Shares had a mixed performance on Wednesday as investors awaited crucial economic data that could shed light on the effects of U.S. President Donald Trump’s tariffs. The U.S. is set to release its first-quarter GDP data, which is expected to show that the economy either stalled or contracted, due to businesses rushing to import goods ahead of anticipated price hikes from the tariffs. This comes after the U.S. goods trade deficit hit an all-time high in March, leading economists to downgrade their GDP forecasts. BNP Paribas revised its outlook to a 0.6% contraction, down from a previous forecast of a 0.4% growth, but noted that the data may not significantly alter Federal Reserve policy.
Investors are also keeping a close eye on the PCE inflation data, which will give insight into how much room the Fed has to reduce interest rates. In the meantime, earnings reports from companies have added to the uncertainty. Several European carmakers, including Mercedes and Stellantis, suspended their profit guidance due to the unpredictability of the tariffs, echoing General Motors’ similar move the previous day. Swiss bank UBS also expressed caution over the uncertain economic outlook.
Despite the gloomy tone, the European stock market showed a slight uptick, as much of the negative sentiment seemed to already be priced in, and there was some optimism that trade tensions might ease in the future. President Trump signed orders on Tuesday aimed at softening the impact of his auto tariffs, with reports suggesting that a deal had been reached with a foreign nation, though the details remained unclear. Additionally, better-than-expected growth in the eurozone economy during the first quarter helped boost sentiment.
In contrast, oil markets reacted more sharply. Brent crude futures dropped by 1.85% to $63.06 per barrel, while U.S. crude fell by 1.7% to $59.38 per barrel. Both benchmarks were on track for their largest monthly declines in nearly three and a half years. The tariff tensions have also impacted China, where factory activity contracted at the fastest rate in 16 months. This contributed to a drop in Chinese shares, while Hong Kong’s Hang Seng Index saw a modest increase.
The economic uncertainty led to continued gains in U.S. Treasuries, with the 10-year yield hitting its lowest point in three weeks. The dollar was on track for its worst monthly performance since November 2022, while the yen and euro saw significant monthly gains. Meanwhile, spot gold fell by 0.9%, settling at $3,286 an ounce.
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