Tuesday's Markets Update (April 1, 2025)

01 Apr 2025 by rate3

On Tuesday, stock indexes are mostly in the red ahead of the April 2nd self-inflicted tariffs. Factory activity contracted for the first time in 3 months, while prices soared to their highest levels in 3 years. Additionally, there was the sharpest deterioration of business conditions in 2 years, alongside a drop in job openings.

World's Markets:

European inflation eased to 2.2%, with a notable drop in energy prices, while food prices surged. At the same time, unemployment continued to fall to 6.1%, with the lowest level reached in Germany (3.5%) and the highest in Spain (10.4%). Meanwhile, the EU manufacturing sector has been improving for the past four months but still remains in contraction territory.
Spanish manufacturing fell to yearly lows (49.5) due to new orders as factory owners reduced their inventories in anticipation of lower sales ahead of the tariffs.
The situation in the manufacturing sector is even more severe in Italy, where production has continued to decline for 12 straight months.
France is in a slightly better position, supported by purchases from Africa and Asia; however, its production sector has also been in contraction for the past two years.
German producers are similarly stuck in a two-year downturn, although their situation is slowly improving as well.
Brazilian manufacturing continued to expand, albeit at a slower pace, as higher interest rates eased demand.
China's manufacturing rose to its highest level since November, with foreign sales growing the most in 11 months.
Commodities and Currencies:

Gold climbed to a new record of 3130 before easing on profit-taking, marking its best quarterly performance in 40 years (since 1986).
Crypto:

BTC, ETH, and SOL increased amid general confusion in the markets prior to the April 2 tariff disaster, which is expected to exceed the scope of the 1930 Smoot-Hawley tariffs that halved the country's exports, led to multiple bank insolvencies, and essentially started the Great Depression.
The State Of Markets: Mixed, the world's markets lack direction ahead of the April 2 tariffs announcement. Some traders are 'buying the news,' while most investors continue to de-risk in anticipation of a worldwide recession.

Details

FYI: The Smoot-Hawley Tariff Act of 1930 was a U.S. federal law that significantly raised import duties on a wide range of goods. The primary goal was to protect American farmers and industries from foreign competition during the early stages of the Great Depression. It was sponsored by Senator Reed Smoot and Representative Willis Hawley. The act was signed into law by President Herbert Hoover on June 17, 1930. Despite widespread opposition from economists who warned of its potential negative consequences, the bill passed. It dramatically increased tariffs on thousands of imported goods. Other countries retaliated by imposing their own tariffs on American goods, leading to a significant decline in international trade. While it didn't cause the Great Depression, the Smoot-Hawley Tariff Act is widely believed to have worsened its severity. The most significant impact was the sharp decline in international trade. Estimating the exact USD loss is difficult due to the complexity of the global economy at the time. However, it is known that U.S. exports fell from roughly 7B USD in 1929, to roughly 2.5B USD in 1932. This drastic drop shows the impact. Tariffs raised the prices of imported goods, making them less affordable for consumers. The decline in trade contributed to bank failures, particularly in agricultural regions. The act further strained the global economy, which was already struggling. The act was intended to protect domestic industries, and in the very short term, some industries may have seen temporary benefits. However, these were greatly outweighed by the negative consequences.