Market navigator: week of 7 April 2025

Written by

Fabien Yip

Market Analyst

Summary

• What Happened Last Week: Trump's aggressive reciprocal tariffs triggered a global market sell-off with US equities hit hardest. Strong US job market data kept the Fed's policy path uncertain.
• Markets in Focus: US indices saw their worst one-day sell-off since 2020, with Nasdaq 100 down 22% from February peak. The Hang Seng Index extended losses amid trade tensions while Japanese yen strengthened as a safe haven.
• The Week Ahead: Markets will closely monitor trade negotiations following tariff announcements, while key economic releases include US and China inflation data, FOMC minutes, and the start of the US earnings season with major banks reporting.

What happened last week

• 'Liberation Day' aftermath: President Trump's aggressive reciprocal tariffs plan unveiled on 2 April could raise US tariff rates above 20%, the highest in over a century. Economists believe this will hamper growth in the global and US economies. Global risk assets tumbled with US stocks bearing the brunt. Investors rushed to safe-haven assets; US 10-year treasury yields dipped below 4% and the Japanese yen rallied.
• Strong US job market: March data showed 155,000 jobs added in the ADP report and 228,000 in non-farm payrolls (nearly double expectations), with unemployment stable at 4.2%. This robust labour market places the Federal Reserve (Fed) in a challenging position between inflation and recession risks. We expect rates to remain unchanged in May.
• Chinese economic improvements: Manufacturing and non-manufacturing activities accelerated in March as foreign demand increased, though this was overshadowed by tariff concerns. The Hang Seng Index fell 2.5% last week.
• RBA on hold: Australia's central bank kept rates unchanged amid a tight labour market and tariff uncertainties. Governor Bullock noted no explicit rate cut discussions. Initial AUD/USD gains were erased by market turbulence from US tariffs and Chinese retaliation.

Markets in Focus

US stock market shows recessionary fear

The latest US trade policies revealed on 'Liberation Day' established a 10% base level tariff on all imports and additional duties on imports from jurisdictions with larger trade imbalances, including some of US' close allies. The announcement shocked global markets, triggering concerns as some economists believe the announced tariffs may double core inflation while reducing gross domestic product (GDP) growth by one percentage point. Meanwhile, JPMorgan increased their prediction for the likelihood of a US recession from 40% to 60%.

All major US indices experienced their worst one-day sell-off since COVID in 2020 on 3 April, the first trading day after the announcement. The Dow Jones lost 15% while the Nasdaq 100 index fell by 22% from their respective peaks in February. Large US banks such as Bank of America and Citigroup, which are sensitive to economic growth slowdowns, and companies dependent on Asian supply chains like Apple and Shopify have been most severely affected.

Technical charts show the US Tech Index struggling to maintain position above 17,243, a support level established by the August 2024 low. A decisive breakthrough could push the index further down towards the April 2024 low of 16,970. While the relative strength index (RSI) has fallen below the 30 threshold, indicating a potential short-term rebound, any recovery would likely encounter resistance at around 19,000. A sustainable reversal of the prevailing downtrend appears unlikely in the medium term without a decisive break above the 200-day moving average.

In addition to monitoring developments in trade negotiations, investors will focus on earnings as US companies begin to report their first-quarter financial results this week.

Figure 1: IG US Tech 100 index (daily) price chart

Hang Seng Index hit with shocking tariffs

The Hang Seng Index (HSI) failed to reverse its downtrend last week amid escalating trade tensions, extending its consecutive losing streak to four weeks. The index is approaching a market correction after retracing more than 9% from its peak on 19 March. Exporters have been most severely impacted, with Shenzhou International and Techtronic Industries falling 14% and 12% respectively, while Alibaba and JD.com dropped 5%.

Following the reciprocal tariff announcements, all China imports will face at least 54% tariffs starting 9 April. This does not include product-specific tariffs implemented since Trump's first administration, nor the additional 25% tariffs Trump has threatened to impose on nations importing Venezuelan oil. Tariff exemptions on de minimis packages, valued at $800 or below, will also be eliminated from 2 May onwards. The Chinese government condemned the recent measures as bullying and announced retaliatory tariffs of 34% on all US goods.

The technical outlook appears grim as the index has already fallen through an important support level formed by the recent February low and the 50-day moving average. The next crucial support level is the 100-day moving average at 21,190. Failure to hold could erase the year-to-date gains.

Figure 2: Hang Seng Index (daily) price chart

Japanese yen appreciates amid risk-off sentiments

USD/JPY extended its losses last week as investors sought safety following the 'Liberation Day' announcement. The traditionally defensive yen reached a six-month high last Thursday before pulling back to 146.90. Recent inflation and wage growth data provide solid grounds for the Bank of Japan (BoJ) to raise rates further this year.

From a technical perspective, the currency pair breached an important support level around 146.6, which coincides with lows in March 2024 and March 2025. Signs of overselling are emerging with the RSI approaching 30. The price trend also exhibits characteristics of a bear market Wave V under the Elliott Wave Theory, suggesting the next move is likely to be a rebound at or above the next support level of 144.0 to 144.5, with major resistance around 148.8.

Figure 3: USD/JPY (daily) price chart

The Week Ahead

This week, the market will closely monitor the development of trade negotiations as government officials and business executives worldwide engage with the Trump administration regarding retaliation tariffs. Other key economic releases include trade indicators from China and March inflation data from both China and the US. The Federal Open Market Committee (FOMC) will also release the minutes from their March meeting on Thursday. The US earnings season is commencing, with major banks being the first important reports to watch.

In addition to external uncertainties surrounding trade, China faces domestic deflationary pressures. Producer price growth has been negative since November 2022, while consumer price growth continues its downward trajectory. Traders will closely scrutinise the Consumer Price Index (CPI) and Producer Price Index (PPI) data on Thursday for signs of improvement following the government's consumption stimulus plan announced in March.

Figure 4: China's consumer and producer prices (March 2015 to February 2025)

Key macro events this week

Monday 7 April 2025

• 2:00pm (HK time) – Germany Balance of Trade (February): previous €16B, consensus €17.8B

Tuesday 8 April 2025

• 8:30am (HK time) – Australia Westpac Consumer Confidence Change (April): previous 4%
• 9:30am (HK time) – Australia National Australia Bank (NAB) Business Confidence (March): previous -1

Wednesday 9 April 2025

• 1:00pm (HK time) – Japan Consumer Confidence (March): previous 35.0, consensus 34.9

Thursday 10 April 2025

• 2:00am (HK time) – US FOMC Minutes
• 9:30am (HK time) – China CPI year-over-year (YoY) (March): previous -0.7%, consensus 0%
• 8:30pm (HK time) – US Core CPI (March): previous 0.2% month-over-month (MoM), consensus 0.3%. Previous 3.1% YoY, consensus 3%.
• 8:30pm (HK time) – US CPI (March): previous 0.2% MoM, consensus 0.1%. Previous 2.8% YoY, consensus 2.6%.

Friday 11 April 2025

• 2:00pm (HK time) – UK GDP MoM (February): previous -0.1%, consensus 0.1%
• 8:30pm (HK time) – US PPI MoM (March): previous 0%, consensus 0.2%
• 10:00pm (HK time) – US Michigan Consumer Sentiment Preliminary (April): previous 57.0

Saturday 12 April 2025

• 3:10pm (HK time) – China Balance of Trade (March): previous $170.52B
• 3:10pm (HK time) – China Exports YoY (March): previous 2.3%
• 3:10pm (HK time) – China Imports YoY (March): previous -8.4%

Key corporate earnings

Wednesday 9 April 2025

• Seven & i Holdings

Thursday 10 April 2025

• Progressive
• Fast Retailing

Friday 11 April 2025

• Zijin Mining
• Fuyao Glass Industry
• JPMorgan
• Morgan Stanley
• BlackRock
• Wells Fargo
• BNY Mellon

Source: Trading Economics, AASTOCKS (as of 7 April 2025, based on HK time zone)