26/05/2025
Markets Rebound as Tariff Delay Eases Tensions Amid Inflation and Earnings Focus
Weekly Financial Market Summary: Outlook and Key Drivers
Markets opened the week with a rebound in risk assets, driven by a delay in the implementation of proposed US tariffs on European Union imports. European equities, including the DAX and CAC 40, posted solid gains, with German automakers such as Mercedes-Benz, BMW, and Volkswagen all rising over 1%. US equity futures also advanced, reversing last week’s sell-off that had been triggered by escalating trade tensions and concerns over fiscal policy. The Stoxx Europe 600 index recovered from earlier losses, while the S&P 500 and Nasdaq 100 futures climbed more than 1%.
The temporary easing of trade tensions followed a shift in stance by President Trump, who announced a delay in the imposition of 50% tariffs on EU goods from June 1 to July 9, following discussions with European Commission President Ursula von der Leyen. The back-and-forth nature of Trump’s tariff threats and subsequent reversals has injected volatility into markets, contributing to investor fatigue and concerns about eroding sentiment. Additionally, Trump’s threat of a 25% tariff on smartphones not produced in the US, including Apple and Samsung products, has heightened uncertainty for multinational firms.
US Treasury yields surged earlier last week due to concerns over the deficit implications of Trump’s proposed tax policies, with the 10-year yield breaching 4.6% and the 30-year yield topping 5.1%, levels not seen since 2007. However, the rise in yields partially reversed on Friday, as renewed tariff threats prompted a flight to safety. Interest rate-sensitive stocks, particularly those in the Russell 2000, underperformed, falling nearly 4% compared to a 2.6% decline in the S&P 500.
The dollar weakened across the board, with Bloomberg’s dollar spot index approaching its lowest level since July 2023. Despite a continued bearish stance, speculative traders have trimmed short dollar positions. Meanwhile, gold prices saw upward momentum amid geopolitical tensions and tariff risks, prompting Citi to raise its short-term price target to a range of $3,100–$3,500 per ounce.
Crude oil prices edged slightly higher after the tariff delay, though gains were capped by oversupply concerns. Reports suggest OPEC+ may increase production in July. Brent and WTI crude futures were up marginally, trading near $64.19 and $61.52 per barrel, respectively. Additionally, signs of port congestion in northern Europe raised concerns over potential maritime disruptions tied to trade tensions, which could exert upward pressure on global shipping costs.
Corporate earnings remain in focus, with Nvidia’s report on Wednesday, May 28th, expected to serve as a barometer for growth stocks and the broader tech sector. The chipmaker, a key player in the AI boom, is projected to post adjusted EPS of $0.88 on revenue of $43.3 billion, significantly above the $0.61 EPS and $26 billion revenue from a year ago. Given Nvidia’s outsized contribution to the S&P 500’s recent gains, its outlook may influence broader market sentiment. Other notable earnings include reports from Okta, Salesforce, and Costco.
On the macroeconomic front, the highlight will be the release of April’s core Personal Consumption Expenditures (PCE) price index on Friday, May 30th, the Federal Reserve’s preferred inflation metric. Consensus expectations indicate a monthly increase of 0.1%, with the annual rate projected at 2.5%, a slight deceleration from March. Market participants will be closely watching these figures for indications of inflationary pressures stemming from trade policy changes.
Despite lingering policy uncertainty, corporate earnings have broadly outperformed. With over 90% of S&P 500 constituents having reported, earnings growth for Q1 is tracking at 12.9% year-over-year, surpassing earlier forecasts. The low rate of EPS guidance withdrawals indicates resilience among US firms, contributing to continued bullishness among equity strategists, some of whom maintain optimistic year-end targets for the S&P 500.
In sum, while the delay in tariffs has provided near-term relief to markets, persistent uncertainty around trade policy and fiscal dynamics continues to pose risks. Key events this week, particularly Nvidia’s earnings and the PCE inflation print, will be pivotal in shaping market direction.
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The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
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