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 S&P 500 Drops 2% Amid Economic Concerns: Markets Wrap

Trump is set to launch so-called reciprocal tariffs on April 2, a centrepiece of his plan to rebalance global trade, boost US manufacturing and fund his domestic policy priorities. In turn, consumer sentiment has plummeted as tariffs drive up price expectations, while a key US inflation gauge rises, and spending remains stagnant. Last week, US stocks took a hit, bonds surged, and gold reached a record high due to signs of weakness in the US economy and fears of rising inflation amid a trade war. The S&P 500 fell 2%, marking its worst quarter since 2022. US consumer sentiment dropped, and long-term inflation expectations surged. Tech mega-caps fell 3.5%, and the yield on 10-year Treasuries dropped to 4.26%.

The Nasdaq Composite lost 2.7%, and the Dow Jones Industrial Average slipped 1.7%. Major tech stocks like Amazon and Alphabet fell over 4%, while Canadian retailer Lululemon tumbled 14%.

Wall Street’s “fear gauge” (VIX) topped 21, and the US dollar fell 0.1%Economists have lowered their US growth expectations due to tariff and policy uncertainties. Despite the turbulence, some analysts believe US stocks can recover and post gains by the end of 2025.

Xi Woos Global Business Leaders as Trump Escalates Trade War

Chinese President Xi Jinping called on global business leaders to push back against protectionism, seeking to leverage the growing backlash to US tariffs and promote China as a reliable partner.

Xi criticised Donald Trump’s trade actions, highlighting China’s stability at a meeting in Beijing with 40 corporate leaders, including Stephen Schwarzman of Blackstone Inc. and Jay Y. Lee of Samsung Electronics. His comments followed Trump’s intensification of the trade war, which prompted threats of retaliation from the EU and other allies. Xi’s remarks are part of a campaign to attract investors amid slowing growth and geopolitical tensions. He promised to improve market access and address operational challenges in China, calling the nation a “favourite destination” for foreign investors.

Despite significant capital outflows from China, foreign companies maintain a strong interest in operating within the country. Xi emphasized China’s commitment to providing a transparent and predictable policy environment, urging global business leaders to embrace opportunities in China.

Reeves’ Spring Statement: Significant Welfare Cuts and Economic Reforms Unveiled

Chancellor Rachel Reeves unveiled her Spring Statement, focusing on reducing public spending rather than increasing taxes to balance Britain’s finances. Key announcements include significant cuts to welfare, aiming to save £5 billion annually. Reforms to personal independence payments (PIP) and Universal Credit will cut the welfare budget by an estimated £3.4 billion. The Office for Budget Responsibility (OBR) forecasts inflation to peak at 3.8% in July before easing to 2.1% by 2026.

Despite these measures, the OBR warns they fall short of addressing broader economic challenges. Unemployment is expected to rise to 4.5% in 2025. However, the OBR projects a surplus in Treasury finances, with a £6 billion budget surplus forecast for 2027-28.

Reeves ruled out new tax rises, instead pledging to crack down on tax avoidance. Growth forecasts for 2025 have been halved from 2% to 1%, but new housing policies are expected to boost GDP by 0.6% over the next decade.