Swissquote Bank: Soft data and dim forecasts put fragile optimism to the test
Market sentiment somehow improved on news that Donald Trump would ease auto tariffs by lifting some levies on imported auto parts, and to avoid aluminium and steel levies stacking up alongside the rest of the tariffs—probably as a marketing move as he gave a speech in Michigan marking his 100 days in office. As a result, carmakers around the world and major US indices posted gains yesterday.
Part of the gains was also due to hope that US corporate earnings would be resilient to tariff uncertainty, that Scott Bessent is eyeing July 4th to pass a multi-trillion-dollar tax cut package to help improve the new administration’s plunging approval ratings, and that the Federal Reserve (Fed) would step in if things worsened. But the majority of the news was less than ideal—to say the least. So let me cite a few that caught my attention.
First, GM lowered its earnings guidance for the year citing tariff uncertainty, suspended a $4bn share buyback plan, and postponed its earnings call as it needed more clarity on tariffs before making additional statements. The tariff relief for carmakers helped GM recover most early losses, but the stock remained capped at its 50-DMA and the top of its November-to-date bearish trend channel.
Kraft Heinz cut its annual sales and profit outlook due to weakening consumer sentiment and the prospect of higher costs. Chipmaker NXP tanked nearly 7% after warning of a ‘very uncertain environment.’ UPS announced it will cut 20,000 jobs and close dozens of facilities. S&P Global lowered its revenue forecast, expecting that companies will delay debt sales due to highly uncertain market conditions.
Apple said it would produce iPhones in the US—good luck with that. Adidas said it would reflect tariff-led price increases in US prices. Amazon first suggested it could show the additional cost of tariffs on bills—like Chinese retailers do—but walked back the decision after facing the White House’s rage, which called the move ‘political’. Hilton lowered its earnings forecast, PayPal didn’t improve its forecast despite a stronger-than-expected quarter, while Spotify offered a muted outlook.
Then, Super Micro Computer posted softer-than-expected quarterly results after the bell, Snap flagged lower sales, and Starbucks' sales fell slightly faster than expected.
US futures are in the negative this morning.
The rest of the week will be crucial for Big Tech. Microsoft, Meta, and Qualcomm are due to release earnings today after the bell; Apple and Amazon report tomorrow. There are reports—pre-earnings—that Microsoft and Amazon could scale back spending plans due to an overestimation of AI demand that may have resulted in oversupply. Spending plans will be just as important as quarterly results. Hints of lower AI spending from the four biggest spenders globally (expected to spend over $300bn this year) could send markets back into bearish territory, while reiterating spending commitments could convince some investors to buy the dip—not knowing, however, how big a hit US Big Tech could take from the trade war, as Europe is now directly targeting these firms in retaliation against Trump’s tariff attacks.
Anyway, on the data front, the news isn’t brilliant either. US job openings fell in March, and the Atlanta Fed’s GDPNow forecast was revised down further to 2.7%—suggesting that the US economy may have contracted by 2.7% in Q1. The first official US GDP estimate is due today, with a Bloomberg consensus pointing to 0.4% growth—so expect some disappointment. But disappointment doesn’t mean a risk-off move. Since a sharp contraction has likely already been priced in, a weak number could lead to dip-buying on rising dovish Fed expectations.
Besides that, US ADP data and CPI updates from Eurozone countries will be in focus.
In FX, the US dollar is slightly better bid this week on signs that Trump is pulling back tariffs, but risks remain tilted to the downside. The EURUSD saw strong resistance into the 1.1420 level after data yesterday hinted at softer sentiment across the Eurozone: lower-than-expected GDP growth coupled with a higher-than-expected CPI print from Spain. Today, French and German numbers will be in focus. The euro needs strong growth and soft inflation to break the 1.15 resistance against the US dollar.
European equities, meanwhile, are enjoying a rare calm amid Trump’s attacks. The Stoxx 600 extended gains above the 200-DMA for a second straight session, yet trade negotiations with the US aren’t going in the right direction—which could limit enthusiasm as the index approaches a critical Fibonacci resistance.
Over in China, the CSI 300 remains particularly flat amid conflicting PMI numbers—official data suggests contraction, while the Caixin print hints at slight expansion in manufacturing activity. That, coupled with worsening global trade sentiment and a 3.76 million barrel rise in US weekly oil inventories, sent US crude below $60pb this morning. The outlook for oil and industrial metals remains negative given the gloomy global growth outlook.
In Australia, the latest CPI print came in stronger than expected, giving some support to AUDUSD. But the Aussie still needs reassurance that China is doing fine to clear its 200-DMA resistance.
Closer to home, UK food prices posted their biggest jump since January last year due to tax increases and a sharp rise in the national minimum wage, which hit supermarkets particularly hard. The 6.7% minimum wage hike fuelled UK inflation expectations and tamed dovish Bank of England (BoE) bets.
On the inflation spectrum, the euro appears to be in the best place—with potential disinflationary impact from a stronger euro and weaker energy prices. The UK sits in the middle, with an uncertain inflation and growth outlook as tax and wage hikes could offset disinflation from stronger sterling and softer energy. The US is in the worst place among the three, with sharply deteriorating growth and rising inflation expectations.
As such, the euro has the most positive outlook, followed by sterling, and lastly the US dollar.