North America
With US equity markets closed on Friday for Good Friday celebrations, the shortened trading week saw further declines in major US equity indices as investors concerns over trade policies and rising tensions between the Trump administration and US Federal Reserve weighed on sentiment. The S&P 500 and Nasdaq Composite indices declined 1.5% and 2.6% respectively. However, US small caps bucked the trend, with the Russell 2000 index posting a 1.1% gain. During the week, the Trump administration implemented new restrictions on semiconductor exports, requiring companies such as Nvidia and Advanced Micro Devices (AMD) to obtain new licenses before selling to China, Hong Kong, Macau and D5 countries (UK, South Korea, Estonia, New Zealand and Israel). This move stoked concerns over the potential revenue headwinds for the semiconductor sector. As consumer confidence remains at an all-time low, US retail sales increased by 1.4% in March, the highest increase in more than two years, as households stepped up purchases of goods to avoid higher prices caused by tariffs. Core retail sales rose 0.4%, marginally higher than the previous month. However, economists anticipate this boost to be short-term, with expectations for a stagflation environment to prevail. While the weakening US growth prospects usually spur on interest rate cuts, US Federal Reserve (US Fed) Chairman Jerome Powell signalled a “wait-and-see” approach, as uncertainty remains on the impact of tariffs on US inflation which currently sits at 2.4% (core CPI was 2.8% year-on-year). While the news dampened investor sentiment, the US Fed’s cautious stance quickly drew sharp criticism from US President Donald Trump, who renewed his calls to dismiss Powell – once again putting the US Fed’s independence into question. In the bond markets, US Treasury yields drifted lower over the week, with the 2-Year and 10-Year yields falling to 3.80% and 4.33%, respectively. Treasury prices were supported by the pivot away from the reciprocal tariffs announced by the Trump Administration on 2 April. However, yields spiked towards the end of the week after Trump’s renewed threats to remove Powell unsettled investors and raised doubts over the traditional “safe haven” status of US Treasuries. The US Dollar also weakened, with the Dollar Index — which measures the greenback against a basket of major currencies — slipping 0.73% as investor confidence in the world’s reserve currency continued to be eroded.

Europe & UK
Across the Atlantic, European equity markets were more upbeat, with the STOXX 600 index rising 4.1% in local currency terms (4.5% in US Dollar terms) over the trading week. Germany’s DAX and France’s CAC40 indices posted strong gains, advancing 4.1% and 2.55% in local currency terms (4.5% and 3.0% in US Dollar terms) respectively. The reversal of the Trump administration’s proposed 20% reciprocal tariff on EU imports – replaced with a blanket 10% tariff – boosted investor optimism, raising hopes for a potential easing of US-EU trade tensions. In economic data, Euro Area annual inflation continued to decline towards the European Central Bank’s (ECB) 2% target, easing to 2.2% in March from 2.3% in February. Annual services inflation, a particular concern for policymakers, also declined 0.3% to 3.4% in March, marking the lowest level in nearly three years. Against this backdrop, the ECB announced a 25 basis point cut to its three key interest rates: lowering the deposit facility to 2.25%, the main refinancing rate to 2.40%, and the marginal lending facility to 2.65%. However, the ECB emphasised that growth prospects across the Euro Area have weakened owing to rising trade tensions, and that increased uncertainty will dampen confidence among households and companies. Meanwhile, the UK’s FTSE 100 advanced 4.0% in local currency terms (5.7% in US Dollar terms), again benefitting from declining inflation rates and an easing of global trade tensions. UK Consumer Price Inflation (CPI) eased to 2.6% in the 12 months to March, marginally lower than the prior month’s figure and consensus expectations. Core CPI, which strips out volatile food and energy prices, fell to 3.4% in March, down from 3.5% in February and in line with consensus expectations. With inflation on a downward trajectory and economic growth remaining sluggish, markets increasingly anticipate the Bank of England (BoE) will move to lower interest rates in the near term.

Japan
The US and Japan kicked off preliminary negotiations aimed at reaching a bilateral deal to ease trade tensions as soon as possible. While specific details of the discussion remain undisclosed, both sides were positive about the meeting, with preparations for further discussions later this month underway. The news supported Japanese equity markets, with both the Nikkei 225 Index and TOPIX rising 2.4% and 2.6% in local currency terms (3.3% and 3.5% in US Dollar terms) respectively. On the economic front, Japan’s core consumer price index (CPI), which excludes volatile fresh food prices, rose 3.2% year-over-year in March, up from 3.0% in February, marking the fourth consecutive month that core inflation has remained above the 3.0% threshold. While government subsidies have softened the impact of higher energy costs, surging food prices, particularly rice, have driven inflation upward. Rice prices soared 92.1% year-over-year, the sharpest increase since comparable records began in January 1971. Headline CPI edged slightly lower, coming in at 3.6% for March compared to 3.7% in February. Despite persistent inflation, the Bank of Japan (BOJ) faces challenges in tightening policy. While rising prices would typically warrant further interest rate hikes, concerns over slowing economic growth, exacerbated by the Trump administration’s trade policies, and a strengthening of the Japanese Yen against the US Dollar present significant headwinds to future rate increases.