Trade War and Geopolitical Instability in the spotlight

International Markets: the impacts of trade and geopolitical tensions on financial markets

By Itaú Private Bank

2 minutes of reading

The global economic scenario in April was marked by intense volatility and upheavals in financial markets. In this edition, Marcio Brito, Head Investor at Banco Itaú International, discusses the trade tensions between the United States, China, and Europe, as well as the geopolitical impacts on global stock exchanges.

Main highlights:

  • Trade War: The escalation of retaliatory tariffs between the US and China, along with tensions with Europe, led to a significant drop in global markets. The S&P 500 recorded one of the largest losses in history in just four days, wiping out about 7 trillion dollars in market value from American stocks.
  • Geopolitical Instability: The ongoing war between Ukraine and Russia, coupled with new instability in Israel, contributed to shaking global markets. As a result, there was a migration of investors to safe-haven assets, such as gold, which reached new historical records with an increase of nearly 10% in April.
  • Trump vs. Powell Conflict: The clash between the American president and the Fed chairman intensified, with Trump accusing Powell of "sinking" the economy by keeping interest rates high. This dispute between fiscal and monetary policy brought more uncertainty to the markets, leaving Wall Street on high alert.
  • Stock Market Performance: The European stock market outperformed the American one in April. The MSCI Europe closed the month up 3.7%, while the S&P 500 fell about 1.5%. Sectoral diversification in Europe and the faster deceleration of inflation contributed to this performance.
  • Weakening of Dollar: There was a decline in the US dollar against major developed market currencies, especially the euro. Factors such as weak economic data in the US, concerns over new trade tariffs, and divergent monetary policies influenced this movement.
  • Outlook for May: Markets will remain attentive to three main factors: tariff negotiations between the US, China, and Europe; central bank speeches on possible interest rate changes; and economic indicators, including employment data, inflation, and earnings reports from major technology companies.