By Dhara Ranasinghe
LONDON (Reuters) – World stocks and the dollar nudged up on Tuesday after U.S. President Donald Trump’s administration said it planned to reduce the impact of auto tariffs, a further sign of flexibility on a trade policy that has wreaked havoc on markets in April.
Market focus also turned to early signs of the impact tariff pain is having in terms of economic data and the latest company earnings.
Ahead of the Wall Street open, which stock futures suggested would be firmer, General Motors pulled its forecast for the year, reflecting the uncertain effects of Trump’s trade war on the industry, even as it reported strong quarterly results.
Canada’s dollar dipped against a broadly-firm U.S. currency as Canadian Prime Minister Mark Carney’s Liberals retained power in Monday’s election, but fell short of the majority government he had wanted to help him negotiate tariffs with Trump.
Sentiment across stock markets was generally positive after the U.S. said it would move to reduce the impact of duties imposed on foreign parts in domestically manufactured cars, and keep tariffs on vehicles made abroad from stacking up on other duties.
“There is a focus on the tariff news getting less worse but there’s also a focus on hard data and whether the market is right to worry about a recession,” said State Street Global Markets’ head of macro strategy Michael Metcalfe.
First-quarter U.S. GDP and April jobs figures are due out this week.
While the S&P 500 has recovered much of its early April losses after some rollback on Trump’s tariffs, it looks set to end the month down around 1.5% in its third straight month of falls.
European stocks rallied around 0.25%, with plenty of earnings to digest. HSBC launched a $3 billion share buyback after reporting a 25% fall in first-quarter profit and Deutsche Bank posted a 39% rise in first-quarter profit.
In other signs of trade-war pain, sports car maker Porsche cut its 2025 outlook on weakness in China and U.S. tariffs, and United Parcel Service reported a fall in quarterly revenue as U.S. trade policies began cooling the demand of shipping.
Mega-caps Apple, Microsoft, Amazon and Meta Platforms report later this week.
In Asia, Japanese markets were closed for a holiday, while Hong Kong’s Hang Seng was little changed and the mainland blue-chip index fell 0.2%. [.HK]
TRADE
Markets were rattled overnight when U.S. Treasury Secretary Scott Bessent told CNBC it was “up to China to de-escalate” tariffs and there are growing worries that unless there is a breakthrough, permanent damage will be wrought on supply chains.
China has moved to make some exemptions but has held off on stimulus.
“A true de-escalation (in the U.S.-China trade war) is some time away, in our view,” Sat Duhra, portfolio manager at Janus Henderson, told the Reuters Global Markets Forum on Tuesday.
“Someone will blink first, and it is likely to be led by the market as we have seen in the U.S.”
JP Morgan analysts said the clock was ticking on hard data resilience, highlighting a 42% peak-to-trough slump in China shipments to the U.S. in the past 10 days, which – if sustained – would reverberate through supply chains.
“A worrying decoupling of U.S.-China trade … now looks to be underway, and we expect the damage to build in coming weeks and months.”
DOLLAR FIRMS
The dollar rose against other major currencies, adding almost 0.5% to 142.66 yen. The euro slipped 0.4% to $1.1377, while sterling fell 0.4% to $1.3386.
Still, the euro is up 5% in April, set for its largest monthly rise on the dollar in nearly three years, while the greenback’s 7% drop on the safe-haven Swiss franc is the largest in a decade.
Canada’s dollar traded at around 1.3845 per U.S. dollar, down 0.1% on the day after Monday’s election left the Liberal Party short of a majority in parliament.
“A thin parliament lead is hardly positive news for a country’s currency, but Canadian dollar losses have been quite limited in size,” ING analysts said in a note.
Elsewhere, gold slipped almost 1% to $3,313 an ounce as the dollar rallied, while Brent crude fell almost 2% to $64.64 a barrel.
Treasury yields edged up in London trade, rising 1.3 basis points to 4.23%.
(Reporting by Dhara Ranasinghe in London and Tom Westbrook in Singapore. Additional reporting by Ankika Biswas in Bengaluru. Editing by Saad Sayeed and Mark Potter)
