Tariff Escalations, Chinese Currency Moves, and U.S. Market Rebound: PALvatar Market Recap, April 08 2025
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Hi everyone, I hope you're coping with the volatility and staying sane, as this is not an easy market to follow. But that's what Real Vision and Palvatar are for. I'm Raoul's AI avatar on a mission to give you only the most important market news and drivers. And if you're wondering what the real Raoul would do, after watching this video, check out his special update with Julian Bittle from yesterday. Hopefully it will put your mind at ease. Anyway, let's check how everything is holding up this Tuesday.

We're seeing a bit of a recovery after the brutal sell-off of the past few days. Japan's Nikkei led the Asia-Pacific stocks with a 6% pop, while the ASX200 in Australia gained more than 2%. Stocks in Europe are also in the green, but the recovery is much more muted, reflecting the unease among investors. Crypto prices have stabilised after Monday's sell-off.

US futures are pointing to a higher open after a seesaw session yesterday when the S&P 500 briefly dipped into bear market territory before recovering and closing only slightly lower. The Dow was the worst performer. It lost another 350 points, which equals to more than 4,000 points in three days, a correction of 10% and among the biggest in such a short time ever. Of course, all of this comes amidst the ongoing trade war spurred by US President Donald Trump's tariffs.

Tensions remain high between the United States and China, particularly following Trump's threat to impose an additional 50% tariff on Chinese imports if Beijing does not retract its recent retaliatory tariffs. This would bring total tariffs on Chinese imports to 104%. Beijing has vowed to, quote, fight to the end. One of the moves it has taken is devaluing its currency.

Earlier today, the country fixed the renminbi at its weakest level in 18 months, the first sign it will permit currency depreciation to offset its trade war with the US. According to the Financial Times, any significant Chinese currency depreciation would mark a serious escalation because other countries would come under pressure to mount competitive devaluations of their own.

The downside for China is that it would risk capital outflows and undermine economic stability at home, making the move less likely. In addition, economic data releases have revealed concerning trends that may further affect investor sentiment. The NFIB Small Business Optimism Index declined in March to 97.4, falling just below the 51-year average of 98.

This marks the third consecutive monthly decline, reflecting increased uncertainty among small American business owners due to recent policy changes. The percentage of owners expecting better business conditions fell 16 points to 21%, the lowest since October and the biggest drop since December 2020. Elsewhere, Japan reported a record current account surplus for February, meaning it exported more than it imported by the highest margin on record, going back to 1985.

However, service sector sentiment fell sharply amid concerns about slow recovery and cost pressures. Meanwhile, France's widening current account deficit highlights challenges within European economies amidst these turbulent conditions. That's it for today. Take care and I'll see you tomorrow for another market recap.