What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets
It’s Friday, so today I’ll provide a quick overview of what’s happening in global markets and then offer you some weekend reading suggestions away from the headlines.
Today’s Market Minute
* U.S. President Donald Trump on Thursday threatened to slap a 200% tariff on wine, cognac and other alcohol imports from Europe, opening a new front in a global trade war that has roiled financial markets and raised recession fears.
* Top U.S. Senate Democrat Chuck Schumer on Thursday said he would vote to advance a Republican stopgap funding bill, signaling that his party would provide the votes to avert a government shutdown.
*The European Central Bank has given UniCredit approval to buy up to 29.9% of Commerzbank, the Italian bank said on Friday, adding it would likely wait until next year before deciding whether to pursue an acquisition.
* Germany’s Chancellor-in-waiting Friedrich Merz urged sceptical lawmakers on Thursday to back his proposals for a massive increase in state borrowing, framing them as a test for Germany to stand tall on the world stage and safeguard European security.
* China’s Hong Kong and Macau Affairs Office reposted a commentary criticising CK Hutchison’s port deal with U.S. firm BlackRock as a betrayal of China, sending shares of the Hong Kong-based conglomerate sharply lower on Friday.
Shutdown reprieve
The S&P 500 on Thursday clocked a technical 10% correction from recent highs for the first time since 2023, but it may get some relief at the end of a torrid week from signs that a partial U.S. government shutdown may be averted.
With losses of more than 4% for the week through Thursday’s close, the S&P 500 was on course for its worst week in two years, but futures bounced overnight as one of the multiple clouds hanging over the market appeared to pass after the bell.
Top U.S. Senate Democrat Chuck Schumer said he would vote to advance a Republican stopgap funding bill, signaling that his party would provide the votes needed to avert a government shutdown before the midnight deadline on Friday.
But risk of a partial government shutdown was just one of the uncertainties weighing on stocks, which include an escalating global trade war and fears that it may sow a rare downturn in the economy.
With few major economic updates this week and the Federal Reserve’s latest policy meeting coming next week, markets will likely focus today on the University of Michigan’s latest survey on consumer confidence.
Economic jitters appear to be undermining investment confidence beyond stocks, as high yield bond risk premiums have widened off recent lows without further drops in benchmark Treasury yields.
So called junk spreads on the sub-investment grade corporate bond index expanded to their widest in more than six months to 340 basis points on Thursday, with high-yield volatility gauges hitting their highest since November 2023.
Overseas, stocks indexes caught a break on Friday as Wall Street futures stabilized, despite ongoing losses in some sectors in Europe wary of upcoming U.S. tariffs.
Chinese mainland shares jumped more than 2% on fresh domestic stimulus hopes. China’s financial regulators urged institutions to boost support for consumption, promising in a statement on Friday to relax consumer credit quotas and loan terms.
Meanwhile, the dollar ticked higher, and gold surged to a another record high.
Weekend reading suggestions
Here are some articles away from the day-to-day headlines that you may find interesting.
* Former Reserve Bank of India boss and ex-IMF chief economist Raghuram Rajan takes “Trumponomics’ to task in a post on Project Syndicate and asks if Trump’s agenda is worth it if the price is America’s ‘exorbitant privilege’.
* Washington’s Institute of International Finance takes a look at Trump policies today and frets about the sustainability of America’s debt trajectory, with its models showing tax hikes or spending cuts of over 2.5% of GDP needed to steady the ship.
* Voter regret? Reuters shows how DOGE job cuts are bringing pain to Trump supporters.
* The Bank for International Settlements’ quarterly review this week talked of the risks that markets and economies face because of “tariffs wrapped in uncertainty” and “the race between the growth trajectory and the debt trajectory”.
* This year’s Central Banking magazine prize for economic research at central banks goes to Adrian, Boyarchenko and Giannone for their work on ‘growth at risk’ models and the use of financial conditions gauges to predict downturns.
* As European defence and fiscal policies have been transformed this year and defence stocks have soared, Reuters reporters show how many of Europe’s money managers are reviewing ESG policies to find ways to take part in the shift.
* In the meantime, former Airbus boss Tom Enders is urging Europe to prepare for the worst by leading the race to build armed robots.
* The messy world of sovereign debt restructuring and ‘odious debt’ turns to Syria, as explains Peterson Institute for International Economics’s Adnan Mazarei.
* Speaking of ‘odious debt’, some financiers are examining what may happen if those on a thrift drive at the U.S. Treasury look into the long-dormant unpaid British debts to America from World War One.
* As the world looks back at five years since the pandemic, many are still being impacted by it directly, as ThomsonReuters Foundation’s Emma Batha explains with her feature on “UK parents quit jobs to care for children with long COVID”.
Chart of the day:
Next week brings a sweep of major central bank meetings that would normally hold world markets in thrall. But the scale of U.S. policy uncertainty and an unfolding global trade war mean the monetary easing of the past year will likely come to a halt as central bankers move to the sidelines and consider the fallout.
Today’s events to watch:
* University of Michigan March consumer sentiment survey; Canada January manufacturing sales
* European Central Bank board member Piero Cipollone speaks
* US corporate earnings: Hudson Global, Drilling Tools, WeRide, GoGo
* NATO Secretary General Mark Rutte in Washington
(By Mike Dolan, editing by Anna Szymanski; mike.dolan@thomsonreuters.com)
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