Trump considers relief on auto tariffs

General market commentary

US and global equities finished broadly higher yesterday following the announcement of tariff exemptions for electronics, with smartphones, computers, and semiconductors no longer subject to reciprocal tariffs. The move provided a temporary reprieve from the escalating trade war, lifting investor sentiment, especially in small- and mid-cap shares, along with the tech-heavy Nasdaq. However, optimism remained cautious after comments suggesting these exemptions could be short-term, with a separate tariff framework for semiconductors expected in the coming months. Support also came from a stabilising bond market, as the 10-year Treasury yield dropped to 4.38%. US consumer sentiment was impacted by rising inflation expectations, with the Federal Reserve warning that tariff-induced inflation could have long-lasting effects on employment and economic output.

As the earnings season heats up, markets are poised to shift focus towards corporate results, with analysts revising Q1 earnings growth estimates down to 7.3% from 18.2% in Q4 2024. Despite lower growth projections, sectors such as healthcare and technology are expected to show positive earnings, while energy and materials may see declines. While tariff risks persist, valuations have become more attractive, with major indices trading at or below their 10-year historical averages. This market correction may present an opportunity for disciplined, long-term investors, as history suggests strong returns following heightened volatility.

Latest market and economic update

Most Asian equity markets rose on Tuesday, buoyed by hopes of further U.S. tariff exemptions, particularly in tech and auto sectors, although gains were tempered by ongoing trade tensions and low volumes ahead of the Good Friday holiday. Chinese markets lagged, fluctuating amid escalating trade disputes with the U.S. and caution ahead of key GDP data due Wednesday.

US equity futures fell overnight as uncertainty over President Trump's shifting stance on trade tariffs continued to weigh on investor sentiment, despite recent gains on Wall Street. While positive Q1 earnings provided some support, concerns over the economic impact of the trade war and the Federal Reserve's response to potential recession risks kept markets on edge.

European equities closed higher on Monday, with the pan-European STOXX 600 rising 2.7%, driven by positive sentiment following U.S. President Trump’s tariff exclusions on Chinese imports. Key gainers included Deutsche Bank, Standard Chartered, and Infineon, while Novo Nordisk and BNP Paribas also saw notable increases.

The US dollar remained steady on Tuesday but stayed close to a three-year low against the euro, which reached a high of $1.1474 last week. Despite a slight rebound, the dollar continues to face pressure from ongoing tariff uncertainties and investor concerns, with its value down over 4% this month.

Oil prices edged higher in Asian trading today, supported by President Trump's potential pause on auto tariffs and a rebound in China’s crude imports, while markets also focused on U.S.-Iran nuclear talks. However, OPEC revised down its global oil demand growth forecast for 2025, citing weaker-than-expected data and the impact of U.S. trade tariffs.

Equities on the move

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

LVMH’s first-quarter revenue fell 3%, missing expectations due to weaker sales in the U.S. for beauty products and drinks, and continued sluggishness in China. The luxury giant, hit by trade tensions and recession fears, saw declines across several divisions, particularly in its fashion and leather goods sector, and faces challenges from President Trump’s tariff policies

Goldman Sachs exceeded first-quarter profit expectations, driven by a 27% rise in equities trading revenue amid market volatility, but CEO David Solomon warned of a challenging environment due to tariff-related uncertainties. Despite strong trading, investment banking fees declined, and concerns over global trade tensions and a slower IPO recovery weighed on the outlook.

BNY Mellon exceeded first-quarter profit expectations, reporting adjusted earnings of $1.58 per share, driven by growth in assets under custody and higher fee-based revenue. The bank's total fee revenue rose 3% year-on-year to $3.40 billion, while assets under custody increased by 9% to $53.1 trillion.

Nvidia announced plans to build AI supercomputers entirely in the U.S. for the first time, securing over one million square feet of manufacturing space in Arizona and Texas, with production set to begin in 12 to 15 months. The company aims to produce up to half a trillion dollars of AI infrastructure in the U.S. within four years, boosting supply chain resilience and job creation.

Pfizer announced the discontinuation of its chronic weight management drug candidate, danuglipron, after a review of clinical data and regulatory feedback, despite earlier positive results. The decision followed concerns about potential liver injury in a trial participant, though Pfizer remains committed to advancing other obesity treatments in its pipeline.

Lowe’s has agreed to acquire Artisan Design Group for $1.33 billion from Sterling Group to expand its offerings for professional customers amid slower demand for home remodels and construction. The deal, expected to close in Q2 2025, will be funded with cash and includes Artisan’s $1.8 billion in revenue and 3,200 installers across 18 states.

Apple led global smartphone sales in the first quarter, with strong demand for the iPhone 16e in markets like Japan and India, despite flat sales in the U.S., Europe, and China. This growth came amid ongoing trade tensions and U.S. tariffs, which prompted Apple to expedite shipments to avoid potential duties, while competitors like Samsung and Xiaomi followed in market share.

The German government acknowledged the competition regulator's approval of UniCredit's increased stake in Commerzbank but reiterated its support for the bank's independence. Despite this, the government expressed opposition to UniCredit's approach, highlighting concerns over hostile takeovers of systemically important banks.

Palantir's shares rose 4.6% yesterday, after NATO acquired its AI-powered military system, the Palantir Maven Smart System NATO, to enhance warfighting capabilities. The system, which will be integrated into NATO’s operations within 30 days, aims to improve intelligence fusion, targeting, and decision-making through advanced AI, including machine learning and large language models.

Hertz Global confirmed a data breach involving its vendor, Cleo Communications, exposing customer details such as contact info, credit card, and driver’s license data. The company found no evidence its own network was affected or that the data was misused.

Atlas Holdings is in advanced talks to acquire banknote printer De La Rue for around 130 pence per share, with an announcement expected soon. The deal excludes De La Rue’s authentication division, which is set to be sold to Crane NXT for £300 million.

Sony has raised the price of its PlayStation 5 by around 25% in Europe, the UK, Australia, and New Zealand, citing inflation and economic challenges. The price hike follows recent tariffs in the US, though the PS5 Pro model remains unaffected.

Morgan Stanley upgraded BYD to "overweight," raising its price targets due to the company's strong fundamentals, growing market share, and technological advancements in the electric vehicle sector. The firm expects BYD to contribute over 30% of global EV growth by 2025, with potential to rival Toyota in overall vehicle sales by the end of the decade.

JPMorgan lowered its target for TSMC shares, citing concerns over tariffs and the global slowdown, while revising its 2025 revenue and EPS forecasts. Despite this, JPMorgan expects continued long-term growth in datacenter AI and a potential short-term rebound in TSMC’s shares.

Deutsche Bank upgraded Peloton to "Buy," arguing the shares have been excessively punished despite tariff concerns and consumer spending pressures. While lowering revenue and EBITDA forecasts, the bank sees Peloton’s earnings growth as more stable than the recent 30% share price drop suggests, expecting strong performance due to its subscription-led model.

Baird upgraded Atlassian to "Outperform," citing its strong platform strategy, momentum in generative AI, and attractive valuation offering nearly 30% upside. The firm highlighted Atlassian's growing enterprise appeal, positive customer feedback, and the integration of Rovo, its AI assistant, as key factors driving future growth and engagement.

UBS downgraded Stellantis to "neutral," reducing its price target due to the impact of US auto tariffs and market share losses, particularly in North America. The company faces negative free cash flow and lower earnings forecasts, with restructuring costs in North America adding further uncertainty to its near-term prospects.

Upcoming data and events

Today, financial markets will closely watch key economic data, including the New York Empire State Manufacturing Index, import/export price indices, and the weekly API crude oil report. In addition, earnings season continues, with major reports expected from Bank of America, Citigroup, Johnson & Johnson, Vinci, and Publicis.

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