Trade Truce Sparks Market Rally

European stock exchanges experienced a notable upswing today, mirroring positive trends across major European markets. This surge is largely attributed to the US management’s decision to suspend “mutual” tariffs for 90 days, a move welcomed by European Commission President Ursula von der Leyen as a crucial step towards global economic stability. Von der Leyen reiterated her long-standing support for a zero-tariff agreement between the EU and the United states.

I have always supported a zero to zero tariff agreement between the European Union and the United States.
Ursula von der Leyen, President of the European Commission

The technology, industrial, and banking sectors led the gains, reflecting investor confidence in a more stable trade environment. However, analysts caution that the tariff situation remains fluid. While the US has suspended some tariffs, a 10% duty remains on most US imports. Furthermore, tariffs on key sectors like automobiles, steel, and aluminum are unaffected by this recent development.

US Trade Strategy: A Calculated Approach?

While announcing the 90-day tariff suspension, the US also increased duties on chinese products by 125%. US Treasury Secretary besent suggested that the initial imposition of tariffs was a strategic maneuver to bring countries to the negotiating table. This approach highlights the complexities of the ongoing global trade war and the potential for further shifts in policy.

EU’s Retaliatory Measures

In response to US tariffs on steel and aluminum, the EU council recently approved duties of up to 25% on €21 billion worth of US goods, including products like soy and motorcycles. This retaliatory action, while less than a 1:1 match, is designed to disproportionately impact states that support the current US administration.

Monetary Policy Considerations

Recent FOMC reports indicate concerns about rising inflation amidst economic growth and employment gains. Federal Reserve officials are grappling with the delicate balance between managing inflation and sustaining economic momentum. Tom barkin of the Federal Reserve Bank of Richmond noted that the Fed’s response is contingent on medium- to long-term economic adjustments, emphasizing the critical role of tariff policy duration in their evaluations.

The Fed reaction function deals with the medium-long term economic adjustments, with the duration of crucial tariff policy for evaluation.
Tom Barkin, Federal Reserve Bank of Richmond

Economic Data: China’s Deflationary Pressures

Economic data released from China revealed that inflation in March was slightly below expectations, reaching -0.1% year-over-year (compared to expectations of no change) and -0.4% month-over-month (compared to -0.2% expected). This marks the second consecutive month of deflation,accompanied by an accelerated decline in producer prices. Thes figures raise concerns about potential deflationary pressures within the Chinese economy, which could have broader global implications.

currency and Commodity Markets

The Euro experienced a slight upward trend against the US dollar, trading at 1.099. gold saw an increase of 1.12%, reaching $3,17.3 per ounce. Simultaneously occurring, crude oil prices (Light Sweet Crude Oil) declined by 1.17%, settling at $61.62 per barrel.

Bond Market Activity

The spread between Italian and German 10-year bonds narrowed significantly, decreasing by 10 basis points to +115 basis points.The yield on the 10-year Italian BTP (Buoni del Tesoro Poliennali) is currently at 3.80%.

European Market Performance

Across Europe, major indices posted substantial gains:

• Frankfurt (DAX): +7.03%
• London (FTSE 100): +5.06%
• Paris (CAC 40): +6.76%

Milan Stock Exchange (Piazza Affari) Highlights

The Italian stock market (Piazza Affari) mirrored the broader European rally, with the FTSE MIB index surging by 7.17%. The FTSE Italia All-share index climbed to 37,219 points, while the FTSE Italia Mid Cap and FTSE Italia Star indices rose by 5.4% and 5.91%,respectively.

Top Performers on the FTSE MIB

Notable gainers among blue-chip stocks on the Piazza Affari included:

• Stellantis: +12.81%
• Prysmian: +11.81%
• STMicroelectronics: +11.80%
• Fineco: +11.61%

Leading Stocks on the FTSE Mid Cap

The best-performing stocks on the FTSE Mid cap were:

• Technoprobe: +12.98%
• LU-VE Group: +10.27%
• Tamburi Investment Partners (TIP): +9.35%
• De’ longhi: +8.90%