Weekly Market Update (April 06, 2025)
- Market Hedwig
- 18 hours ago
- 2 min read
HIGHLIGHTS
US markets suffered the largest drop since COVID driven by the tariff. S&P500 and NASDAQ dropped around 7% and 8% respectively. Volatility index (VIX) jumped from 20 to 45.5. Markets rush to government bonds, with 10Y treasury yields down over 30 bps.
Retaliation: The 20% tariff on EU will take effect on 9 April. UK is negotiating to reduce the new 10% tariffs, but will potentially impose retaliation tariffs if the deal falls through. Germany and France are also considering retaliation tariffs to strengthen their negotiation position, targeting US tech and services.
Commodity: Oil prices dropped to 4-year low as the markets are worried that the tariff could induce a recession. Gold also dropped after reaching all-time high. Although gold is supposed to be a safe-haven while some of the drop is driven by the selloff for covering the margin of the loss in equities.
Job: Nonfarm payroll reported higher than expectation (228k actual vs 140k expected), indicating a healthy labour market before the expected impact of tariffs. Unemployment increased slightly by 0.1% as labour participation increased.
MARKETS
15,587.79 | -10.02% | |
S&P 500 | 5,074.08 | -9.08% |
Dow | 38,314.86 | -7.86% |
10-Year | 3.98% | -28bps |
Brent | 65.95 | -8.01% |
DXY | 102.89 | -1.08% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Goldman Sachs: Investors have started to rotate into more defensive sectors, including food producers and utilities. Consumer staples that have fewer imports outperformed this week.
Morgan Stanley: Buying the dip is tempting - as it worked post-COVID. However, data shows that the prior market narrative is broken. Fed is no longer lowering rates, and the policy uncertainty is elevated, which is pressuring risk premiums and limiting the broad index’s attractiveness.
Fixed Income
Morgan Stanley: Although markets expect no change in rate at the Fed’s March meeting, there is still a surprise in the Treasury market. A reduction in Treasury security balance sheet runoff is announced, from $25 billion to $5 billion monthly pace. It would potentially add $160 billion to Treasury market liquidity.
UBS: High-yield spreads have widened significantly. It is likely to remain sensitive to the continuous concerns on US growth trajectory.
Economy
J.P. Morgan: Germany new fiscal package could transform both the country and EU in the coming decade. It is proposed as the response to uncertainty in security blanket from the US.
UBS: Over 3-6 months horizon, effective tariff rate will gradually decline as the political, business and economic pressures increase. It will be a period of slower growth and extended period of market volatility.
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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