Tariff talk to intensify as April deadline approaches

US equities saw a precious support from the Federal Reserve (Fed) last week, as policymakers decided to downplay the impact of tariffs on inflation by saying that it would be ‘transitory’ and slowed the pace of QT. As such, the S&P500 closed last week 0.51% higher avoiding further losses into the correction zone despite gloomy outlook from FedEx, Micron Technology and Nike. Nasdaq gained some 0.25% over the week, the Dow Jones rebounded from the 50-week moving average to close the week 1.20% higher, small and mic-cap stocks also recovered. Across the Atlantic, Thursday and Friday were not cheery, as some investors decided to take profit after the German government passed a bill to expand infrastructure and security spending by boosting debt, and before the US tariffs are due to become effective from April 2nd. The Chinese equities, on the other hand, gave back some of the government-stimulus-boosted gains.

This is were we are right now. The week will probably be heavy with tariff talk. The early-week echoes are positive with rumours that the upcoming tariffs would be more measures than previously thought. But, who knows?

PMI numbers

Investors will be watching the March preliminary PMI numbers today. The contraction in Japan’s manufacturing PMI showed an unexpected acceleration of the contraction in the manufacturing activity in early March. Australian figures showed faster expansion in both services and manufacturing. The European figures could confirm an improved set of numbers, as well, due to the positive impact of massive government spending on overall mood across the old continent, while the US numbers are under the threat of a sharp fall in US growth expectations. The latest US GDP update is due Thursday and is expected confirm a slowdown in US economic growth from 3.1% to 2.3 in Q4. Atlanta Fed’s GDPNow Forecast has improved last week but still points at around 1.8% contraction in Q1 of this year.

The US dollar is softer this morning after a three-session rebound that let the major currencies like the euro and sterling take a breather after an impressive rally since the beginning of the year. But – unlike the expectations that the US tariffs would send the euro to parity against the greenback – the outlook for the euro is now positive on improved growth expectations due to the spending boost, and sterling is also challenging the 1.30 mark. But gains in sterling are vulnerable ahead of this week’s budget statement that will confirm that Rachel Reeves is left with less than £10bn of budget headroom to boost growth – meaning that either she will hint at higher taxes or less spending. Both are negative for growth. And in an environment of increased focus on growth expectations from the FX traders, sterling may struggle to clear the 1.30 offers, even against a globally weakened US dollar.

In commodities, gold is in a good position to benefit from tariff shenanigans, while oil remains under the pressure of weak – and weakening – global growth expectations.

CoreWeave IPO

CoreWeave, an Nvidia-backed cloud computing company specialized in GPU infrastructure for AI, will go public on the Nasdaq this week. The IPO pricing is scheduled for Wednesday, the company is expected to start trading on Thursday under the ticker CRWV. The company is expected to offer 49 mio shares priced between $47 and $55 a share, and raise up to $2.7bn. The company announced a net loss of more than $800mio in 2024 but their revenue reached $1.92bn and they secured a 5-year contract worth nearly $12bn with OpenAI and count Microsoft among their big clients. The problem is, it has a handful of big clients and a lot of debt to repay, and the AI craze has been losing momentum since the beginning of the year. The CoreWeave IPO will be an interesting barometer on how excited the tech investors still are despite a more than 20% pullback in Magnificent 7 stocks since the December peak. Nvidia lost up to 30% since its January ATH following an almost 1000% rally between 2023 and the end of the 2024. A set of strong earnings and robust forecast, the announcement of a chip that’s even faster than Blackwell – the next generation chip that started selling a few months ago – and partnerships with companies that are not necessarily in the technology sector couldn’t help reverse losses. Investors flocked into the Chinese tech stocks instead on realization that it’s possible to build AI models on cheaper chips and Chinese-made chips. This week, all eyes are on the Chinese Boao Forum – the Chinese version of Davos – where Xi Jinping will meet with the foreign company CEOs in an effort to strengthen investor confidence to keep the positive momentum going.