Asian markets and the U.S. dollar kicked off the week with a sense of caution on Monday, as uncertainty surrounding U.S. trade policies continued to loom large. This comes at a time when a wealth of economic data and significant tech earnings are on the horizon.

Trade Policy Uncertainty

Despite claims from President Donald Trump about positive developments in trade negotiations with China and other nations, concrete evidence remains elusive. Over the weekend, Treasury Secretary Scott Bessent did not support Trump’s assertions regarding ongoing tariff discussions with China, leaving many investors puzzled.

According to Christian Keller, head of economic research at Barclays, “The uncertainty itself is at least as damaging as the tariffs, affecting the U.S. economy as much as, if not more than, the global economy.” Keller warns that while the current earnings season may yield strong results, many firms are likely to adopt a cautious stance until clarity improves, making a recession increasingly probable.

Market Movements

In early trading, market activity was subdued. The MSCI Asia-Pacific index, excluding Japan, saw a modest increase of 0.1%. Japan’s Nikkei 225 climbed by 0.9%, and South Korea’s index rose by 0.2%.

• EUROSTOXX 50 futures gained 0.3%.
• FTSE and DAX futures both increased by 0.2%.

Conversely, S&P 500 futures fell by 0.4%, while Nasdaq futures declined by 0.5%. The S&P 500 has rebounded nearly 12% from its low on April 8 but is still 10% below its record high.

Corporate Earnings Insights

Overall, corporate earnings have shown resilience, with a rise of over 9%. However, Bank of America noted that only 64% of companies exceeded earnings per share (EPS) expectations, down from 71% in the previous quarter. This week, around 180 S&P 500 companies, representing over 40% of the index’s market capitalization, are set to report earnings, including tech giants like Apple, Microsoft, Amazon, and Meta Platforms.

Key Economic Indicators

This week is also packed with crucial economic updates, including U.S. employment figures, GDP growth, and core inflation metrics.

• Payrolls are projected to rise by 135,000, and inflation is anticipated to soften.
• However, uncertainty surrounds GDP figures, with a surge in gold imports potentially skewing the results. The median forecast anticipates a modest 0.4% annualized growth, while the Atlanta Fed’s GDPNow estimate suggests a decline of -0.4% when excluding gold.

Federal Reserve Speculations

The upcoming jobs report is expected to refine market expectations regarding Federal Reserve policies, with futures indicating a 64% likelihood of a rate cut in June and a total of 85 basis points of easing by the end of the year.

“We anticipate another strong non-farm payrolls report, which may counter predictions of a Fed policy easing in June,” remarked Jonas Goltermann, deputy chief markets economist at Capital Economics. This anticipated report could bolster the dollar’s recovery from recent three-year lows.

However, Goltermann cautions that the unconventional policies of the Trump administration may lead to long-term confidence issues regarding the U.S. as a safe haven, leaving the dollar "held hostage" to the administration’s decisions.

Currency and Commodity Updates

The dollar index held steady at 99.695, above last week’s low of 97.923. The euro traded at $1.1350, slightly below its recent high of $1.15783.

Consumer price data for Germany and the eurozone is expected this week, with forecasts suggesting a further decline in headline inflation, potentially influencing the European Central Bank to consider another rate cut in June.

The Bank of Japan is also set to convene this week, with expectations leaning towards maintaining rates at 0.5% due to the economic uncertainty linked to U.S. tariffs.

The dollar has recently improved to 143.65 yen, recovering from last week’s seven-month low of 139.89, though it remains approximately 4% lower for April.

In the bond market, Treasuries remained stable after Trump’s assurance that he wouldn’t attempt to dismiss Fed Chair Jerome Powell, maintaining 10-year yields at 4.235%, down from April’s peak of 4.592%.

Gold and Oil Prices

In a sign of stabilizing risk sentiment, gold prices retreated to $3,307 per ounce, down from an all-time high of $3,500.

Oil markets opened quietly, impacted by concerns over global economic slowdown and OPEC’s plans for increased supply. Brent crude rose by 13 cents to $66.98 per barrel, and U.S. crude added 7 cents, reaching $63.09 per barrel.

As the week unfolds, investors will be keenly monitoring these developments for insights into future market movements.