Equities and Tariff Developments
U.S. equities ended modestly lower on Tuesday as market participants reacted to ongoing tariff-related developments. The U.S administration announced a temporary pause on tariffs targeting consumer electronics such as smartphones and semiconductors. However, these tariffs are expected to return soon, categorized under sector-specific measures. In response, China suspended purchases of Boeing jets and related aircraft equipment. A temporary suspension of auto tariffs is also being considered by the White House, which had previously helped carmakers by providing them with time to restructure their supply chains.
Performance Metric
Despite a brief uptick in share prices over the last two days, major indices remain in negative territory for the year. The S&P 500 has declined by approximately 8%, while the Nasdaq is down around 13%.
Valuations and Outlook
While returns have been negative, the recent market correction has led to more attractive valuations. The S&P 500 is now trading at about 18 times next year’s earnings, which is closer to its 10-year historical average. Similarly, the Nasdaq’s forward price-to-earnings multiple has dropped from 30 to approximately 21. These more reasonable valuation levels, combined with elevated volatility and the possibility that the worst of the tariff impacts have already been priced in, could offer a foundation for long-term equity support. Although risks remain, many investors are cautiously optimistic that the likelihood of a recession has diminished.
Global Market Snapshot
Asia
Asian equities mostly fell on Wednesday, with technology shares under pressure following Nvidia’s warning about new U.S. chip export controls to China. This warning overshadowed stronger-than-expected Chinese GDP data. While China’s economy grew by 5.4% year-on-year in the first quarter, quarterly growth was just 1.2%, missing estimates and highlighting the growing toll of the escalating U.S.-China trade conflict.
Europe
European shares moved higher, led by a 2.4% gain in Italian equities. The rally was tempered by a steep 7.8% drop in LVMH shares after a weaker-than-expected first-quarter sales report. Investors remain hopeful that the U.S. might modify or relax certain tariffs, and attention is now turning to the upcoming European Central Bank policy meeting.
Currency and Bond Markets
The U.S. Dollar Index declined below the 100 mark, hitting a three-year low. The euro gained strength, trading at 1.1338 against the dollar. Investors are showing caution ahead of Federal Reserve Chair Jerome Powell’s speech, amid ongoing trade uncertainty. Meanwhile, the yield on the U.S. 10-year Treasury note remained steady at 4.33%, reflecting investor patience as they await new signals on inflation and growth risks.
Commodities
Oil prices edged lower, weighed down by the uncertain implications of U.S. tariff policy. The International Energy Agency downgraded its global oil demand growth forecast for 2025, citing weaker economic activity from escalating tariffs and increased U.S. production. These developments have negatively impacted sentiment in energy markets.
Equities on the Move
| Company | Key Update | Market Reaction |
|---|---|---|
| Nvidia | Faces a $5.5 billion Q1 charge from new U.S. chip export restrictions targeting its H20 AI chips sold to China | Shares down 6.3% |
| Tesla | Suspends imports of Chinese components for its Cybercab and Semi trucks due to new tariffs | Growth strategy disrupted |
| Citigroup | Beat Q1 earnings estimates with strong equity trading; raised provisions and announced share buybacks | Outlook clouded by tariffs |
| Bank of America | Exceeded Q1 profit estimates with solid trading and interest income; investment banking fees declined | Optimism on income outlook |
| United Airlines | Cut profit forecast and plans to reduce domestic capacity by 4% due to economic uncertainty and possible recession risks | Demand concerns increase |
| Interactive Brokers | Beat earnings; declared higher dividend and 4-for-1 share split; shares dropped despite strong performance | Shares fell ~10% |
| Applied Materials | Acquired 9% of BE Semiconductor, focusing on hybrid bonding technology; no board seat or further acquisition plans | Strategic tech investment |
| Rio Tinto | Reported weakest Q1 iron ore shipments since 2019 due to cyclones; lowered full-year shipment outlook | Operations disrupted |
| Microsoft | Maintains Buy rating from BofA with lowered price target to $480; strong AI and cloud positioning offset by macro concerns | Strong AI growth forecast |
| LVMH | Disappointed in Q1 with 5% sales decline in Fashion & Leather Goods; Goldman Sachs cut forecasts and price target to €610 | Shares fell 7.8% |
Key Data and Events to Watch
Investors will closely monitor the release of U.S. retail sales data and crude oil inventories today. Additionally, Federal Reserve Chair Jerome Powell is scheduled to speak, which may provide further insights into the Fed’s stance on inflation and growth. On the corporate earnings front, several major companies are reporting results today, including ASML Holdings, Prologis, Abbott Laboratories, U.S. Bancorp, and The Travelers Companies.
For more information visit https://cc.com.mt/. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice.
