This past week felt like an economic earthquake. What started as a sudden tariff announcement in the U.S. rapidly evolved into one of the biggest global equity selloffs since the height of the COVID-19 pandemic. With financial markets reeling, central banks pausing, and global supply chains in turmoil, investors were left wondering: what just happened—and what comes next?
Let’s break it down and connect the dots from Wall Street to Tokyo, Frankfurt to Beijing.
U.S. Markets: Tariff Blitz Triggers Turmoil
The spark was lit by a sweeping 25% tariff on all non-U.S. auto imports announced by the U.S. administration. This sudden move ignited a massive equity selloff:
S&P 500: down 9.3% — its worst week since March 2020
Nasdaq: plunged 10%, led by tech and communication services
Dow Jones: fell 7.9%
Russell 2000: dropped 10% for the week, now down 30% from its peak and officially in bear market territory
Fed’s Cautious Response
Fed Chair Jerome Powell acknowledged the risks, citing the potential for higher inflation and slower growth. However, the Fed refrained from announcing any immediate policy shifts, emphasizing uncertainty over the tariffs’ full impact.
Economic Data: Mixed Signals
Manufacturing PMI dipped into contraction, with firms citing rising input costs tied to tariffs
Services PMI declined but remained just above expansion territory
Non-farm payrolls surprised to the upside with 228,000 new jobs, indicating labor market resilience
Safe-Haven Surge
10-year Treasury yields fell below 4% as investors sought safety
Oil prices collapsed to $62/barrel, lowest since April 2021
USD Index fell 1% for the week, down 5% year-to-date
European Markets: Caught in the Crossfire
Europe wasn’t spared. The U.S. auto tariffs hit the continent hard, with no exemptions granted:
Euro Stoxx 600: down over 8%
German DAX & French CAC 40: both dropped 8%
Italy’s FTSE MIB: declined more than 10%
Stagflation Fears & ECB Caution
As inflation remains sticky and growth falters, markets fear a return to stagflation. The ECB is under pressure to cut rates as early as April, but leaders like Christine Lagarde urge patience amid trade uncertainty.
Mixed Data
Headline inflation declined to 2.2%
Core inflation came in below expectations
Unemployment fell to a record low of 6.1%
UK Markets: Housing Hit, Market Slumps
The FTSE 100 fell 7%, battered by global headwinds and domestic policy changes. Increased transaction taxes have cooled the UK housing market:
House prices stagnated in March
Mortgage approvals dropped to a six-month low
The Bank of England remains cautious, unlikely to ease policy until the trade and inflation picture becomes clearer.
Japan: Export Engine Under Threat
Japan’s markets dropped sharply:
Nikkei 225: down 9%
TOPIX: down 10%
The U.S. tariffs — now totaling nearly 50% on Japanese autos — sparked fears of a broader economic slump. Government bond yields fell and the yen strengthened to 146/USD, adding pressure on exporters and raising deflationary concerns.
BoJ Governor Kazuo Ueda signaled that planned rate hikes may be postponed, citing growing global uncertainty.
China: Strikes Back Hard
China wasted no time in responding:
34% retaliatory tariff on U.S. goods starting April 10
Rare earth export restrictions
Investigations into U.S. medical firms
Bans on U.S. poultry and sorghum imports
Blacklist of 11 U.S. defense contractors
These aggressive measures signal a deepening trade rift. Analysts warn of a 1–2% GDP hit but expect Beijing to launch targeted stimulus to soften the blow.
The Global Picture: Interconnected Shockwaves
This week’s events illustrate the extreme interconnectivity of the global economy. A single U.S. policy decision set off a domino effect across continents, hitting equities, commodities, currencies, and central bank strategies in real time.
Key Data to Watch: April 7 Onward
Eurozone retail sales
U.S. wholesale inventories
FOMC meeting minutes
U.S. CPI and PPI inflation reports
UK GDP
U.S. jobless claims and Michigan Consumer Sentiment Index
Conclusion
This past week was a wake-up call — a stark reminder that geopolitical shocks can reshape markets overnight. With central banks exercising caution and trade tensions intensifying, uncertainty is the new norm.
Stay tuned and stay informed. The next data points could either fuel further volatility or offer a moment of stability.
FAQs
Why did global markets crash last week? A sweeping U.S. tariff on non-U.S. autos triggered a worldwide selloff, compounded by fears of inflation and slowing growth.
What’s the Fed doing in response? Fed Chair Powell acknowledged the risks but held off on immediate policy changes, citing uncertainty.
How is Europe responding to the trade fallout? Markets expect a rate cut, but the ECB remains cautious due to unpredictable trade effects on inflation and growth.
What was China’s response? China retaliated with new tariffs, export restrictions, blacklists, and industry-specific sanctions, signaling a long-term escalation.
What should investors watch next? Key economic data this week — including CPI, PPI, and central bank minutes — will be critical to understanding future policy paths.
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