What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets

It's Friday, so today I'll provide a quick overview of what's happening in global markets and then offer you some weekend reading suggestions away from the headlines.

I'd love to hear from you, so please reach out to me at [email protected].  

Today's Market Minute

* Trump's tariffs have sown fears of trade wars, recession and a $2,300 iPhone.

* How many people does it take to slap a tariff on a penguin? One. Donald Trump's formula for calculating his tariffs mean even remote, frozen islands inhabited solely by the little birds are getting hit by those levies.

* Japanese banks are the latest casualty in the market turmoil that Trump's tariffs have unleashed, with a sector index in Tokyo staging its biggest one-day fall since last August.

* French President Emmanuel Macron has called for European companies to suspend planned investment in the US after Trump's announcement of sweeping global tariffs on American imports.

* Trump's tariffs are worrying some at home too. One US Senate Republican is pushing to require congressional approval for new tariffs.

'Magnificent' bear

The still ongoing tariff-inspired rout on Wall Street and in stock markets around the world centres heavily on the once 'Magnificent Seven' megacap U.S. tech stocks, which are now likely in the front line of the global trade war.

Thursday saw the biggest one-day losses for U.S. equity indexes since the pandemic shocks of 2020, with drops of 4-7%. Popular funds tracking the 'Mag 7' tumbled in time, losing 7% on the day and clocking a 25% drop from December's record highs. The group is now in a technical bear market for the first time since it emerged two years ago.

The 'Mag 7' epitomized the "U.S. exceptionalism" theme for investors around the world, so many suspect this rapid reversal may be emblematic of how the trade shock will unfold. Europe, for one, sees Big Tech as a legitimate target in likely tariff retaliation, as the U.S. runs a trade surplus in services and digital-related trade with the region. 

French President Emmanuel Macron called on European firms to suspend U.S. investments until negotiations get underway.

With U.S. President Donald Trump claiming his trade plans are "going well", U.S. and global recession fears are mounting. In a note entitled "There will be Blood", JPMorgan on Thursday raised its chances of a worldwide economic recession this year to 60% from 40%.  

Trade-related downturn fears were further reinforced by slowing service sector readings from ISM's March survey on Thursday.

U.S. stock futures show no sign of recovery early on Friday and look set to extend losses by another 1% before the week is out, as the VIX 'fear index' rises above 30 for the first time since last August's yen-related volatility explosion. 

Recession worries also pummeled bank stocks around the world, with Japanese banks hit by up to 10% on Friday.  

In turn, futures markets are now pricing in four Federal Reserve interest rate cuts this year. Ten-year Treasury yields fell below 4% for the first time in six months, with U.S. corporate 'junk' spreads rising above 400 basis points for the first time since 2023.

Hit by global demand fears and OPEC production hikes, U.S. crude oil saw prices fall to their lowest since 2023. 

The dollar's plunge this week is perhaps the most startling of all the big moves as it normally gets a 'safe haven' boost in times of stress. The break with this pattern suggests foreign investors might be fleeing from U.S. assets at large. The greenback did perk up somewhat from the year's lows on Friday, however.   

All eyes will be on Fed Chair Jerome Powell when he speaks on Friday. Currently, Fed officials still appear to see no urgency to cut rates, as the jobs market remains firm and the inflation picture continues to be murky due to tariffs.

Friday's March payrolls are being released today, but like so many upcoming economic releases, they will not be overly useful because they will not capture the implications of this week's tariff shock. Profit warnings and guidance cuts from the first-quarter corporate earnings season starting next week will probably be more significant.

Weekend reading suggestions

Here are some articles away from the day-to-day headlines that you may find interesting.

* Family fortunes? As World Liberty Financial raised more than half a billion dollars, President Donald Trump's family took control of the crypto venture and grabbed the lion's share of those funds, aided by governance terms that industry experts say favor insiders. Reuters correspondents Tom Wilson, Tom Bergin, Lawrence Delevingne and Michelle Conlin look into the issue surrounding World Liberty crypto tokens.

* Not-so-free markets? This month's edition of the International Monetary Fund's Finance & Development magazine has a piece from Oren Cass, founder of the conservative think tank American Compass. He critiques interpretations of Adam Smith's famed 'invisible hand' reference from his seminal book "The Wealth of Nations". With an invisible nod to the week's events, he argues a post-World War Two obsession with unfettered global capitalism and free trade was misplaced and based on a misunderstanding of Smith.

* Forgone conclusion? Writing for Project Syndicate, economists Paola Subacchi and Paul van den Noord examine the risk to U.S. Treasuries from foreign investor flight and reckon that the 'convenience yield' from holding U.S. government debt should prevent overseas holdings from dissipating rapidly.

* Elon-gated? Tesla's quarterly sales plunged 13% to the weakest in nearly three years, hurt by a backlash against CEO Elon Musk's politics, rising global competition and people waiting for a refresh of its highest-selling electric vehicle Model Y. Reuters photographers capture just some of the visible protests against the Tesla boss seen at home and abroad in recent weeks.

* Dude, where's my car? Soaring demand for Toyota's gasoline-electric hybrids has left suppliers struggling to keep pace, leading to shortages of parts and months-long waits for car buyers. Reuters correspondents Aditi Shah and Norihiko Shirouzu report how stocks of hybrids are low at Toyota dealers across major markets, including the U.S., Japan, China and Europe.

Chart of the day 

Historically, the borrowing premium for risky U.S. corporate debt still seems well contained, but trade-related recession fears are starting to bite in a high-yield bond market that was recently priced for perfection. 'Junk' spreads topped 400 basis points on Thursday for the first time since 2023, with measures of high yield volatility hitting their highest in two years as stocks tumbled. While falling Treasury yield benchmarks are a factor, the expanding spreads also reflect worries that a recession and idiosyncratic trade and supply-chain stress could lead to rising default rates.  

Today's events to watch

* U.S. March employment report; Canada March employment report 

* Federal Reserve Chair Jerome Powell and Fed Board Governors Christopher Waller and Michael Barr speak 

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.