General Market Analysis – 01/04/2025
Mixed Markets Ahead of Tariff Update – Dow up 1%
US stocks saw a mixed day ahead of key tariff updates and economic data due later this week. The Dow added 1%, the S&P rose 0.55%, while the Nasdaq dropped 0.14%. Treasury yields fell again after Friday's sharp drop, with the 2-year down 2.9 basis points to 3.883% and the 10-year down 4.4 basis points to 4.205%. The dollar crept higher against major currencies, with the DXY up 0.16% to 104.17.
Oil prices surged higher amid increasing supply concerns, with President Trump considering further tariffs on Russia and possibly military action against Iran. Brent crude rose 2.71% to $74.73 a barrel, and WTI gained 3.06% to $71.48 a barrel. Gold continued to climb as haven flows pushed it to new record highs, gaining 1.23% on the day to close at $3,123.33 an ounce.
Tariff “Liberation Day” – How Hard Will They Go?
Investors and traders are closely watching developments in Washington, especially regarding President Trump's latest tariff announcements and whether the new administration will take a more aggressive stance to "level the playing field." Some market estimates suggest that a harder tariff policy could raise the average tariff rate by up to 28%, potentially causing a 4% reduction in US GDP and pushing prices up by 2.5%, resulting in a $1 trillion decrease in output. These numbers, though estimates, could have substantial economic impact.
Many investors are hoping for a softer tariff update on Wednesday, with announcements likely to come after the Asian market opens when liquidity is low and most products could experience volatility. Overall, most traders expect the tariff updates to create more volatility, and even once markets stabilize, the future direction remains unclear.
Rate Decisions and Data Ahead, But Tariffs to Dominate
Today’s macroeconomic calendar is busy, with many data points to keep traders focused on the fundamentals. However, all market participants are aware of the tariff updates due on Wednesday from President Trump, and most expect their impact to dominate.
The Australian market will be in focus to kick off the day, with Retail Sales data (expected +0.3% m/m) due in the morning session and the Reserve Bank of Australia’s rate decision in the afternoon. The RBA is widely expected to keep rates unchanged after January's "hawkish cut," with traders focusing on the statement and subsequent press conference for any policy hints.
As the London market opens, focus will shift to Europe, with CPI data and a scheduled speech by ECB President Christine Lagarde.
In the New York session, key US data will be released, including ISM Manufacturing PMI (expected 49.5) and JOLTs Job Openings (expected 7.9 million). However, once again, most traders expect the impact of tariff discussions to outweigh the data’s short-term effects.
