Stocks drop, dollar gains amid tariff uncertainty
Investor focus turns to details of Trump's reciprocal tariffs as gold huddled near record high on safe haven flows. Fed's cautious tone provides dollar support
Published: 05:03 PM,Mar 21,2025 | EDITED : 09:03 PM,Mar 21,2025
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City. — Reuters
European and world shares fell on Friday but were set for a weekly gain and the euro steadied just shy of a five-month high, as investors finished a busy week without much more clarity on the big market questions than they had at the start.
MSCI's all country world share index was last down 0.17 per cent with Europe's STOXX 600 0.7 per cent lower in morning trade, after Asian shares had dropped a similar amount earlier in the day.
Wall Street slid overnight and S&P 500 futures were down around 0.4 per cent heading into the open.
On the week shares across the world are slightly higher, with the mood somewhat less febrile than it was earlier in March, when markets were dominated by fear that policy uncertainty in the United States, particularly regarding tariffs, would push the world's largest economy into recession.
While those fears have not gone away, central banks were in the spotlight instead this week and the US Federal Reserve, the Bank of Japan and the Bank of England all held rates steady.
With the main questions for markets being matters of fiscal and geopolitical policy, however, policymakers too were left with little to say other than to emphasise what Fed chair Jerome Powell called the 'unusually elevated' uncertainty.
Investors will now focus on the details of the Trump administration's April 2 reciprocal tariffs, which remain unclear, while reports of Israeli airstrikes on Gaza and a huge blast from a Ukrainian drone attack on a Russian military airfield were a reminder of rising geopolitical tensions pushing investors towards safe haven assets.
On top of that, Britain's Heathrow Airport, the world's fifth busiest, was shut after a huge fire at a nearby electrical substation and investors were reassessing bets on Türkiye's turnaround story after the long-feared detention of President Tayyip Erdogan's main political rival earlier in the week.
As well, Germany's Bundesrat upper house of parliament on Friday approved plans for a spending splurge. Though that was expected, investor focus is now turning to where and how quickly the money will be spent.
That tectonic shift in Germany, alongside fears of the US recession, have caused a dramatic shift in markets this year, with shares in Europe and Asia outperforming the US, particularly once loved tech stocks and the euro surging. While those moves slowed this week, many analysts think the shift will continue.
'When leadership changes in markets after three years of one-directional trades, it doesn't disappear in three months,' said Manish Kabra, multi-asset strategist and head of US equity strategy at Societe Generale.
'The point is this is rotation in currencies and in equities both between regions and within the US.'
The dramatic recent moves in currencies, which have seen the dollar weaken against most peers, with the euro and Japanese yen standing out, also have been calmer in recent days.
The euro was steady $1.0856 — down on the week, but after finishing February at $1.0375 and hitting a five-month high of $1.0955 earlier this week, the bigger picture narrative is still one of euro strength.
The yen was steady 148.85 per dollar, but 5 per cent stronger this year on expectations that the BOJ will hike rates again in 2025.
Data on Friday showed Japan's core inflation hit 3.0 per cent in February and an index stripping away the effect of fuel rose at the fastest pace in nearly a year, a sign of broadening price pressures that reinforces market expectations of further hikes.
'Although Governor Ueda made much of the risks surrounding US trade policy on Wednesday, we think he’s just hedging his bets — considering it a risk factor,' said Min Joo Kang, senior economist at ING.
'Therefore, if trade tensions don't escalate more than the market currently expects, they won't affect the BOJ's rate hike plans.'
In commodities, oil dipped but was set for its strongest weekly performance since January.
Brent crude futures shed 0.6 per cent to $71.66 a barrel, while US West Texas Intermediate crude futures were down 0.35 per cent at $67.83. Both were up around 1.5 per cent on the week.
Gold eased 0.5 per cent to $3,030 an ounce as investors booked profits after the yellow metal climbed to a record high in the previous session. — Reuters
MSCI's all country world share index was last down 0.17 per cent with Europe's STOXX 600 0.7 per cent lower in morning trade, after Asian shares had dropped a similar amount earlier in the day.
Wall Street slid overnight and S&P 500 futures were down around 0.4 per cent heading into the open.
On the week shares across the world are slightly higher, with the mood somewhat less febrile than it was earlier in March, when markets were dominated by fear that policy uncertainty in the United States, particularly regarding tariffs, would push the world's largest economy into recession.
While those fears have not gone away, central banks were in the spotlight instead this week and the US Federal Reserve, the Bank of Japan and the Bank of England all held rates steady.
With the main questions for markets being matters of fiscal and geopolitical policy, however, policymakers too were left with little to say other than to emphasise what Fed chair Jerome Powell called the 'unusually elevated' uncertainty.
Investors will now focus on the details of the Trump administration's April 2 reciprocal tariffs, which remain unclear, while reports of Israeli airstrikes on Gaza and a huge blast from a Ukrainian drone attack on a Russian military airfield were a reminder of rising geopolitical tensions pushing investors towards safe haven assets.
On top of that, Britain's Heathrow Airport, the world's fifth busiest, was shut after a huge fire at a nearby electrical substation and investors were reassessing bets on Türkiye's turnaround story after the long-feared detention of President Tayyip Erdogan's main political rival earlier in the week.
As well, Germany's Bundesrat upper house of parliament on Friday approved plans for a spending splurge. Though that was expected, investor focus is now turning to where and how quickly the money will be spent.
That tectonic shift in Germany, alongside fears of the US recession, have caused a dramatic shift in markets this year, with shares in Europe and Asia outperforming the US, particularly once loved tech stocks and the euro surging. While those moves slowed this week, many analysts think the shift will continue.
'When leadership changes in markets after three years of one-directional trades, it doesn't disappear in three months,' said Manish Kabra, multi-asset strategist and head of US equity strategy at Societe Generale.
'The point is this is rotation in currencies and in equities both between regions and within the US.'
The dramatic recent moves in currencies, which have seen the dollar weaken against most peers, with the euro and Japanese yen standing out, also have been calmer in recent days.
The euro was steady $1.0856 — down on the week, but after finishing February at $1.0375 and hitting a five-month high of $1.0955 earlier this week, the bigger picture narrative is still one of euro strength.
The yen was steady 148.85 per dollar, but 5 per cent stronger this year on expectations that the BOJ will hike rates again in 2025.
Data on Friday showed Japan's core inflation hit 3.0 per cent in February and an index stripping away the effect of fuel rose at the fastest pace in nearly a year, a sign of broadening price pressures that reinforces market expectations of further hikes.
'Although Governor Ueda made much of the risks surrounding US trade policy on Wednesday, we think he’s just hedging his bets — considering it a risk factor,' said Min Joo Kang, senior economist at ING.
'Therefore, if trade tensions don't escalate more than the market currently expects, they won't affect the BOJ's rate hike plans.'
In commodities, oil dipped but was set for its strongest weekly performance since January.
Brent crude futures shed 0.6 per cent to $71.66 a barrel, while US West Texas Intermediate crude futures were down 0.35 per cent at $67.83. Both were up around 1.5 per cent on the week.
Gold eased 0.5 per cent to $3,030 an ounce as investors booked profits after the yellow metal climbed to a record high in the previous session. — Reuters