Market navigator: week of 14 April 2025
US indices rallied despite 2000-point daily swings as Trump suspends most reciprocal tariffs, while Hang Seng falls 8.5% amid continuing trade tensions.
Written by
Fabien Yip
Market Analyst
Summary
- What Happened Last Week: Trump suspended most tariffs for 90 days except for China. US inflation eased whilst China's deflation worsened amid escalating trade tensions.
- Markets in Focus: Volatility dominated with mixed results - US indices rallied (Nasdaq +7.4%, Dow Jones +5.0%) despite 2000+ point daily ranges, whilst Hang Seng Index fell 8.5%, extending its five-week decline. The yen strengthened 2.3% as safe-haven demand increased.
- The Week Ahead: Markets will monitor trade talks whilst awaiting China's GDP data, US retail sales, and ECB rate decisions. earnings season continues with reports from semiconductor, financial, and luxury goods companies.
What happened last week
- U-turn on tariffs: President Trump implemented a 90-day pause on higher reciprocal tariffs, excluding China, which now faces 145% duties. China countered by raising retaliatory tariffs to 125%. Global equity markets fluctuated dramatically in response to rapidly evolving policy announcements.
- US inflation moderates: The consumer price index (CPI) contracted 0.1% month-on-month while core CPI increased 0.1% (+2.8% year-on-year), below consensus expectations. Notably declining hotel and airfare prices suggest weakening consumer demand. The Federal Reserve maintains a cautious stance as current data precedes the potential inflationary impact of recent Chinese tariff increases.
- China deflation continues: consumer prices fell 0.1% YoY while producer prices declined 2.5% YoY, underperforming forecasts. This compounds economic challenges amid US trade tensions.
- Risk Aversion Grows: Yen and Swiss Franc strengthened in volatile markets. Gold price reached a new record high of $3245. Confidence in US safe havens weakened, with 10-year and 30-year treasury yields hitting 4.56% and 4.97%, and the dollar index falling below 100 for the first time since July 2023.
- First-quarter earnings commence: JPMorgan and Morgan Stanley shares rose Friday after beating expectations on strong equity trading. Bank executives cited concerns over trade policy uncertainty while expressing optimism about potential tax reforms and deregulation.
Markets in Focus
Exceptional volatility in US equity markets
Trade policy developments have emerged as the primary catalyst driving market performance over the past fortnight. Asset prices were whipsawed with extreme volatility -- the Dow Jones experienced daily trading ranges exceeding 2,000 points during three sessions of the five-day trading week, while the volatility index (VIX) oscillated between 30 and 60. Despite this heightened turbulence, the Nasdaq 100 index recorded a 7.4% gain, with the Dow Jones advancing 5.0% for the week.
While headline inflation appears contained according to the March CPI data release, consumer sentiment indicators show marked deterioration, with the latest University of Michigan Consumer Sentiment Index registering at 50.8, substantially below consensus. Paradoxically, forward-looking consumer inflation expectations for the upcoming 12-month period surged to 6.7%, reaching levels not observed since 1981. This divergence is aligned with the Federal Reserve (Fed) concerns regarding potential stagflationary pressures, with tariff-induced inflation likely to delay planned interest rates cuts.
Technical analysis indicates the US Tech 100 Index is consolidating near its 20-day simple moving average (SMA) following a significant rebound from 16,324, which now constitutes a key support level. The recent price recovery has normalised the relative strength index (RSI) to neutral territory, suggesting a temporary equilibrium between buying and selling pressures. For a sustainable reversal of the prevailing downtrend to materialise, the index would need to breach and maintain position above the technically significant 200-day SMA at 20,475. Substantial resistance level is anticipated at approximately 20,400, potentially constraining upward momentum absent meaningful improvement in global trade relations.
As the earnings reporting cycle accelerates, investors will scrutinise forward guidance from corporate executives to navigate current market turbulence. Any substantive developments in trade negotiations will prove decisive in determining near-term market direction.
Figure 1: Volatility index (daily) chart
Figure 2: IG US Tech 100 index (daily) price chart
Hang Seng Index pressured by escalating US-China trade tensions
The Hang Seng Index (HSI) extended its downward trajectory by 8.5% last week amid deteriorating trade relations, marking its fifth consecutive weekly decline. The benchmark experienced a substantial peak-to-trough retracement of 23% from its 19 March high before stabilising at the current 20,915 level. Technology sector constituents and export-orientated manufacturers bore the brunt of selling pressure, with Lenovo shedding 24% and Alibaba declining 17% within a single trading week.
Following multiple rounds of retaliatory measures, the US has elevated its blanket tariff on Chinese imports to 145%, while Beijing has implemented retaliatory duties of 125% on all US-originated goods. Chinese authorities have signalled they will cease responding to further US tariff increases, citing diminishing economic relevance. Market participants now await potential stimulus initiatives from Chinese policymakers to mitigate the adverse economic impact of these trade barriers and address persistent deflationary pressures in the domestic economy.
Technical indicators suggest an emerging trend improvement as the index has maintained positioning above its 200-day simple moving average (19,920), coinciding with early signs of positive momentum. Our analysis indicates potential for an HSI retracement towards the 22,700 level. Conversely, should the index breach its 200-day moving average support, subsequent price action would likely target the 18,671 level.
Figure 3: Hang Seng Index (daily) price chart
Japanese yen appreciates amid risk-off sentiments
USD/JPY extended its decline last week as investors flocked to the Japanese yen amid heightened market volatility. The yen strengthened 2.3% against the dollar as investors abandoned the US currency, which has lost its traditional safe-haven appeal. This shift reflects growing concerns about US economic vulnerability. Our analysis points to further yen appreciation potential, though the path will likely include periodic pullbacks. Ongoing uncertainties surrounding US-Japan trade negotiations could temporarily interrupt this trend, potentially introducing short-term pressure on the yen.
From a technical perspective, the currency pair has breached an important support threshold at approximately 144. Technical indicators suggest emerging oversold conditions, with the RSI approaching 30. The price action pattern displays characteristics consistent with a bearish Wave V under the Elliott Wave framework, suggesting a probable corrective rebound (Wave A) at or above the next support zone of 141.5-142, with significant resistance anticipated at approximately 147.8.
Figure 4: USD/JPY (daily) price chart
The Week Ahead
This week, market participants will maintain close attention on evolving trade negotiations as government officials and business executives worldwide engage with the Trump administration on trade policies. Other key economic releases include China's first-quarter GDP figures, US retail sales data, and monetary policy decisions from both the Bank of Canada (BoC) and European Central Bank (ECB). The quarterly earnings reporting cycle continues with important disclosures from Taiwan's semiconductor manufacturers, major US financial institutions and healthcare companies, alongside European luxury goods producers.
The ECB convenes Thursday for its monetary policy deliberations. Against a backdrop of persistent uncertainty surrounding US-EU tariff negotiations, deteriorating consumer confidence, and inflation metrics stabilising within proximity of target parameters, the ECB will likely implement a rate reduction at the forthcoming meeting. Interest rate futures markets currently reflect expectations for three additional 25 basis point (bp) cuts before year-end, anticipated in April, July, and October. Should the ECB's forward guidance adopt a more accommodative stance than currently discounted by market participants, this divergence would likely catalyse euro depreciation against major currency counterparts.
Figure 5: Euro area interest rate and inflation rate (March 2024 to March 2025)
Key macro events this week
Tuesday 15 April 2025
- 9.30am (HK time) -- Australia RBA Meeting Minutes
- 2.00pm (HK time) -- UK Unemployment Rate (February): previous 4.4%, consensus 4.4%
- 5.00pm (HK time) -- Germany ZEW Economic Sentiment Index (April): previous 51.6
- 8.30pm (HK time) -- US Import Prices MoM (March): previous 0.4%, consensus 0.1%
Wednesday 16 April 2025
- 10.00am (HK time) -- China GDP Growth Rate YoY Q1: previous 5.4%, consensus 5.1%
- 10.00am (HK time) -- China Industrial Production YoY (March): previous 5.9%, consensus 5.6%
- 10.00am (HK time) -- China Retail Sales YoY (March): previous 4%, consensus 4.1%
- 2.00pm (HK time) -- UK Inflation Rate YoY (March): previous 2.8%, consensus 2.7%
- 8.30pm (HK time) -- US Retail Sales MoM (March): previous 0.2%, consensus 1.3%
- 9.45pm (HK time) -- Canada BoC Interest Rate Decision: consensus keep at 2.75%
Thursday 17 April 2025
- 7.50am (HK time) -- Japan Balance of Trade (March): previous ¥584.5B
- 9.30am (HK time) -- Australia Unemployment Rate (March): previous 4.1%, consensus 4.2%
- 8.15pm (HK time) -- ECB Deposit Rate Decision: consensus reduce to 2.25%
- 8.30pm (HK time) -- US Building Permits Preliminary (March): previous 1.459M, consensus 1.46M
- 8.30pm (HK time) -- US Housing Starts (March): previous 1.501M, consensus 1.41M
Friday 18 April 2025
- 7.30am (HK time) -- Japan Inflation Rate YoY (March): previous 3.7%
Key corporate earnings
Monday 14 April 2025
Tuesday 15 April 2025
Wednesday 16 April 2025
Thursday 17 April 2025
Source: Trading Economics, AASTOCKS (as of 14 April 2025, based on HK time zone)
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