Equities surge as Trump pauses tariffs

General market commentary

US equities surged across the board following President Trump’s announcement of a 90-day pause on new tariff hikes for most countries, with the exception of China, where tariffs were raised to 125%. This move offered a welcome reprieve from escalating trade tensions, helping to lift investor sentiment and spark a relief rally. The pause, which lowers tariffs to a baseline of 10%, alleviated some of the uncertainty that had plagued markets, and allowed for the prospect of a more predictable trade environment. The rally was particularly strong in tech shares, with major indices such as the Nasdaq soaring by over 12%, its biggest gain since 2001.

In addition to the tariff developments, the release of the Federal Reserve's meeting minutes from last month underscored concerns about inflation and slower growth. Policymakers were largely unified in their view that the economy faced risks of higher inflation, but the minutes also indicated a potential willingness to adjust policies based on economic conditions. Investors will be watching the upcoming consumer price index data closely for further clues on inflation and the Fed's next steps. With the market still reeling from recent volatility, the VIX index spiked above 50 earlier this week, highlighting the extent of the uncertainty. However, historical trends suggest that such high levels of market volatility can present opportunities, as they are often followed by positive returns over the next 12 months.

As markets stabilise, it’s crucial to remain focused on diversification and long-term investment strategies. Despite the recent volatility, bear markets are typically followed by longer bull-market periods with higher returns. With equities having already priced in much of the negative news this year, the potential for recovery is significant if a recession fails to materialise. Investors should continue to focus on diversified portfolios and avoid trying to time the market, a strategy that has historically outperformed attempts at short-term market predictions.

Latest market and economic update

Asian equities surged on Thursday, following Wall Street’s strong rally, with Japan’s Nikkei and South Korea’s KOSPI leading the rebound. Chinese markets also rose despite the heightened trade tensions, supported by state-backed investments, while data showed China’s consumer inflation fell more than expected in March, reflecting weaker domestic demand, and producer prices also declined, signalling ongoing economic pressures.

US equity futures were modestly higher overnight, as markets awaited further developments following President Trump’s announcement of a 90-day pause on certain tariffs. Investors are focusing on the broader economic outlook, with key attention on upcoming inflation data and the impact of trade tensions, particularly with China, on global growth.

European equities saw a sharp decline on Wednesday, with the STOXX 50 dropping 3.1% and the STOXX 600 falling 3.7%, driven by escalating trade tensions after China raised tariffs on U.S. goods to 84%. The market was also impacted by President Trump's comments on potential new tariffs, while the European Commission approved retaliatory tariffs on US products, adding to the growing uncertainty.

The US dollar index held steady around 102.8 on Thursday following a rebound in the previous session, supported by President Trump’s 90-day tariff pause for non-retaliating countries. Meanwhile, the euro traded at 1.0982 against the dollar, with investors closely watching upcoming inflation data for further indications on the Federal Reserve’s policy direction.

Oil prices dipped this morning, with Brent crude falling 1.18% to $64.71 per barrel, as rising tensions from President Trump’s tariff hike on China to 125% overshadowed the temporary tariff reprieve for other countries. Despite short-term gains from supply disruptions like the Keystone Pipeline shutdown, uncertainty around global growth and China's economic outlook weighed on demand, leaving oil prices vulnerable to further downward pressure.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Delta Air Lines pulled its 2025 financial forecast and projected lower-than-expected profits for the current quarter, citing stalled travel demand and the economic uncertainty caused by U.S. tariffs. To protect margins, the airline will defer aircraft deliveries affected by tariffs and cut capacity, which reassured investors despite the broader weakening in consumer and business confidence.

Walmart reaffirmed its commitment to its "everyday low price" strategy and maintained its full-year sales and income growth forecasts, despite concerns over rising prices from U.S. tariffs, particularly on imports from China. Although the company acknowledged the impact of tariff uncertainty on first-quarter income, its shares rose after President Trump announced a 90-day pause on tariffs, and Walmart remained confident in navigating the current environment.

Volkswagen's operating results for the first quarter fell to €2.8 billion, down from €4.6 billion last year, largely due to valuation changes from U.S. tariffs, diesel issue provisions, and costs linked to carbon regulations and restructuring its software unit. Despite this, the company maintained its full-year sales growth forecast of up to 5%, excluding potential tariff impacts.

Amazon is reportedly considering a $15 billion expansion plan to build around 80 new logistics facilities in U.S. cities and rural areas, focusing on delivery hubs and some automated fulfilment centres, although the projects are still under discussion. Additionally, the company has cancelled orders for several products made in China and other Asian countries in response to recent U.S. tariffs, which has raised concerns among vendors.

Alphabet reaffirmed its commitment to investing $75 billion this year to expand data centre capacity and support its AI developments, including the Gemini model, despite the uncertain payoff and potential cost increases from a global trade war. The company aims to enhance its core offerings, such as Search, while advancing AI services for both consumers and enterprise customers.

Capri Holdings is in talks with Prada over a potential $1.4 billion deal for Prada to acquire Versace, although the agreement is still awaiting final approval from the Versace family amid market volatility and tariff uncertainties. The deal, which could be announced as early as Thursday, faces significant challenges due to the impact of the ongoing trade war on the luxury retail sector.

Benchmark added Tesla to its "Best Ideas" list, viewing the recent equity pullback and sales decline as overblown given the company's near-term catalysts and long-term growth potential. While lowering its price target to $350, the firm remains optimistic about Tesla's new vehicle release and robotaxi launch, alongside its ambitions in robotics, despite acknowledging risks like political pressure and rising competition.

Bank of America analysts highlighted that shifting iPhone production to the U.S. could increase costs by up to 25%, with a 90% surge possible if tariffs are applied to imported components. While Apple could explore strategies like diversifying production to India and adjusting pricing, the bank does not foresee immediate changes to its production strategy, focusing instead on long-term supply chain diversification.

Evercore ISI initiated coverage on Visa, Mastercard, and PayPal with In-line ratings, highlighting them as defensive plays in a volatile market, but noting concerns about valuation and execution risks. While Visa is seen as a long-term growth stalwart, Mastercard is favoured for its valuation, and PayPal's turnaround hinges on successful execution amid macroeconomic challenges.

Monness, Crespi, Hardt downgraded Fiserv to Sell from Neutral, citing concerns over high valuations, particularly for its Clover point-of-sale unit, amid weakening consumer trends and softening discretionary spending. The analysts set a $145 price target, warning that the shares do not adequately reflect the rising downside risks in a slowing macro environment.

BofA Securities upgraded Samsung Electronics to "buy" from "neutral" and raised its price target, citing better-than-expected earnings, a low valuation, and reduced concerns over potential US tariffs. The analysts expect continued growth driven by memory price recovery, cost cuts in smartphones, and stronger demand for DRAM and HBM3e, with opportunities for market share gains in Europe and emerging markets.

Deutsche Bank downgraded several European luxury shares and reduced target prices, citing growing uncertainty over sustained demand recovery and a weaker macroeconomic environment. While it downgraded names like Richemont, Kering, and LVMH, it upgraded Hermès to "buy" due to its stronger resilience, with Burberry also identified as a top pick.

Bernstein has highlighted Vinci as one of its top picks for Q2 2025, with an "outperform" rating and a target price of €146.7, citing its strong market position, rising earnings, and solid cash flows. They believe the current share price undervalues Vinci’s assets, particularly its defensive toll roads and contracting units, presenting an attractive opportunity for investment.

Upcoming data and events

Today's key data releases, including the Consumer Price Index (CPI), Initial Jobless Claims, and speeches from Federal Reserve officials, are expected to influence market movements. Additionally, earnings reports from companies such as CarMax and Tesco will be closely watched as traders prepare for the day's market action.

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