U.S. stocks dollar steady: Trump’s auto tariff decision causes uptick in equities and currency on Tuesday. This move is a response to growing pressure from automakers and gives the market a brief respite as it gets ready for a busy week of company results and economic data.
Tariff Reduction on Auto Parts
The U.S. has announced plans to soften the tariffs imposed on foreign auto parts used in domestically manufactured vehicles. Additionally, tariffs on cars made abroad will not be compounded with additional duties. This adjustment in the U.S. Businesses that were facing higher operational costs as a result of the tariffs have found some respite from the tariff strategy as it eases trade tensions between the US and its trading partners.
Market Responses and the Economic Outlook
While ongoing worries about the China tariffs have kept the overall market response moderate, European and S&P 500 futures saw a 0.1% uptick. The dollar was broadly higher, especially against the Canadian dollar, which slightly weakened after Mark Carney’s Liberals retained power in the Canadian election but failed to secure a majority.
While the S&P 500 has rebounded from its early April losses, the dollar has remained relatively stable rather than seeing a significant rebound. The euro is showing strength, up 5% in April, poised for its largest monthly increase against the dollar in nearly three years.
Tensions in U.S.-China Trade
With U.S. Treasury Secretary Scott Bessent saying that it is on to China to de-escalate the trade disagreement, concerns about the U.S.-China trade relationship remain. Worries are growing that unless a breakthrough occurs, the damage to supply chains could be permanent. China’s recent exemption moves from tariffs have done little to ease tensions, with the country holding off on stimulus measures, anticipating that the U.S. will back down first.
Future Economic Information and Business Profits
U.S. economic statistics, including the first-quarter GDP and April jobs reports, will offer a more comprehensive view of the economy this week. Front-loaded purchases anticipated ahead of new levies could support these numbers. However, a significant drop in Chinese imports to the United States is noted by J.P. Morgan analysts, suggesting that supply chains may face difficulties in the future.
With big corporations like BP, Adidas, Coca-Cola, General Motors, and Visa scheduled to report later today, corporate results will also be crucial this week. Mega-cap companies like Apple, Microsoft, Amazon, and Meta Platforms will follow later in the week, with investors keenly eyeing these reports for insights into the broader economy.
Commodity and Treasury Markets
While the price of Brent crude dropped 1% to $65.21 per barrel, the price of gold slid 1% to $3,305 per ounce. In the bond markets, U.S. Treasury rates stayed steady, with the benchmark 10-year yield staying at 4.206%.
Source: Reuters
