By Mike Dolan
Morning Bid U.S.
A look at the day ahead in U.S. and global markets from Mike Dolan
The furious April for U.S. markets has calmed down a bit as the month draws to a close on Wednesday, and now its time to consider the costs to the real economy.
Today’s Market Minute
* U.S. Treasury Secretary Scott Bessent says he does not back President Donald Trump’s assertion that tariff talks with China are under way.
* Trump urges Russia to stop its attacks in Ukraine and suggests Ukrainian President Volodymyr Zelenskiy is ready to give up Crimea as the price of a peace deal with Russia.
* Canadian prosecutors charge a 30-year-old Vancouver resident with murder for killing at least 11 people and injuring dozens after he rammed an SUV through a crowd at a Filipino community festival in the western Canadian city.
* Risks are high the global economy will slip into a recession this year, according to a majority of economists in a Reuters poll.
* The euro’s unexpected surge since Trump’s big tariff announcement is likely to shave at least a couple of percentage points off European company earnings, adding to the impact of the levies themselves, according to economists.
The toll from Trump’s tariffs
Some signs of de-escalation of the U.S.-China trade war encouraged a rally in Wall Street stocks last week, while U.S. Treasuries and the dollar were steadied by President Donald Trump’s claim that he did not intend to fire Jerome Powell, despite his blistering attacks on the Federal Reserve Chair.
Anxiety persists, however, as none of the major economic or corporate concerns of the past few month have been resolved and policy visibility remains low.
U.S. stock index futures were slightly in the red again ahead of Monday’s open. Despite last week’s bounce, the S&P 500 remains down 2.6% since the April 2 Trump tariff announcements and down 6.5% for the year to date. The tech-heavy Nasdaq is still down 11% for 2025.
Some of the trade relief from last week was dialed back a bit over the weekend. Treasury Secretary Scott Bessent on Sunday did not confirm Trump’s assertion that tariff talks with China were under way and said he did not know if the U.S. president had talked to Chinese President Xi Jinping.
Attention now turns to the toll Trump’s tumultuous first 100 days in office have taken on the real economy. This milestone will be marked on Wednesday.
Even though the first quarter gross domestic product estimate coming on Wednesday does not capture the period since the April 2 tariff announcement, there is still a significant risk of a negative growth print.
First quarter corporate earnings will continue to stream in too, with some 40% of S&P 500 firms reporting this week and four of the once ‘Magnificent Seven’ megacaps – Microsoft, Meta, Apple and Amazon – reporting on Wednesday and Thursday. The key focus will be on the companies’ outlooks for the rest of the year.
More up-to-date will be a sweep of labor market reports coming this week culminating in the April employment report on Friday. Weekly jobless numbers suggest the employment picture has held up well, leaving the Fed to focus squarely on potential price aggravations from tariffs.
However, March inflation readings from the personal consumption expenditures series – the one most closely watched by the Fed – are expected to be benign when released on Wednesday too. However, that may just be the calm before the storm.
U.S. bond markets will keep a close eye on the Treasury’s quarterly funding estimates and plans this week. 10-year yields were subdued first thing Monday after last week’s jitters sparked by concerns about Fed independence.
The dollar index is marginally firmer, with Canada’s dollar a tad weaker as the country heads to the polls on Monday. Prime Minister Mark Carney’s Liberal Party looks set for a return to power, an outcome that seemed unlikely before Trump’s inauguration, tariff plans and threats to Canadian sovereignty swung Canadian opinion polls.
The dollar is down slightly against Japan’s yen, with the Bank of Japan likely to resist raising interest rates again when it meets this week as tariff uncertainty cuts across rising inflation numbers.
Japan’s top currency diplomat Atsushi Mimura on Monday denied a media report that Scott Bessent had told his Japanese counterpart at a bilateral meeting in Washington that a weak dollar and a strong yen are desirable.
Chart of the day
With the first estimate of U.S. gross domestic product for the first quarter due on Wednesday, the Atlanta Federal Reserve’s closely watched ‘GDPNow’ model is still showing a real GDP contraction for the three months through March, both on a headline basis and when adjusted for high gold bullion imports that weighed on net trade in the period.
The consensus of economic forecasters is for a modest expansion of 0.4%, which is still sharply slower than the 2.4% growth in the final quarter of last year. While GDP statistics can be distorted and are continually revised, a first quarter contraction would be an ominous sign nonetheless, not least because it would have come before the April 2 global tariff announcement. It would also raise the risk that a technical recession could be recorded in the first half of the year.
Today’s events to watch
* Election in Canada
* Dallas Federal Reserve April manufacturing survey
* European Central Bank Annual Report for 2024, with ECB Vice-President Luis de Guindos. Bank of Finland governor Olli Rehn speaks
* U.S. corporate earnings: Domino’s Pizza, Cadence Design, NXP Semiconductors, Teradyne, Universal Health, Cincinnati Financial, Nucor, Brown & Brown, F5, Revvity, Roper, Waste Management, Welltower, Alexandria Real Estate,
* U.S. Treasury quarterly borrowing estimate
(By Mike Dolan, editing by Anna Szymanski; mike.dolan@thomsonreuters.com)
