Markets Jump on Trade War De-Escalation Hopes
Following a sell-off in US assets on Monday, the markets responded favourably to comments from US Treasury secretary Scott Bessent on Tuesday.
In other news, the International Monetary Fund (IMF) amended its growth forecasts for 2025, and Tesla announced first quarter results. Keep reading to find out more.
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Bessent Trade Talk Soothes Market
At a private conference hosted by JPMorgan on Tuesday, US Treasury secretary Scott Bessent reportedly told investors that he expects “there will be a de-escalation” in the trade war between the US and China in the “very near future”.
He further noted that the current situation between the two countries was not sustainable.
Nevertheless, there are no indications that trade talks between the world’s two largest economies have actually begun. At the same meeting on Tuesday, Bessent himself commented that any negotiations between the two would be a “slog”.
US stocks jumped after Bessent’s comments were reported. Following Monday’s declines, the S&P 500, Dow Jones and Nasdaq closed Tuesday’s session with gains of 2.5%, 2.7% and 2.7% respectively.
The US dollar also responded well, with the Dollar Index clawing back some of the previous day’s losses and trading higher on Wednesday morning.
Gold, which soared to a record high of more than $3,500 during Tuesday’s session, retreated and closed the day down more than 2% at $3,346.
Trump Rows Back on Powell Comments
On Monday, criticism from US President Donald Trump aimed at Federal Reserve Chair Jerome Powell sparked a sell off in US assets, with Wall Street and the US dollar closing Monday’s session sharply lower.
However, on Tuesday, President Trump poured cold water on speculation that he could sack Fed Chair Jerome Powell.
In comments in the Oval Office, Trump stated he had “no intention” of firing Jerome Powell but reiterated that he “would like to see him be a little more active in terms of his idea to lower interest rates. This is a perfect time to lower interest rates”.
IMF Cuts Growth Forecasts
Yesterday, in its latest World Economic Outlook, the International Monetary Fund (IMF) slashed its growth forecasts for the US in 2025. In January, the IMF had forecast growth of 2.7% for the world’s largest economy but downgraded their figure to 1.8% yesterday.
The IMF also downgraded growth forecasts for the Euro Area, the UK, Japan, Canada, China and India, amongst other countries.
The fund noted that “downside risks dominate the outlook” and that “escalating trade tensions and elevated policy-induced uncertainty may further hinder growth”.
Tesla Earnings Miss
After the markets closed on Tuesday, Tesla released its first quarter earnings report.
Tesla had already disclosed at the beginning of the month that deliveries had fallen significantly in the first quarter, so it was not a surprise to see earnings follow suit.
In the first quarter, revenue dropped 9% whilst adjusted Earnings per Share (EPS) slid by 40%. Both of these figures fell short of analyst expectations.
However, Tesla’s share price surged in after-hours trading after CEO Elon Musk said he will begin to dedicate “far more” time to Tesla and less to his role in President Trump’s administration.
As of the market close on Tuesday, Tesla shares were down by more than 40% since the start of the year.
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