Tariff Regime
Market turmoil continued over the week, but a clear reversal to the prior week with equities markets rallying hard as the United States Administration looked to defer the reciprocal tariff regime for ninety days. The ‘on-off’ reciprocal tariff regime set by the United States continues to see financial markets struggle to gain a foothold.
The most obvious example of this has been the moves in bond markets as yields pushed higher over the week reflecting concern about the likely impact of the proposed tariff regime on the global growth outlook, but equally, the increasing reduced confidence around the United States. Investors are now starting to pivot away from the United States given the chaotic nature of the United States’ trade policies, which has the potential to further upend the defensive nature of bond markets, particularly if some of the largest holders of United States Treasuries (that is, China) look to sell down positions as the impact of any tariff regime take hold.
Bond Markets
For the United States, rising bond yields will only add to market risks over the medium term that has potential to spill over into other sectors of the economy, and it is no surprise to see the gold price continue to push towards record levels (plus twenty percent quarter-on-quarter). The uncharacteristic moves in bond markets given the macroeconomic backdrop will remain a key focus in relation to the overall stability of financial markets. While central banks have remained on the sidelines, continued volatility in bond markets may require some level of intervention to ensure ongoing stability and normalcy of market operations.
China & Australia
On the data front, the main focus will be on manufacturing reports out of the United States alongside a raft of housing and retail sales data. In China, the release of first quarter two thousand twenty-five gross domestic product data (forecast five point two percent year-on-year, one point four percent quarter-on-quarter) along with export/import trade data and retail sales (forecast four point three percent year-on-year) will further highlight the outlook for tariffs, while in Australia, the release of employment data will reflect the overall state of the domestic jobs market. Overall, we maintain a cautious outlook with policy uncertainty at extreme levels.
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