US tariffs on some tech imports temporarily halted

The Trump administration has suspended tariffs on imports of smartphones, some computers and some technology, softening the effect of tariffs introduced on all US trading partners on April 2nd. President Donald Trump though did say he could consider tariffs on imports of chips and that the exemptions were temporary. Pre-existing tariffs linked to fentanyl production in China of 20% on imports from China would still remain in effect.

Susan Collins, the head of the Boston Federal Reserve, said the Fed would “absolutely be prepared” to stabilize financial markets according to comments made to the press. Collins said that rates were not the “only tool in the tool kit” and wouldn’t necessarily be the appropriate policy to address disfunction in key markets like US Treasuries.

Consumer sentiment in the US worsened more than expected in April according to a survey from the University of Michigan. The overall sentiment index fell to 50.8, down from 57 a month earlier with sharp drops in assessments of both current conditions and future expectations. Year-ahead inflation expectations have spiked to 6.7% from 5% a month earlier, their highest level since the early 1980s when the US was beset by high inflation. Medium-term inflation expectations also worsened to 4.4% from 4.1% a month earlier. PPI inflation in the US eased in March, falling by 0.4% m/m while on a headline basis year/year PPI inflation fell to 2.7% from 3.2% a month earlier.

Egypt’s sovereign rating outlook was changed to stable from positive by S&P while the ‘B-‘ rating was affirmed. Fitch also affirmed their ‘B’ rating on Egypt with a stable outlook.

Today’s Economic Data and Events

• 08:30 JN industrial production y/y Feb
• 11:00 TU current account balance Feb: forecast USD -4.4bn

Fixed Income

• US Treasuries extended their sell-off on Friday with yields pushing higher. The 2yr UST yield added nearly 10bps at the end of the week to close just shy of 4% with almost 31bps of increase for the week as a whole. The 10yr UST yield added more than 6bps last week to close at 4.4895% with almost 50bps off increase for the week.
• European bond markets were relatively quiet in the final session of the week though gilts did sell off sharply. Emerging market bonds fared poorly amid the uncertainty on US tariff policies with local currency markets sinking. Regional credit was negative across the board with weaker indexes for the UAE, Saudi Arabia and all other GCC markets.
• UAE m-bills were higher last week with the June 25 maturity m-bill trading at 99.107 at the end of the week, up by about 0.1% on the week.

FX

• Currency markets showed broad USD-weakness last week with all major peers gaining against the US dollar. EURUSD added 3.6% last week to close at 1.1355 even ahead of an anticipated rate cut from the ECB this week. A 25bps cut from the ECB on April 17 is nearly 100% priced in while another two cuts are expected by the end of the year. GBPUSD added 1.6% last week to close at 1.3087 while USDJPY fell by 2.3% in a choppy week to close at 143.54.
• The Canadian dollar managed to strengthen last week with USDCAD closing lower by 2.4% at 1.3876 while both AUD and NZD also gained.
• INR was weaker last week by almost 1% at 86.0488 while TRY closed nearly unchanged at 37.8997.

Equities

• Signs of the US government relenting on some of the more aggressive tariff measures helped to turn equities around at the end of the week with the Dow Jones managing a gain of 1.6% on Friday while the S&P added 1.8%. For the week as a whole the S&P recovered 5.7% while the Dow added almost 5%. European markets remained soft with the Euro Stoxx index lower by 0.7% on Friday while the FTSE managed a gain of 0.6%.
• In local markets the DFM traded lower by 0.2% while the ADX managed a 0.5% gain. The Tadawul opened the trading week with a 0.8% gain.

Commodities

• Oil prices pushed higher at the end of the week with Brent futures up 2.3% at USD 64.76/b and WTI added 2.4% at USD 61.50/b. However, both benchmarks still endured losses for the week after some volatile trading sessions.
• The US and Iran held direct negotiations over the weekend and agreed to meet again for follow-up talks. Ahead of the talks, the US energy secretary said that the US could compensate for squeezing out Iranian exports through sanctions.
• Gold prices extended their gains at the end of the week with spot touching more than USD 3230/troy oz. Precious metals were higher across the board while industrial metals also pushed higher.