As markets recover from the recent tensions spurred by trade concerns, attention now shifts back to key economic data and corporate earnings. With a temporary respite from a potential global trade war, investors are eyeing a more familiar set of indicators that could shape market direction.
Six weeks after U.S. President Donald Trump’s “Liberation Day” tariffs sparked global market turmoil, the lessons seem clear: wait for the details and capitalize on dips. The announcement of a 90-day suspension of the harshest tariffs between China and the U.S. provided a better-than-expected outcome, resulting in strong gains in Asian equity markets, particularly in Japan, following a rally in U.S. stocks.
However, Trump’s recent comments on high U.S. drug prices led to a sharp selloff in Japanese pharmaceutical stocks on Monday. Despite this, the actual executive order targeting cheaper drug prices overseas led to a rebound in healthcare stocks on the Nikkei. Investors should keep an eye on the European pharmaceutical sector, which has outperformed the broader market this year.
Trump’s remarks on expensive injectable obesity treatments, presumably referring to drugs from Novo Nordisk and Eli Lilly, could lead to cost-cutting pressure in the U.S. and potential price hikes in Europe. Bayer AG’s comments following its first-quarter results today may offer insight into how the German healthcare giant plans to handle these challenges.
The U.S. dollar saw slight weakening in Asia, but retained most of its gains against the yen, euro, and Swiss franc after the trade truce announcement. However, uncertainty remains, as the policy shift and questions about what comes after the next three months weigh on investment sentiment. Equity futures suggest a subdued opening in Europe, with a slight pullback in the U.S.
Analysts are anticipating a recovery in German investor sentiment, with the ZEW economic research institute releasing its May data today. This follows a sharp drop in sentiment after tariff concerns caused investor morale to plummet to its lowest point since the start of the Ukraine war.
In the U.S., the Consumer Price Index (CPI) data will provide crucial clues about the timing of potential rate cuts by the Federal Reserve. Traders are now expecting a 57-basis-point rate cut this year, down from over 100 basis points in mid-April.
Key economic and corporate events to watch on Tuesday include:
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UK employment data (March)
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Speeches from BoE Governor Andrew Bailey and Chief Economist Huw Pill
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Germany’s ZEW business sentiment (May)
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U.S. CPI inflation data (April)
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Earnings reports from Under Armour, Venture Global, Bayer, and On Holding
For those tracking tariff developments, our new daily news digest, Tariff Watch, provides a roundup of key headlines impacting global trade.
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