Another Bloodbath Today? Traders Eye Economic Data and Tariffs

Where Are Markets Today?

European markets and U.S. futures are trading lower as investors continue to a highly defensive mode amid escalating global trade tensions and fears of a potential economic slowdown. All of this comes at a time when the mother of all economic data will be released and if the data confirms further pessimism than one can easily anticipate another major blood bath in the markets today.

Down Turn

A major factor driving the market downturn is the recent announcement by U.S. President Donald Trump of new tariffs on imports, particularly affecting China, Mexico, and Canada. This has raised fears of an escalating trade war, which could significantly disrupt global supply chains and economic growth. The tariffs have led to heightened uncertainty in both European and U.S. markets, with investors concerned about the potential retaliation from trading partners and the broader impact on global trade and corporate earnings. This fear of further economic strain has sparked selling in futures markets across both regions, pushing prices lower ahead of the opening bell.

Another key reason for the weak market outlook is the growing concern over an economic slowdown, further compounded by mixed corporate earnings reports. Both European and U.S. futures are reacting to weaker-than-expected earnings in key sectors, with reports of slowing consumer demand and rising operational costs. The U.S. service sector, in particular, has shown signs of cooling, as reflected in the latest ISM Services PMI data. Similarly, concerns about inflation pressures and tightening credit conditions are dampening investor optimism. With economic indicators pointing to slower growth, futures markets are responding by retreating, as investors adjust their expectations for both corporate profits and broader economic performance.

These factors combined are creating a cautionary mood across markets, with both European and U.S. futures likely to open lower as the effects of trade uncertainty and economic slowdown weigh heavily on investor sentiment.

Drivers Behind the Market Move

Key Factors Impacting U.S. and European Markets Today

Today, the U.S. and European markets are being influenced by a combination of recent developments, ranging from economic data to geopolitical tensions. Investors are reacting to a mix of factors that could set the tone for market movements in the short term. Here are the three main drivers behind the market action:

• Escalating Trade Tensions from Trump’s Tariff Policies

The biggest catalyst for market moves today is the renewed trade tensions stemming from U.S. President Donald Trump’s announcement of new tariffs on imports from China, Mexico, and Canada. This move is sparking fears of a prolonged trade war, which could disrupt global supply chains and lead to higher inflation. Trump's tariffs are fueling concerns over slower global growth, causing investors to reassess their exposure to riskier assets. European markets are particularly sensitive, given their heavy reliance on exports, while U.S. markets are also feeling the strain, with tech companies heavily exposed to global supply chain disruptions.

• Cooling Economic Data from the U.S. and Europe

Recent economic data showing a slowdown in both the U.S. and European economies are influencing market sentiment. In the U.S., the ISM Services PMI report showed a notable decline in March 2025, pointing to cooling activity in the services sector, which accounts for more than two-thirds of the economy. Similarly, in Europe, the PMI reports have indicated weaker manufacturing output, exacerbating concerns over economic deceleration. These signs of slowing economic momentum are prompting investors to reconsider their growth projections, contributing to downward pressure on both U.S. and European futures.

• Geopolitical Concerns and Rising Oil Prices

Geopolitical tensions are also playing a significant role in today’s market moves, particularly regarding the ongoing conflicts in Eastern Europe. The potential for escalating tensions between Russia and Ukraine continues to create uncertainty around global energy markets. This uncertainty, coupled with rising oil prices, is heightening concerns over inflation and supply chain disruptions. As oil prices rise, there are increased fears that energy costs will further strain economic recovery, both in the U.S. and Europe, adding to the existing pressures on the markets.

These developments are shaping investor sentiment today, with rising trade tensions, slowing economic growth, and geopolitical uncertainties weighing on market performance across both continents.

Upcoming Economic Events

Key Releases and Market Impact

As we enter a week packed with critical economic data, market participants are anticipating several important events that could provide vital insights into the labor market, inflation trends, and overall economic activity. These reports will not only affect investor sentiment but will also shape expectations around monetary policy and broader market trends. Here’s a detailed breakdown of the key upcoming events and how the market is likely to react based on potential outcomes:

Construction PMI

The Construction PMI provides an important indicator of growth in the construction sector, which is a key driver of the broader economy.

• A stronger-than-expected Construction PMI would signal healthy expansion in construction activity, which could boost investor confidence in the economy’s overall growth trajectory. If the data surpasses forecasts, expect bullish moves in related sectors, such as construction, real estate, and industrials, as investors bet on sustained economic recovery and robust infrastructure spending.
• Conversely, a lower-than-expected reading could suggest a potential slowdown in construction activity, which may lead to a softening of market sentiment and a potential pullback in commodity prices, particularly those associated with construction materials (e.g., steel, lumber).

Average Hourly Earnings m/m

The Average Hourly Earnings report provides a snapshot of wage growth, a crucial gauge of inflationary pressures.

• A higher-than-expected number would signal robust wage inflation, potentially triggering concerns that rising labor costs could feed into broader price increases, keeping inflationary pressures elevated. In such a scenario, expect the market to price in further rate hikes from the Federal Reserve, leading to higher bond yields and potential weakness in growth stocks, which are more sensitive to rising rates.
• On the flip side, a weaker-than-expected print would suggest easing inflation pressures in the labor market, raising hopes for a dovish Fed stance. This could drive rallying risk assets, particularly equities, as investors would expect less aggressive monetary tightening, benefiting sectors like technology and consumer discretionary.

Non-Farm Employment Change

The Non-Farm Employment Change report is one of the most closely watched indicators of labor market health.

• A stronger-than-expected number would suggest a resilient labor market, with more jobs being added than anticipated. This would likely trigger a positive market reaction, with cyclical stocks (those sensitive to economic growth) such as consumer discretionary, materials, and industrials seeing upward pressure. Investors might also anticipate that strong employment could lead to continued tightening by the Federal Reserve, which would drive higher bond yields.
• However, if the Non-Farm Employment number comes in weaker than forecast, it would raise concerns about a slowing economy, possibly leading to a pullback in stocks and increased demand for safer assets like bonds. This could dampen confidence in future growth and exacerbate recession fears, particularly if wage growth isn’t robust.

Unemployment Rate

The Unemployment Rate provides a critical gauge of overall labor market health.

• A lower-than-expected unemployment rate would indicate a tight labor market, with fewer people out of work than anticipated. This could suggest strength in consumer spending, a key driver of economic growth, and investors might anticipate continued inflationary pressures that could lead to further Federal Reserve tightening. If the unemployment rate beats forecasts, expect a positive reaction in cyclical stocks, which tend to perform well during periods of economic expansion.
• On the other hand, if the unemployment rate rises or remains higher than expected, it would signal weakness in the labor market, possibly leading to dovish Fed expectations and giving a boost to risk assets like tech stocks and consumer staples, which tend to do well in periods of slower growth or economic uncertainty.

Fed Chair Powell Speaks

Any comments from Fed Chair Jerome Powell carry significant weight in shaping market expectations around monetary policy.

• If Powell delivers a hawkish speech indicating concerns about persistent inflation or the need for further rate hikes to control inflation, this could trigger higher bond yields, weaker growth stocks, and increased market volatility. Market participants would likely adjust their expectations for further Fed tightening, which could hurt high-growth, interest rate-sensitive stocks.
• On the other hand, a dovish speech could signal that the Fed is satisfied with inflation trends or the broader economic outlook, suggesting that tightening might be scaled back. In this case, growth stocks could rally, and there could be a decline in bond yields, benefiting risk assets and equities.

FOMC Member Waller Speaks

The speech by FOMC Member Christopher Waller is another key event that market participants will be watching closely for clues about the Fed’s policy stance.

• A hawkish tone from Waller, focusing on concerns about inflation or the need for continued rate hikes, would likely cause bond yields to rise and put downward pressure on equities, particularly in sectors that are sensitive to higher rates like real estate and technology.
• Conversely, if Waller takes a more dovish approach and signals concern about slowing economic growth or the need for caution in tightening policy, we could see bond yields fall, leading to a rally in growth sectors and potentially lifting the broader market sentiment.

Gold Prices

Gold prices have seen a modest decline amid market reactions to economic and geopolitical tensions. Despite a drop in prices, gold remains on track for a fifth consecutive weekly gain, as concerns about global economic stability persist.

Current Price: Gold is trading at $3,097.99 per ounce, down 0.5%. This slight decline follows news of Trump's tariff increases and the resulting market volatility.

Market Dynamics: While gold saw a decline, its overall performance remains strong, reflecting its status as a safe-haven asset in times of uncertainty. Investors are closely monitoring upcoming U.S. economic data to gauge potential impacts on the Federal Reserve’s monetary policy.

Market analysis is presented by Zaye Capital