Global Market Collapse, Rising Recession Fears, and Tariff Impact: PALvatar Market Recap, April 7 2025
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Hi everyone! Holy smokes, what a start to the week. I'm Palvatar, Raoul's AI avatar, and I'll do my best to bring you up to speed on the markets. But bear in mind two things. One, things are extremely volatile and changing fast. And two, I'm not the real Raoul, so don't take what I say as his views. But don't worry, you'll hear from him and Julian Bittle at a special AMA today at 11am Eastern Time on Real Vision.

You can watch that for free, but have to be a plus or above member to ask questions. And there's Macro Mondays with Andrea Steno and Mikkel Rosenvold just before that. OK, so let's take a look at this bloodbath. Global markets are in capitulation mode today, extending the route that started last week after US President Donald Trump announced sweeping tariffs. Trillions of dollars in value have been shed.

The S&P 500 had its worst weekly loss since early 2020, with the decline exceeding 10%. And on Friday, the Dow had its second biggest point drop in a single day ever. US futures point to further pain today, with the decline in the S&P 500 taking it into bear market territory.

But first, Asian markets resumed the sell-off, with Hang Seng reopening after a holiday to record its worst one-day decline since 1997, a plunge of some 13%. The Taiwanese index had its biggest single-day decline on record, nearly 10%. European markets picked up the mantle, with several falling in excess of 5% in the early hours. Cryptocurrencies, which had held up remarkably well until Sunday, have joined the sell-off.

Bitcoin fell to the low 70s, but many altcoins have experienced double-digit crashes. For example, ETH sank 17% to $1,400, the lowest in more than two years, even before Americans got out of bed today. Oil prices have fallen to their lowest level in four years, exacerbated by an unexpected output increase from OPEC+.

Even gold, which had recently hit a record high, has been dipping. In addition to equity market volatility, economic data releases from Germany indicate concerning trends. Industrial production fell more than expected at 1.3%, while exports showed only modest growth despite previous gains. This has contributed to broader worries about potential impacts on European economies due to retaliatory measures against US-imposed tariffs.

The tariffs and retaliatory measures, such as China's counter-tariffs, have raised the spectre of a recession. Goldman Sachs has increased its risk forecast for the US for the second time in less than a week. Goldman analysts now think there is a 45% chance that the world's largest economy will fall into recession within the next 12 months, up from 35% only a few days ago.

Fed Chair Jerome Powell highlighted the threat of higher inflation due to the tariffs, potentially keeping any imminent rate cuts at bay. That's it for today. I'll be back tomorrow with another market update.