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Futures markets buoyant as they sail towards tariff storm

Futures markets buoyant as they sail towards tariff storm

The financial markets started the week on a positive note, with U.S. stocks futures up and the dollar strengthening ahead of the data-driven week and the threat of steep U.S. Tariff hikes.

S&P 500 Futures increased by 0.7% during the Asia session, while Nasdaq futures grew by 0.8%. European futures rose 0.3% during the afternoon session in Asia.

The Nikkei 225 and Hang Seng of Hong Kong both remained flat, while the euro, after a slight drop last week, remained steady at $1.0822.

Investors are uneasy about the situation in emerging markets. Indonesia's fragile stock exchange has suffered a sharp drop, while Turkey's Lira is on a knife-edge due to the imprisonment of President Tayyip Erdoan's main opponent.

The shares of Australia's fibre-cement manufacturer James Hardie dropped 14.5% after the company announced that it would purchase U.S. outdoor products maker AZEK Company in exchange for $8.8 Billion in cash and stocks.

This week, we will see global purchasing managers' indexes, preferred inflation data from the U.S. Federal Reserve, inflation data for Australia and Japan as well as a budget update and earnings figures in China.

Analysts said that after a volatile trading month in stocks, bonds, and currencies, there was no clear trade to come.

Chris Weston is the head of Pepperstone's research.

"You have to think like the consumers and households," said he, as fears of a global slowdown led to the selling of dollars and stocks for weeks and the strong rally in Treasuries.

We start to panic when we see that the price pressures won't be temporary or there is a higher likelihood of recession.

Trump has promised to impose a complex barrage of tariffs on next week. The details are unclear, but they will be calculated in order to reflect both the impact of foreign import tariffs and foreign value added taxes.

S&P 500 gained a little on Friday, after Trump hinted that he was flexible. However, after an eventful first two months, which included tariffs on China, Mexico, and Canada, traders are hesitant to bet on Trump's willingness to make deals.

The yield on ten-year U.S. Treasury bonds has fallen by 38 basis points since mid-February, and now stands at 4.28%. Investors have fled U.S. stocks and have rallied in Hong Kong and Europe after the Wall Street indexes dropped.

Hong Kong shares have risen 18% this year, which is the highest gain in any major market. However, a drop of 4,4% over two days late last week indicated a pause while traders considered their next moves - and Trump’s.

The focus will be on the earnings of BYD automaker, Kuaishou video platform as well as Chinese bank and several property developers. The shares of China's biggest food delivery company Meituan dropped 3% on Friday after the firm reported revenue that was more or less in line estimates.

Dollar Tree, a discount retailer in the U.S. and Lululemon, a high-end athletic clothing company are both on the agenda.

Gold was just below the record high of last week, at $3,021 per ounce. Bitcoin remained at $87,000.

In a client note, Bob Savage of BNY's macro-markets strategy department said: "Cash and safe assets remain the counterbalance for any larger change in strategy."

"We expect that a series diplomatic meetings will eventually avert the extreme tariffs, but not before April. This leaves the sequencing concerns about Trump's policy changes continuing to move markets, with continued economic uncertainty." (Reporting and editing by Christopher Cushing, Saad Sayeed and Tom Westbrook)

(source: Reuters)