This week, the interplay of US-Japan trade talks, US-China tariff escalations, and new restrictions on chip exports has kept markets on edge. Meanwhile, Federal Reserve Chair Jerome Powell’s measured response to the turmoil has dashed hopes for immediate intervention, leaving investors to grapple with volatile asset prices and shifting risk sentiment.
The current market landscape is a complex tapestry of competing forces, from Bitcoin’s resilience to Ethereum’s technical signals, US equities’ performance, and gold’s safe-haven allure. Below, I offer my perspective on these developments, weaving together the broader macroeconomic context, asset-specific dynamics, and the implications for investors navigating this fraught environment.
The tentative global risk sentiment reflects the high stakes of ongoing tariff negotiations, particularly between the US and its major trading partners. The advancement of US-Japan trade talks, marked by President Trump’s optimistic claim of “big progress,” provided a modest lift to Japanese equities, with the Nikkei 225 gaining slightly. However, the yen weakened as investors priced in the likelihood of a deal that could avert higher US levies on Japanese goods, particularly in the auto sector. This development underscores Japan’s delicate balancing act: while a trade agreement could stabilise its export-driven economy, a stronger US dollar against the yen could pressure Japanese manufacturers’ competitiveness. The Bank of Japan, already grappling with a low-yield environment, may face further constraints if US tariffs dampen economic growth, as Governor Kazuo Ueda recently hinted.
For investors, the yen’s trajectory and Japan’s market performance hinge on the specifics of any deal—whether it prioritises market access or imposes new non-tariff barriers.
The US-China trade war, however, remains the epicentre of market anxiety. The White House’s confirmation of a staggering 245 per cent cumulative tariff rate on Chinese imports, following China’s retaliatory 125 per cent levies on US goods, signals a deepening economic standoff. This tit-for-tat escalation, coupled with new US restrictions on chip exports by Nvidia and AMD, has battered technology stocks and fueled fears of disrupted global supply chains. The chip export curbs, targeting Nvidia’s H20 and AMD’s MI308 AI chips, are a strategic move to limit China’s access to advanced technology, but they come at a cost: Nvidia estimates a US$5.5 billion hit to its revenue, and its shares slumped nearly seven per cent.
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The broader tech-heavy Nasdaq Composite fell 3.1 per cent, contributing to the MSCI US index’s 2.2 per cent decline. These developments highlight the fragility of the tech sector, which has been a cornerstone of US market performance but is now vulnerable to geopolitical shocks.
China’s response has been multifaceted, blending defiance with pragmatism. Beijing’s vow to “fight to the end” against US tariffs is tempered by signals of openness to negotiations, suggesting a desire to avoid a complete collapse of trade relations. However, China’s reported sale of confiscated cryptocurrency holdings, including Bitcoin, amid an economic slowdown, adds another layer of complexity.
This move, likely driven by the need to bolster fiscal reserves, has sparked speculation about its impact on crypto markets. Remarkably, Bitcoin has shown resilience, holding above US$84,000 despite the sales. This strength can be attributed to Bitcoin’s growing perception as a hedge against macroeconomic uncertainty, particularly as central banks and investors seek alternatives to traditional assets amid trade war volatility. Posts on X reflect this sentiment, with some users noting Bitcoin’s 64 per cent market dominance—a level not seen since early 2021—as evidence of its safe-haven appeal.
Ethereum, by contrast, has struggled, slipping below US$1,600 and entering a technically bearish phase. An analysis by CryptoQuant’s abramchart offers a nuanced perspective, suggesting that Ethereum’s current price near its realised price of US$1,585 could signal a deep-value accumulation zone. Historically, such levels have preceded major bull runs as long-term holders re-enter the market. However, technical indicators paint a mixed picture: Ethereum’s breach of its 20-day moving average and its position well below the 200-day average confirm a strong downtrend, while the relative strength index near 40 indicates weak momentum.
The compressed Bollinger Bands suggest a potential breakout, but the direction remains uncertain. For investors, Ethereum’s current dynamics present both opportunity and risk. While the realised price level hints at undervaluation, the broader market’s risk-off mood and trade war headwinds could delay a rebound.
The Federal Reserve’s role in this turbulent environment cannot be overstated. Chair Jerome Powell’s remarks this week, emphasising a wait-and-see approach to tariffs, have quashed expectations of a “Fed put”—a swift policy response to stabilise markets. Powell’s caution is rooted in the dual risks of higher inflation and slower growth, which tariffs are “highly likely” to exacerbate. His acknowledgement that the Fed faces a “highly uncertain outlook” underscores the central bank’s dilemma: cutting rates could fuel inflation while holding or raising rates risks stifling growth and employment. The Fed’s benchmark rate, currently between 4.25 per cent and 4.5 per cent, reflects this holding pattern, with traders still betting on cuts by June despite Powell’s reticence. The Fed’s data-dependent stance, coupled with solid economic indicators like March’s 228,000 job additions, suggests that any policy shift will hinge on clearer evidence of tariff-related economic fallout.
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Fixed-income markets have also felt the strain, with US Treasury yields edging lower as investors reassess growth prospects. The 10-year yield fell 5.6 basis points to 4.28 per cent, and the two-year yield dropped 7.5 basis points to 3.77 per cent, reflecting concerns about a potential recession. The US dollar index’s 0.8 per cent decline, reaching its lowest level since April 2022, signals waning confidence in US assets as investors pivot to safe-haven currencies such as the Japanese yen and Swiss franc. Gold, meanwhile, has surged 3.5 per cent to a record US$3,339 per ounce, with ANZ Bank forecasting a rise to US$3,600 by year-end.
This rally, driven by central bank purchases and haven demand, underscores gold’s role as a bulwark against geopolitical and economic uncertainty. Brent crude’s 1.8 per cent rise to around US$65 per barrel, spurred by US sanctions on Chinese importers of Iranian oil, highlights the ripple effects of trade policies on commodity markets.
US equities, particularly the energy sector, have shown pockets of resilience, with energy stocks gaining 0.8 per cent amid higher oil prices. However, the broader MSCI US index’s 2.2 per cent tumble reflects the tech sector’s drag and broader tariff fears. Asian equities, trading in a tight range, have been buoyed by hopes of Chinese stimulus, but volatility persists as negotiation headlines dominate. US equity futures, pointing to a 0.4 per cent higher open, suggest a tentative recovery, but the market’s direction remains contingent on trade developments.
From my perspective, the current market environment demands a disciplined, long-term approach. The escalation of US-China tariffs and chip export restrictions poses significant risks to global growth, particularly for the tech and manufacturing sectors. However, opportunities exist in assets such as Bitcoin and gold, which are benefiting from their safe-haven status. Ethereum’s technical setup, while bearish, suggests potential for accumulation by patient investors.
Powell’s cautious stance, while frustrating for those seeking immediate relief, is a prudent response to an unprecedented policy shock. Investors should focus on diversification, prioritising assets with strong fundamentals and resilience to geopolitical volatility. The road ahead is fraught with uncertainty, but those who navigate it with clarity and conviction may find opportunities amid the storm.
In conclusion, the global markets are at a crossroads, shaped by the interplay of trade tensions, monetary policy, and shifting investor sentiment. The US-China tariff war, US-Japan trade talks, and the Fed’s watchful stance are driving volatility across equities, currencies, and commodities. Bitcoin’s resilience, Ethereum’s accumulation potential, and gold’s surge highlight the divergent paths assets are taking in this environment. As negotiations unfold and economic data clarifies the tariff impact, investors must remain agile, balancing risk and opportunity in a rapidly evolving landscape.
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