Tariffs and inflation squeeze, risk aversion heats up, this week focus on Trump's "equivalent tariffs" and non-farm data

Data released last week has heightened market concerns over the U.S. economic outlook, with increasing signs that consumer confidence has sharply declined and spending has weakened due to fears that tariffs could drive up inflation. Long-term inflation expectations have risen as a result. U.S. stocks suffered a sharp weekly decline, erasing the gains from the previous week's rebound. The SP 500 fell 1.53%, the Dow Jones dropped 0.96%, and the Nasdaq lost 2.59%. The Magnificent 7 tech index slid 2.95% last week.

The crypto market followed U.S. equities in a choppy downtrend. Bitcoin initially surged toward $89,000 last week but retreated amid pressure from Trump's tariff announcement. The release of the PCE data on Friday further accelerated the decline. At the time of writing, Bitcoin was trading at $81,884, down 4.46% over the past seven days. Other major tokens also saw widespread losses, with Ethereum breaking below $1,800, nearing a new low. Market sentiment remains weak and is likely to stay under pressure until there is more clarity on Trump's tariff actions.

In the forex and commodities markets, the U.S. Dollar Index fluctuated and ended the week down 0.05%. Safe-haven demand weighed on risk assets, while geopolitical tensions provided some support for oil prices, which rose around 2% for the week. Gold extended its rally for the fourth consecutive week, reaching a new all-time high, with spot gold surpassing $3,100.

Weak economic data has reignited concerns about the economy, leading to a broad market sell-off. With Trump's "reciprocal tariffs" set to take effect on April 2, market nerves are running high, and risk aversion is intensifying. Additionally, the U.S. March nonfarm payrolls report is set for release this Friday evening, followed by remarks from Fed Chair Jerome Powell. The Federal Reserve left rates unchanged in March, and investors are now eagerly awaiting Powell’s comments on the U.S. economy, inflation, and the potential impact of Trump’s tariff policies. These insights could provide clues about the Fed’s monetary policy direction and offer more reliable guidance for market trends in April.