Futures fall on tariffs, bitcoin hits $120 000: Markets wrap

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Equity-index futures retreated and Asian shares edged down in a cautious start to the week after President Donald Trump dialed up trade tensions by announcing a 30% tariff on goods from the European Union and Mexico.

Contracts for the S&P 500 fell 0.4% and those for European stocks dipped 0.6%. Asian shares were flat, with small gains in Hong Kong and mainland China. Silver gained to trade near the highest level since 2011. Bitcoin breached $120 000 for the first time. The yen rose against the dollar while bond futures dropped after a report that Bank of Japan officials may consider raising at least one of their inflation forecasts at a policy meeting later this month.

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Trump’s latest tariff threats are testing the market’s resilience after the US leader ratcheted up trade measures on everyone from Canada to Brazil to Algeria last week. Despite warnings of complacency, investors have so far behaved as if they’re counting on the president to back down, having seen previous U-turns from his administration. The S&P 500 and the MSCI All Country World Index both hit records this month.

“Investors shouldn’t bank on Trump only bluffing with the 30% tariff threat on EU goods,” Brian Jacobsen, chief economist at Annex Wealth Management, wrote in an email. “That level of tariffs is punitive, but it likely hurts them more than the US, so the clock is ticking.”

Financial markets have been struggling with how to price in the on-again, off-again tariff campaign instigated by Trump so far in his second term. While markets responded to the April 2 “Liberation Day” announcements by selling risk assets and even US Treasuries, those moves have now almost all reversed as the president delayed many of his threatened levies.

The EU had been trying to conclude a tentative deal with the US to stave off higher tariffs, but Trump’s letter punctured the recent optimism in Brussels. The US president did, however, leave an opening for additional adjustments. The EU is now preparing to step up its engagement with other countries hit by Trump’s tariffs, according to people familiar with the matter.

“Why would any country enter into a trade deal with the US after seeing how Mexico and Canada have been treated a few years after signing the USMCA?,” Win Thin, global head of markets strategy at Brown Brothers Harriman, wrote in a note to clients. “At some point, markets will react to what we see as an ongoing erosion in US policy credibility.”

Separately, Trump and his allies stepped up their criticism of the Federal Reserve Chair Jerome Powell’s handling of the expensive renovation of the Fed’s headquarters. Some administration officials are attempting to build a case to remove Powell from the Fed’s Board of Governors.

Late on Sunday, Trump repeated his criticism of Powell and said if the Fed chair stepped down, that would be a “good thing.”

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Deutsche Bank AG strategist George Saravelos said the potential dismissal of Powell is a major and underpriced risk that could trigger a selloff in the US dollar and Treasuries.

If Trump were to force Powell out, the subsequent 24 hours would probably see a drop of at least 3% to 4% in the trade-weighted dollar, as well as a 30 to 40 basis point fixed-income selloff, Saravelos said.

Focus will shift to a slew of economic data this week, including China’s gross domestic product report and inflation readings in Europe and the US. The second quarter earnings season is also due to begin this week, with Wall Street expecting the weakest reporting season since mid-2023. It comes at a time that corporate credit ratings downgrades are becoming more frequent.

In corporate news, Tesla Inc. plans to poll shareholders on whether to invest in xAI, Elon Musk said after the Wall Street Journal reported SpaceX was prepared to funnel $2 billion into the Grok chatbot developer.

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