US stocks ended higher after a choppy week driven by trade tensions. Markets dropped early as investors braced for new US tariffs, but rebounded midweek when President Trump announced a 90-day pause on most tariffs—excluding China. The Nasdaq jumped over 12% on Wednesday, though gains faded as US-China trade tensions escalated. For the week, the S&P 500 rose 5.7%, the Nasdaq gained 7.3%, and the Russell 2000 added 1.8%. The Fed struck a cautious tone, citing risks from inflation and trade policy. March inflation slowed, with core prices up just 0.1%, but consumer sentiment fell sharply as inflation fears grew. Treasury yields surged, especially on long-term bonds, and investment-grade bonds underperformed. High yield bonds rallied midweek but lost steam as market sentiment weakened.
European stocks fell as trade tensions escalated, with the STOXX Europe 600 Index down 1.9%. Losses eased after President Trump announced a delay on most tariffs. Germany’s DAX dropped 1.3%, France’s CAC 40 fell 2.3%, Italy’s FTSE MIB slid 1.8%, and the UK’s FTSE 100 lost 1.1%. In response to market volatility, the ECB and BoE increased financial monitoring. The BoE also delayed bond auctions and warned of risks to financial stability from global trade fragmentation. Germany and Italy both reported declines in industrial output for February, with Italy’s 2024 GDP growth falling short at 0.7%, below the 1.0% target. The Italian government cut its growth forecast to 0.6%. In contrast, the UK economy grew 0.5% in February, beating expectations. Y/Y growth hit 1.4%, though markets still anticipate rate cuts by the BoE later this year.
