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Stocks fall, gold reaches record levels as tariffs fuel recession fears

Stocks fall, gold reaches record levels as tariffs fuel recession fears

On Monday, global equity markets fell and gold reached a new record high after U.S. president Donald Trump announced that tariffs would cover virtually all countries. This stoked fears of a global economic recession due to a trade war.

Trump's comments on Air Force One to reporters seemed to put an end to hopes that the levies could be restricted to a small group of countries who have the largest trade imbalances.

Trump will receive recommendations for tariffs on Tuesday, and then announce the initial level on Wednesday. The auto tariffs are announced the next day.

All three major Wall Street indexes are trading lower. Losses in technology, communication services, and consumer discretionary stocks lead the way. Gains were made by energy, consumer staples and utilities stocks.

George Lagarias is the chief economist of Forvis Mazars. He said, "What Trump's administration has shown so far is you shouldn't expect a consistent strategy."

This is what most scares markets. Markets hate uncertainty and inconsistency.

The Dow Jones Industrial Average dropped 0.11% to 41.538.47. The S&P 500 declined 0.90% at 5,530.99. And the Nasdaq Composite was down 2.00% at 16,976.48.

The STOXX 600 in Europe fell by 1.40%, its lowest level in nearly eight weeks. Major indexes in Frankfurt and London also fell between 1.7 and 2 percent. MSCI's broadest Asia-Pacific share index outside Japan fell 1.9%.

Goldman Sachs analysts now see 35% of the chance that the U.S. will enter a recession. This is up from 20%. They expect Trump to announce on April 2 reciprocal tariffs averaging 15% for all U.S. trade partners.

The data released on Friday highlighted the risks, as core inflation, a key indicator of inflation in general rose more than anticipated in February and consumer spending was disappointing.

The March payrolls report, due Friday, is now even more important. Any result below the expected 140,000 increase will only add to the recession fears.

Talley Leger is the chief market strategist of The Wealth Consulting Group, a New Jersey-based firm.

In a slowing environment of growth, earnings will decelerate or even crash in a recession. This is another major fear on the market. "On the other hand, spiraling inflation would squeeze stock prices on the valuation channel."

Gold prices continued their record-breaking run and reached a new high of $3128.06 Gold futures in the United States rose 1.3% to $3,126.60 per ounce. Spot gold increased 1.18%, reaching $3,120.27.

On the currency markets, the dollar fell against the Japanese yen and rose against the euro due to the uncertainty surrounding tariffs.

The dollar fell 0.13% against the Japanese yen to 149.63. The euro fell 0.27% to $1.0799. The dollar gained 0.48% against the Swiss Franc to 0.885 Franc.

The dollar index (which measures the greenback in relation to a basket including the yen, the euro and other currencies) rose by 0.22%.

Bond investors appeared to be betting that the Fed will cut rates this year by 80 basis points due to the slowdown of the U.S. economy.

The yield on the benchmark 10-year U.S. notes dropped 3.5 basis points, to 4.219%. The yield on the benchmark German Bunds 10-year fell by 2.6 basis points in Europe to 2.706%.

Fed Chair Jerome Powell's Friday speech, which follows a number of Fed speakers during this week, could provide a clearer picture on the outlook for interest rates.

Brent oil rose by 1.41%, to $74.67 per barrel. U.S. crude gained 2.34%, to $70.99 a barrel. Trump also threatened to impose secondary tariffs on Russian oil buyers if he believed that Moscow was blocking his efforts to end Ukraine's war. Reporting by Chibuike OGOH in New York, Editing by Shri Navaratnam and Lincoln Feast; Aidan Lewis, Jan Harvey, Joe Bavier and Lincoln Feast

(source: Reuters)