Market jitters spiked early in the week as President Donald Trump’s aggressive tariff strategy—especially targeting China—collided with his unusually sharp criticism of Federal Reserve Chair Jerome Powell. Labelling Powell a “loser” and “Mr. Too Late” for not slashing interest rates sooner, Trump stirred uncertainty across financial markets.
However, tensions cooled by Tuesday when Trump dialled back his rhetoric and told reporters from the Oval Office that he had “no intention of firing” Powell—remarks that brought a wave of relief across Wall Street, with equity markets extending their rally into midweek. By Wednesday afternoon, the Dow Jones Industrial Average had surged 420 points, or 1.08%. The S&P 500 advanced 1.7%, and the tech-driven Nasdaq Composite leaped 2.8%.
Chair Powell, for his part, has remained steadfast in reiterating the Fed’s commitment to data-driven decision-making, emphasising that any shift in monetary policy would be deliberate, not reactive. He dismissed the notion of an emergency rate cut, reaffirming that changes would be discussed at the next scheduled meeting of the Federal Open Market Committee in May.
Buoying investor sentiment further, President Trump stated on Wednesday his intention to lower the tariff on Chinese goods from the currently imposed 145% levied. He said that the rate would come down substantially at some point, but this would hinge upon President Jinping working with the US to make a deal.
While President Trump’s rhetoric might be the loudest thing to reverberate around markets this week, it certainly wasn’t the only thing for investors to consider. Data published on Wednesday showed that British businesses came under intensified strain in April as heightened global trade tensions stoked renewed concerns over a potential economic contraction. The S&P Global Composite Purchasing Managers’ Index (PMI)—a key barometer of private sector output—fell sharply to 48.2 from 51.5 in March, slipping below the critical 50 threshold that separates expansion from contraction. This marks the index’s weakest performance since November 2022.
While inflationary pressures remain a persistent concern, the pronounced deterioration in business activity is expected to bolster the case for monetary policy easing. Expectations for a Bank of England interest rate cut at the upcoming meeting have solidified, reversing earlier market assumptions that policymakers would maintain a hawkish stance.
Still to come this week we have UK retail sales, Tokyo CPI and US jobs data.
Nicola Tune, Portfolio Specialist
