Technical analysis & fundamentals

Markets slide as tariff pressure mounts

SENIOR MARKET ANALYST

07 Mar 2025

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US stock indices continued their rollercoaster tariff ride yesterday. But this time, the bears had the upper hand. Tariff headlines remained the dominant force, pushing the Nasdaq into correction territory as it has now recorded a 10% decline from its recent record high.

Asian Pacific stock indices ended lower overnight, and equity markets ended the week in negative territory. For the day, Japan’s Nikkei and the Australian ASX 200 lost 2.2% and 1.8%, respectively.

Mainland and offshore Chinese indices fared better. While still down on the day as losses were modest. European stock indices were weaker across the board in early trade, with the German DAX leading the decline, giving back all of yesterday’s gains, and more.

Dollar weakens as major currencies gain

The US dollar’s decline extended further. The Dollar Index has lost 3.7% so far this week, trading at levels last seen on US election day in early November. The decline comes on the back of concerns over US economic growth. Tariffs and the fears of an international trade war have led to a sharp downgrade in the outlook for US economic growth.

Sterling continued its upward momentum, trading above 1.2900 against the dollar, while the euro climbed to 1.0840. Both currencies are back to highs, which were last seen in early November. The euro has rallied even as the European Central Bank announced another 25-basis point rate cut yesterday. The yen has also strengthened against the dollar, with the USDJPY dropping to 147.50 overnight.

Gold steady, oil recovers, crypto drops

Gold was a touch firmer in early trade this morning and continues to consolidate around the $2,900 area. Silver was little changed, and it, too, appears to be consolidating following gains made earlier in the week.

Oil was up over 1% this morning. Front-month WTI bounced off support in the $65 region and is now challenging minor resistance around $67. Despite this, crude remains on track for its biggest weekly drop since October, with supply concerns still the driving factor, while the outlook for global demand remains uncertain.

Crypto markets fell sharply after Trump’s proposed reserve plans for the sector disappointed investors.

Volatility stays elevated ahead of key data

The front-month VIX remains elevated but has pulled back from the 22 area. It still feels as if market volatility is unlikely to fade anytime soon. This marks its fourth rise in the past five sessions, reflecting the ongoing tariff uncertainty.

Plenty of Federal Reserve speakers are scheduled today, with Jerome Powell set to speak at 5:30 PM. The primary data focus, however, will be the monthly Non-Farm Payroll report at 1:30 PM, where expectations for monthly job gains hover around the 160,000 mark.

Key headlines to watch

Chinese trade data showed imports declining at the sharpest rate since July 2023, while exports missed expectations due to US tariffs.
As industry leaders pushed for more favourable regulations, Trump’s White House crypto summit failed to impress.
China called for peaceful coexistence with the US despite ongoing tensions.
Trump dismissed concerns over the stock market, stating that tariffs will ultimately strengthen the US economy.
US clocks move forward this weekend, affecting market opening and closing times for the next three weeks.

Market outlook

Markets remain highly sensitive to tariff headlines, with sharp swings in both directions leaving investors uncertain. The dollar continues to weaken, allowing other major currencies to push higher. Oil is attempting to establish a bottom, with $65 per barrel emerging as a key level to watch.

With elevated volatility, all eyes are now on today’s Non-Farm Payroll report. This could provide the next major catalyst for market direction.