, while advocating for the best possible resolution that would serve European interests.
As these negotiations advance, the countries involved have an opportunity to significantly deepen their economic relationships. That inventory of near-final deals represents this great, once-in-a-lifetime opportunity. The potential end of these accords may usher in dramatic changes to trade dynamics around the world.
Economic Indicators and Market Reactions
At the same time, economic data out of Europe, Japan and China continue to drive negative market sentiments. New Zealand recorded a Manufacturing PMI of 53.2 in March, lower than 54.1 last month. Nevertheless, the contraction marked a third straight month of growth for the manufacturing sector. All of this is good news, implying that it is standing strong in the face of global economic uncertainty.
In the United States, Treasury yields have most recently spiked with that 30-year bond rate regaining its previous highs moving back to 4.95%. This spike is the largest weekly jump since 1982. What’s weighing on investors’ minds now are higher borrowing costs and mounting inflationary pressures. With yields rising, investors at home and abroad are expectedly focused on what this means for domestic and foreign investments.
This week, Japan was clearly joined in a toughened response by the Philippines and most remarkably, Taiwan. It announced that it would flatten its balance sheet with regard to U.S. Treasuries. This move reflects hope in U.S. debt instruments, even during a period of uncertain and extreme economic shifts. As foreign governments continue to decide how best to play their own treasury strategies, these moves may help shape or harm global financial stability.
Stock Market Movements
Even amid these heightened tensions, stock markets continue to feel bulletproof. S&P 500 Futures rose by a modest 0.2%. Nasdaq 100 futures are up by a similar measure of 0.2%. Likewise, European indices advanced in concert. The DAX climbed 0.6% and the FTSE 100 added 0.2%. These gains arguably show investor confidence in current negotiations and economic resiliency despite mixed signals coming from a number of different economic indicators.
In Japan, national policymakers are considering a tax cut on food consumption. Indeed, this initiative largely originates from the Liberal Democratic Party (LDP) and Komeito that rule Japan and are currently seeking to significantly increase domestic consumption. Such measures could further enhance Japan’s economic landscape and influence regional market dynamics.