Morning Bid: Chaotic US trade shifts leave markets wary

European markets are expected to open higher following Donald Trump's reversal on EU tariffs, though concerns persist regarding the unpredictability of U.S. trade policies, as Asian stocks retreated on Tuesday. The dollar remains near a one-month low, while investors are focused on Nvidia's earnings report, expected to show a 65.9% revenue jump, and its strategy to navigate U.S. export restrictions to China with a new, lower-priced AI chipset. Attention is also directed towards upcoming speeches by Federal Reserve policymakers and Friday's U.S. core PCE price index data for further insights into the rate outlook.

Analysis

European markets are anticipated to open stronger, buoyed by the U.S. administration's reversal on threatened tariffs against the European Union, as evidenced by a significant uptick in FTSE futures. However, this positive sentiment may prove short-lived due to persistent concerns over the unpredictability of U.S. trade policy, a factor contributing to a retreat in Asian stock markets and undermining investor confidence. The U.S. dollar remains under pressure, trading near a one-month low and poised for its fifth consecutive monthly decline, its longest losing streak since 2017. Significant investor focus is directed towards Nvidia's forthcoming earnings, where a 65.9% year-over-year surge in first-quarter revenue is expected. Critical attention will be on the company's strategy to navigate U.S. export restrictions on AI chip sales to China, reportedly involving a new, lower-priced AI chipset planned for mass production as early as June. Upcoming Federal Reserve policymakers' speeches and Friday's U.S. core PCE price index data are also key events, expected to provide further clarity on the interest rate outlook, while global central bankers at a BOJ-hosted conference are set to discuss flagging economic growth and persistent inflation.

Key Decisions for Investors

• Consider potential short-term upside in European equities following the U.S. tariff policy shift, but remain vigilant regarding the inherent volatility stemming from unpredictable U.S. trade pronouncements.
• Closely scrutinize Nvidia's upcoming earnings report for details on its China strategy, the market reception of its new lower-priced AI chipset, and any adjustments to its sales outlook given U.S. export curbs.
• Evaluate currency exposures in light of the U.S. dollar's continued weakness and prepare for potential market movements influenced by forthcoming U.S. inflation data and Federal Reserve commentary.