Stocks tread with caution as Trump's tariff plans loom

Source: Reuters.

Investor focus in recent weeks has been firmly on the new round of reciprocal levies that the White House is due to announce on Wednesday at 2000 GMT and which are expected to take effect immediately after Trump announces them.

Trump has already imposed tariffs on aluminium, steel and autos, along with increased duties on all goods from China that have rattled markets as fears grow a full-blown trade war could trigger a sharp global economic slowdown.

European futures indicated a subdued open, with STOXX 50 futures down 0.27% and Germany's DAX futures 0.24% lower.

Asian stocks struggled for direction after a choppy US session. Japan's Nikkei was last up 0.25% after hitting its lowest level since September earlier in the session. South Korea's benchmark index was down 0.6%.

On Wall Street, the benchmark S&P 500 and the Nasdaq ended higher after losing ground earlier in the session. The Dow finished a shade lower.

"Nervousness is the dominant sentiment right now," said Ben Bennett, Asia-Pacific investment strategist at Legal & General Investment Management.

"Investors are hoping for some clarity, and perhaps the start of the deal making phase. But tariffs are already weighing on business sentiment, and this will probably feed through into lower global economic activity in the coming months."

China's blue-chip index was up 0.14%, while Hong Kong's Hang Seng was little changed.

"Trump has called 2 April 'Liberation Day' but it is unlikely that investors will truly be liberated from tariff uncertainties," said Vasu Menon, managing director of investment strategy at OCBC.

"If countries retaliate, Trump could up the ante - this possibility will probably continue to keep investors nervous."

Soft data

Beyond the tariff news, investors are increasingly worried by signs of rising prices, slowing growth and cracks in the labour market.

Data showed US manufacturing contracted in March after growing for two straight months, while a measure of inflation at the factory gate jumped to the highest level in nearly three years amid rising anxiety over tariffs on imported goods.

A report from the Labour Department also showed on Tuesday US job openings fell in February by 194,000 to 7.568 million as uncertainty surrounding tariffs squelched labour demand.

The yield on the benchmark US 10-year Treasury note was at 4.197% in Asian hours having slid to 4.133% on Tuesday, its lowest level since 4 March.

The currency markets remained muted with most pairs trading in tight ranges. The euro was steady at $1.0792, while sterling changed hands at $1.29175. The yen was a shade weaker at 149.92 per dollar.

George Boubouras, head of research at K2 Asset Management, said the key for investors is to look through the noise and gauge the landscape for the second half of 2025, "when the US will roll out their next phase of policies which will include deregulation and tax cuts".

The spotlight though will remain on tariff details, especially after a media report said Trump's aides are considering a plan that would raise duties on products by about 20% from nearly every country, rather than targeting certain countries or products.

"We head into Trump’s moment to shine with many having already deleveraged to run as flat or neutral a position as they can in equity, the USD (dollar) and Treasuries." said Chris Weston, head of research at Pepperstone.

The price of gold, viewed as a safeguard against financial and political stress, remained well bid at $3,116.96 per ounce, up 0.2% and just below the record high touched in the previous session.

Gold has jumped 19% so far this year, adding to a 27% gain in 2024 that was its best annual performance in over a decade.

Oil prices were steady as traders awaited tariff news. Brent futures were little changed at $74.45 a barrel, while US West Texas Intermediate crude futures were at $71.21 per barrel.