Whether Today’s Market Rise Endures Or Represents Just A Dead-Cat Bounce Remains To Be Seen – Currency Thoughts

Whether Today’s Market Rise Endures Or Represents Just A Dead-Cat Bounce Remains To Be Seen

April 8, 2025

As of noon GMT (08:00 EDT), U.S. stock futures had recouped 2.9% in the Russell 2000, 2.7% in the case of the DOW, 2.3% for the S&P 500 and 2.2% in the Nasdaq. In either case, bottom-fishing makes sense after the steep losses of the last few days. Letters went out from financial advisors urging clients not to panic and reminding them of the tendency of markets to become over-extended when unexpected shocks happen. It’s also true that underlying trade tensions have not been resolved, confusion persists over how long the very high tariffs will be maintained, and there has been no sign of the Trump Administration backing down from its broad range of radical policy reversals. It is true that the strategy of waiting out a sudden bear market most times proves more rewarding than  trying to guess when the market is ready to turn back upward. Most times that is so but not always. Two notable exceptions involve the Japanese Nikkei, which from a record high at the end of 1989 did not return to that level until last year, and the DOW, which did not move above its September 1929 peak until 1954. Many investors in each of those cases had fallen victim to Keynes’ warning that in the long run, we’re all dead.

In other stock market action today, share prices advanced 6.0% in Japan, 1.6% in China, 1.5% in Hong Kong, 1.5% in India, and 2.3% in Australia. The key European markets so far have rebounded between 1.3% and 2.2%. Meanwhile, ten-year sovereign debt yields climbed back up 16 basis points in Japan, five bps in Germany and three bps in the United States since Monday’s closing.

The dollar reverted to a soft tone, dropping overnight by 0.9% against the Australian and New Zealand currencies, 0.8% vis-a-vis the yen, 0.5% versus the loonie and Swiss france, 0.4% relative to sterling, but merely 0.1% against the euro. Bitcoin rose 0.5% but remains more than 25% down from its high this past December. Gold and oil prices have firmed 1.3% and 0.5% so far today.

Price data reported today include the following results:

• Dutch consumer price inflation of 3.7% in March was unchanged from the preliminary estimate and slightly under February’s 3.8% 7-month high. Dutch inflation had previously recededfrom 14.5% in July 2022 to -0.4% by October 2023.
• CPI inflation in Indonesia swung from a 399-month low of -0.1% in February to a 3-month high of 1.0% last month but with core inflation remaining steady at 2.5%.
• Taiwanese CPI inflation rose from a 47-month low in February of 1.6% to a 2-month high of 2.3% in March.
• In Latvia, consumer price inflation settled back to a 2-month high of 3.3% in March from February’s 18-month high of 3.7%. CPI inflation in Latvia previously ranged from a high of 22.2% in September 2022 to a 39-month low of 0.1% in May 2024.
• Lithuanian consumer price inflation accelerated 0.6 percentage points to a 19-month high of 4.1% in March.
• Hungarian CPI inflation settled back from a 15-month high of 5.6% to a 3-month low of 4.7% in March. Core CPI slid to 5.7%.
• Croatian producer price inflation, which had been a low as negative 4.7% last September, slipped back to zero percent
• in March after printing at 0.3% in January and 0.5% in February.

Service sector workers in Japan have become much less optimistic. The country’s economy watchers index, that charts the mood of such employees, fell to a 31-month trough of 45.1 in March from 45.6 in February, 49.0 at the end of 2024, and a 2023 high point of 55.0.

Faced with Trump’s tariff hikes, Japan’s government has adopted a very accommodative approach. News of a record Japanese current account surplus in February of 4.06 trillion yen came today at an awkward time in these trade-sensitive times. Israel also is promising to meet Trump’s trade demands more than half way. But at the other end of the reaction spectrum, the Chinese regime headed by Xi Jinping has called the U.S. actions blackmail and is vowing a tit-for-tat fight to the end. The European Union is also rejecting an approach that appeases the U.S. president.

America’s campaign of sudden, steep tariff hikes is intended to bring back manufacturing but causing fits for small U.S. businesses. The NFIB index of small business confidence fell 3.3 points in March to 97.4. That’s down from December’s brief spike to 105.1 that came after the November election and inspired hopes of broad deregulation that would promote small firms.

Australia’s index of business confidence slid a point to a 4-month low of -3 in March, and a measure of Australian consumer sentiment for April showed a 6% drop to a 23-month low.

The French current account deficit in January-February totaled 2.737 billion euros versus a surplus of EUR 3.307 billion a year earlier.

Ireland had some upbeat economic news: the construction purchasing managers index for March jumped over 5 points to a 3-year high of 53.9, and Irish industrial production soared 10.8% on month and 34.9% on year during February.

Euroland house prices in the final quarter of 2024 posted a smaller 0.6% increase from 3Q but an enlarged 4.2% year-on-year advance.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: French and Japanese current accounts, tariff war

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on Tuesday, April 8th, 2025 at 6:28 am and is filed under New Overnight Developments Abroad – Daily Update.
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