U.S.-China trade tensions; bank earnings ahead - what's moving markets

Investing.com - U.S. stock futures edged lower on Friday, as traders assess a deepening trade war between the U.S. and China. Equities slumped in the previous session, resuming a white-knuckle ride that has been fueled by President Donald Trump's shifting trade pronouncements. Elsewhere, traders are preparing for a fresh batch of U.S. bank earnings, with analysts on the hunt for any commentary around tariffs and the wider economic outlook. A key gauge of American consumer sentiment for April is also due to be released.

1. Futures pare gains

Stock futures on Wall Street pared back some earlier gains, after the state-backed Xinhua news agency said China had raised its tariffs on U.S. goods to 125% in retaliation to a recent hike in levies imposed by Trump.

Equities sank in the prior session on renewed investor concerns over an escalating trade war between the U.S. and China.

By 03:18 ET (07:18 GMT), the Dow futures contract had jumped by 109 points, or 0.3%, S&P 500 futures had climbed by 25 points, or 0.5%, and Nasdaq 100 futures had advanced by 121 points, or 0.7%.

On Thursday, only a day after stocks logged their best day since 2008 on relief that Trump had announced a 90-day delay for most of his sweeping reciprocal tariffs, the main averages erased much of these gains.

Denting sentiment was a clarification from Trump that he had hiked tariffs on Chinese imports by a total of 145% since the start of his second term in power.

Trump had previously said he would increase levies on the world's second biggest economy to 125% in response to retaliatory measures from Beijing. However, the White House later explained that the 125% is on top of a 20% tariff the president had already slapped on China for its alleged role in the supply of the illicit drug fentanyl to the U.S.

The turmoil and uncertainty swirling around Trump's often mercurial trade policy -- as well as resumed selling in U.S. government bonds -- largely blocked out an upbeat March inflation report. The data showed that consumer prices rose by less than anticipated on an annualized basis last month.

2. Bank earnings loom

Traders will likely be keeping close tabs on the latest earnings from a slew of major U.S. banks on Friday, including J.P. Morgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), and Morgan Stanley (NYSE:MS).

Typically viewed as the unofficial start of the quarterly reporting season, analysts have suggested that these releases could help set the tone for corporate America during a time when Trump's tariffs are complicating the plans of many businesses.

"For the banks, [the] first-quarter numbers should probably be OK, but that’s not going to be the focus, as investors listen closely for how management teams describe the macro landscape," analysts at Vital Knowledge said in a note to clients.

They added that they expect "the word 'resilient' [...] to be used a lot" by executives at top lenders, even as fears grow over the impact of the levies on growth and inflation. Earlier this week, J.P. Morgan CEO Jamie Dimon argued that the duties will probably lead to a recession and defaults by borrowers.

Although broadly postponed, the tariffs could still have implications for a range of banking activities, including dealmaking advisory and underwriting, loan growth, and provisions, the Vital Knowledge analysts said.

3. University of Michigan confidence survey ahead

On the economic calendar, markets are gearing up for the April consumer sentiment survey from the University of Michigan.

The closely-watched barometer of household confidence plunged in March as Americans fretted over the impact of Trump's tariffs on their personal finances, business conditions, and unemployment.

At the same time, consumer inflation expectations soared, with the University of Michigan report for March showing that long-run price growth projections were above 4% "in light of frequent developments and changes with economic policy."

Taken together, the figures suggested that Americans may be becoming more cautious and reining in expenditures on nonessential items as they attempt to suss out the implications of Trump's tariff actions. Worries have subsequently risen around a potential recession in the broader economy, although recent numbers have not indicated that the U.S. is already in a downturn.

4. Gold hits record high

Gold prices surged to a record high on Friday, extending a recent run-up, as demand for safe-haven assets remained underpinned by heightened concerns over an intensifying U.S.-China trade war.

The yellow metal has clocked stellar gains this week, outpacing all other metals, as investors piled into bullion and the yen as perceived safe havens. Weakness in the dollar also helped spark some gains.

Demand for gold was supported by heightened volatility in risk-driven assets that has been driven by the U.S. and China imposing steep trade tariffs on each other.

Spot gold rose by 0.9% to $3,204.94 an ounce, while gold futures expiring in June jumped 1.4% to $3,223.41/oz by 03:21 ET.

5. Oil on pace for losing week

Oil prices edged higher Friday, but were on course for a second consecutive losing week, as worries remained that the trade tensions between the U.S. and China -- the two largest economies in the world -- will hit crude demand.

At 03:21 ET, Brent futures increased by 0.9% to $63.92 a barrel. U.S. West Texas Intermediate crude futures rose 1.0% to $60.69 a barrel.

Both benchmark contracts are set to drop around 4% this week, adding to their 11% falls in the prior week.

Traders are concerned that deepening international trade tensions will hurt demand, especially given that China, now the major focus of Trump's punishing tariffs, is the world's biggest crude importer.