What are the chances of a recession after Trump’s tariffs?
Major financial advisor JP Morgan has just put out a note titled “there will be blood”.
They’re not talking about the Daniel Day-Lewis film but about the potential for massive losses on global markets, and the potential of a global recession, after Trump’s latest tariffs were announced 24 hours ago.
The firm notes that the “risk of recession in the global economy this year is raised to 60%, up from 40% earlier”.
“Scenario where rest of world muddles through a US recession possible but less likely than global downturn,” they add.
But not everybody thinks a US recession is looming.
Advisory firm Oxford Economics put out a note last night (before Wall Street closed so sharply down) where it gives an “initial assessment” that “a global recession will likely be avoided”.
They do still think that global GDP growth could “plausibly” fall below 2%.
“This would still be some way off the technical definition of a global recession – for this to happen, GDP growth would need to fall below the rate of world population growth, which is currently about 0.9% in annual terms,” Director of Global Macro Research, Ben May, writes.
“Nonetheless, it would be the weakest annual growth rate since the global financial crisis, excluding the pandemic period.”
Why US investors are betting on rate cuts after Trump’s tarrifs
This is another note from CBA that was just released, which talks about the expectations from investors of when the US central bank will next cut interest rates.
It notes that the Federal Reserve’s head will speak in the next 24 hours.
FOMC Chair Powell speaks on the economic outlook (2:25am Sydney time). Markets will be focused on any comments that Chair Powell makes in regards to the impacts of tariffs on the US economy and inflation. Markets are currently pricing around 93bps of FOMC interest rate cuts by year end, compared to around 75bps earlier this week.
There’s been a lot of concern whirling around in the last few days that Trump’s tariffs could push the US economy into a recession. And central banks generally cut rates to help stimulate an ailing economy.
Whether investors have it right is another thing. We’re going to dive into analysts’ thoughts about US recession fears soon.
Market snapshot
- ASX 200 futures: -1.2% to 7,786 points
- Australian dollar: +0.4% to 63.27 US cents
- S&P 500: -4.8% to 5,396 points
- Nasdaq: -6% to 16,550 points
- FTSE: -1.6% to 8,474 points
- EuroStoxx: -2.6% to 523 points
- Spot gold: -0.6% to $US3,114/ounce
- Brent crude: -6.8% to $US69.83barrel
- Iron ore: -0.8% to $US102.05/tonne
- Bitcoin: flat at $US82,357
Prices current around 8:00am AEDT.
Live updates from major ASX indices:
Nasdaq closes down a staggering 6 per cent on Wall Street
Wall Street has finished on Thursday (US time) with massive losses, with the Nasdaq tech index down just under 6%.
Meanwhile, the Dow is off almost 4% and the S&P 500 4.8%.
It’s the biggest losses on Wall Street since shocks from the pandemic back in 2020.
The market losses could reveberate here in Australia today, with futures for the ASX 200 currently down 1.2%.
We’ll keep you updated.
So-called ‘fear guage’ index is shooting up on Trump tariffs
An interesting note just came out of CBA’s currency team, whose morning briefings are always full of little bits of information.
They have this note about the AUD/USD.
AUD/USD traded as high as 0.6389, before unwinding some of the increase. AUD/USD is currently trading near 0.6320. AUD/USD is higher despite a huge 4.7% decline in the US S&P500. The VIX index, or so called ‘fear gauge’ is also up sharply to 29.26%. Lower US equities and a higher VIX almost always mean a lower AUD/USD.
What is the VIX? It’s commonly described as a markets indicator of volatility based on the Wall Street index S&P 500, and as CBA notes, it is sometimes seen as an allegory for fear.
Fears of a US recession rattle Wall Street
Good morning. Emilia here with you on our markets and economics blog this morning.
Strap yourself in. It’s looking like another wild one, a day after US President Donald Trump announced more tariffs.
To catch you up on Wall Street, here is the last 24 hours from our Washington bureau.
Futures for the ASX 200 are at least 1 per cent down, with the Australian share market set for losses today.
We’ll have more analysis soon.
