Market Report: Market sentiment wanes again as courts give tariffs temporary reprieve
Derren Nathan, head of equity research, Hargreaves Lansdown: “When it comes to global trade right now the only certainty is uncertainty. Just a day after US courts halted the lion’s share of Trump’s recent tariff increases, judges have temporarily reinstated the new border taxes. Little wonder markets are struggling for direction. The Footsie is trying to lift its head above water this morning. But Asian stocks were generally down over night and US futures are pointing to a weak open later today. Investors on Wall Street are also weighing up slightly weaker than expected employment data. Last week’s initial jobless claims rose 14,000 to 240,000 with expectations now rising for an uptick in US unemployment which was last reported at 4.2%.
Markets will be hoping May’s core PCE inflation number out later today won’t stray much above annualised forecasts of 2.5%. However, the numbers need to be taken with a large pinch of salt given that they’re yet to feel the full impact of tariffs. Any sign of worsening inflationary pressure is likely to weigh on expectations for further interest cuts by the Fed this year which would be a worry given the inertia building in the economy. On that front there are also some vital signs for consumer health to read today. Personal spending growth is expected to have slowed from 0.7% to 0.2% while the University of Michigan Consumer Sentiment index is forecast to fall from 52.2 to 50.8.
The dollar has given up most of the gains it netted following the initial court ruling. America’s safe haven status has been steadily eroded in recent months reflected by rising bond yields and a weakening currency. The prospect of increased taxes on overseas investors in US assets could see a further flight of capital if Trump’s ‘big, beautiful tax’ bill clears the Senate unchanged next month.
Asset manager M&G has announced a strategic partnership with Japan’s third largest life insurer Dai-ichi Life HD. It seems a win-win for M&G who is set to gain at least $6bn of new business flows from the deal over the next five years, and potentially open up Japanese and Asian markets for its products. And with Dai-ichi looking to acquire 15% of M&G shares in the open market there’s likely to be a positive reaction in the share price. News that M&G’s business performance has been in line with expectations so far this year should also provide some comfort despite the volatile conditions the industry is enduring.
Brent crude prices have fallen to around $63.1 reflecting the mixed signals emerging from Washington over tariffs. A larger than expected 2.8mn barrel drop in US crude inventories helped steady nerves a little. But on the supply side Kazakhstan is resisting production cuts despite pumping out more than its agreed limits. Attention now turns to tomorrow’s OPEC+ meeting where producers are expected to give the nod to a further hike in output in July.”