SINGAPORE: Shares struggled for direction on Wednesday and oil prices slid as relief over a potential easing of global trade tensions was offset by a worsening economic outlook and dour signals from corporates swept up by Donald Trump’s tariffs.
U.S. Treasury yields also languished near multi-week lows as traders raised bets of more rate cuts from the Federal Reserve to support the world’s largest economy.
Despite Trump’s move to soften the blow of his auto tariffs and signs of progress in broader trade negotiations, details remain scant, with Commerce Secretary Howard Lutnick saying he had reached one deal with a foreign power.
Adding to the tariff anxiety, investors were also grappling with deteriorating U.S. data as Trump’s hefty tariffs rippled across businesses and consumers at home.
“We raise the probability of a prolonged economic stagnation in the coming months, meeting the criteria for a recession, to 50%,” said David Kohl, chief economist at Julius Baer.
“The rising probability of economic stagnation in the U.S. is entirely due to the exogenous forces of an erratic and restrictive economic policy with arbitrary tariffs, disruptions to public spending, changing incentives, and an unsustainable fiscal stance.”
Data on Tuesday showed the U.S. trade deficit in goods widened to a record high in March as businesses stockpiled ahead of Trump’s tariffs, suggesting trade was a large drag on economic growth in the first quarter. First quarter GDP data is due later in the day.
U.S. consumer confidence also slumped to a nearly five-year low in April.
The precarious state of the global economic outlook, particularly in the United States, left Wall Street futures struggling to sustain gains made during the cash session overnight.
Nasdaq futures were down 0.6% in Asia, while S&P 500 futures fell 0.4%.
EUROSTOXX 50 futures swung between slight losses and gains, while MSCI’s broadest index of Asia-Pacific shares outside Japan added just 0.1%.
The Nikkei tacked on 0.15%.
The fallout from Trump’s trade war reverberated further through the corporate world as delivery giant UPS said it would cut 20,000 jobs to lower costs, while General Motors pulled its outlook and delayed its investor call, joining a list of companies that have ditched forecasts for 2025 or slashed outlooks.
“You start to see companies… making some statements about low visibility, the unwillingness or inability to sign long-term contracts, to make long-term plans – that’s a very slippery slope,” said Fabiana Fedeli, M&G’s chief investment officer of equities, multi asset and sustainability at a media roundtable on Monday.
Oil prices also extended their steep losses from the previous session on worries about global growth and its impact on demand.
Brent crude futures were down 0.28% to $64.07 a barrel having tumbled 2.4% overnight. U.S. crude lost 0.35% to fetch $60.21 per barrel, after a 2.6% drop on Tuesday.
Spot gold was steady at $3,316.11 an ounce.
Data dump
U.S. growth figures aside, the release of the core PCE price index – the Fed’s preferred measure of inflation – is also due later on Wednesday, ahead of jobs data at the end of the week.
Payrolls are seen rising 130,000 and inflation is expected to ease, but there is much more uncertainty about GDP with the median forecast for a meagre 0.3% annualised growth.
Markets are now pricing in 97 basis points worth of rate cuts from the Fed by December, up from about 80 bps early last week.
That has in turn pushed U.S. yields down, with the two-year Treasury yield at a three-week trough of 3.6400%.
The benchmark 10-year yield last stood at 4.1580%, also its lowest since early April.
In the foreign exchange market, the dollar steadied on Wednesday, as a selloff in the U.S. currency hit pause as traders considered the prospects for a negotiated resolution to the tariffs.
The dollar last bought 142.29 yen while the euro was some distance away from an over three-year top at $1.1383.
Asia shares edge up; dollar at mercy of US trade whims
The Aussie extended early gains to trade 0.3% higher at $0.6401 after consumer prices rose slightly more than expected in the first quarter.
Elsewhere, data from China showed manufacturing activity contracted in April, reversing two months of recovery and keeping alive calls for further stimulus from Beijing.
Chinese shares opened on a muted note in line with the broader market. The CSI300 blue-chip index was up 0.12%, while Hong Kong’s Hang Seng Index (.HSI), opens new tab slid 0.08%.
The onshore yuan eased slightly to 7.2736 per dollar .
“In light of tariffs, we have revised down our 2025 and 2026 (China) GDP growth forecasts to 4%, assuming additional stimulus of 2.5% of GDP, and now envisage more sustained deflationary pressures over this year and the next,” said economists at Societe Generale in a note.
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