Improved risk sentiment to be tested as Trump paves way for fresh tariffs 

Tariffs on electronics in the spotlight

Market participants expecting a break from tariff headlines over the weekend were bitterly disappointed, as electronic items, including smartphones and computers, have been in focus over the past 48 hours. With US tariffs on all Chinese imports reaching 145%, there was some light at the end of the tunnel on Friday evening when the U.S. Customs and Border Protection Agency announced that certain goods, predominantly electronic items from China, would not be taxed at this higher rate.

Instead, a 20% tariff is being imposed at this stage and for the foreseeable future. Some could say that such a decision was the product of severe pressure from US technology companies on Trump, but, nevertheless, this headline has contributed to an improvement in risk appetite, with Asian stocks in the green today.

This positive feeling might not last long, though, as Trump has already commented that he is reviewing the overall electronics supply chain in the US, including semiconductors, and that he is preparing to announce the tariff rate for semiconductors this week. Additionally, the US President has not ‘forgotten’ the pharmaceutical sector, which was left out of the early April announcement. He appears to have decided to give time and space to his team to make progress in the negotiations regarding the country-by-country tariffs.

Despite the back-and-forth, investors are gradually understanding Trump’s plan. He prefers to make an impressive initial step, with pompous rhetoric, only to then gradually reverse his decision, claiming another grandiose victory that only benefits the US economy. This strategy doesn’t apply exactly to China, but it is evident that Trump is interested in a deal down the line on his own terms.

Stocks appear to be in a better mood

US equities experienced another positive session on Friday, closing last week with considerable gains, and once again led by the Nasdaq 100 index. Despite the weekly 7.4% rally, which was the strongest since November 2022, the technology-dominated index is still 18% below its recent peak.

However, despite the improving risk sentiment, both the dollar and gold are recording sizeable moves in opposite directions. Gold reached a new all-time high of $3,246, jumping by 6.5% last week, and is already 23% up in 2025. Part of the reason for this extraordinary move is the sliding dollar.

Euro/dollar is hovering around 1.1400, having reached 1.1473 on Friday, the highest level since February 2022, and dollar/yen has dropped to a new 7-month low in the 142.00 area. Investors’ distaste for dollar-denominated assets is also evident in US Treasury yields. The 10-year yield has climbed to 4.45%, erasing the dip in early April, and potentially reflecting the market’s worry about the inflation outlook and the lack of action to address the ballooning debt.

A holiday-shortened week ahead 

Nevertheless, it’s been a decent start to the holiday-shortened week that includes earnings releases in the US and numerous Fed speakers. Financials are in the spotlight this week, with Tesla being the first heavyweight to report its first quarter of 2025 performance on April 22.

Equally important, there is a plethora of Fed speakers on the agenda, starting with Board Member Waller and Philadelphia Fed President Harker today. Both are positioned on the hawkish spectrum, but only Waller is voting in 2025. Last week's late Fedspeak was not really supportive of imminent rate cuts though, and hence it would be interesting to see if this type of commentary becomes the norm at this point.