On Thursday, Bloomberg published an article claiming that tech giant, Microsoft, had halted or delayed several data centre projects in the United States (US) and globally. Reporting in late February claimed that Microsoft had walked away from several power generation deals which were meant to serve new and power-hungry data centres. This negative shift in tone places cutting-edge data centre suppliers like Nvidia, Broadcom and Arista on notice, given the expectation of a slowdown in data centre spending.
The above report collided with the highly anticipated tariff announcement from US President Donald Trump which included a universal 10% tariff on all imports into the US, effective from 5 April. The White House has branded the tariffs as restorative of national and economic security. However, market consensus is that the tariffs will destabilise global trade and reduce global gross domestic product (GDP) growth.
The 10% universal tariff is essentially a minimum, although most major economies were assigned individualised ‘reciprocal tariffs’ which are as high as 64% for China and 46% for Vietnam, but as low as 8% for Canada and Mexico, which were spared the worst.
A 40% tariff – which is the 30% reciprocal tariff on top of the 10% base tariff – has been imposed on South African imports to the US, which amounts to about $15 billion per year. There could be some relief for South Africa because the White House has excluded certain minerals, like platinum group metals, from the reciprocal tariffs.
On Thursday, the S&P 500 fell 3.3% on opening and extended its losses to close at 5,396.52, down 4.84% for the day. Similarly, the tech-heavy Nasdaq Index declined 5.35%, its sharpest daily drawdown since September 2022. The Hang Seng, FTSE 100 and Euro Stoxx 50 indices lost 1.52%, 1.55% and 3.59% in value, respectively, highlighting the global scale of Thursday’s selloff.
Despite the overall carnage in the equities markets, some stocks bucked the trend. A major US potato supplier to McDonalds, Lamb Weston Holdings, gained 10.01% after releasing earnings, which beat expectations. Tobacco companies Philip Morris and British American Tobacco saw a respective 3.78% and 1.99% increase in value. Several consumer stocks, including fast-moving consumer goods manufacturer, Unilever, fast-food giant, McDonald’s, and confectionery, food and beverage company, Mondelez, climbed 4.49%, 2.15% and 2.68%, respectively, in dollar terms.
The Chicago Board Options Exchange Volatility Index (VIX), which measures the expected volatility of the S&P 500 Index, reached a high of 30, up from the previous peak of 29.57 on 11 March and much higher than its 10-year average of 18.33 on Thursday.
While this week, market jitters have peaked, next week will provide an opportunity to retest the market with the commencement of the US’s first-quarter earnings season. On 17 April, several major US banks will report their earnings, and the feedback from their Chief Executive Officers will provide a barometer reading for household conditions and the economy in general.
DATA IN A NUTSHELL
This week’s key themes:
- US manufacturing contracts
- China’s economic output improved in March
- Further pressure on oil prices as OPEC+ boosts production
- Major currencies strengthen against a weaker dollar
- The rand feels the pressure of local politics and US tariffs
The latest US economic data delivered mixed signals. Core Personal Consumption Expenditure (PCE) inflation, the US Federal Reserve’s favoured inflation measure, rose slightly above expectations to 2.8% year-over-year in February, highlighting persistent underlying inflation pressures. The ISM Purchasing Managers’ Index (PMI) fell to 49.0 in March, marking a contraction in US manufacturing from the previous month’s 50.3, driven by declines in new orders, backlogs and employment, alongside a sharp increase in price pressures. Factory orders rose modestly by 0.6% in February, slightly exceeding forecasts. Initial jobless claims improved, decreasing to 219,000 last week, suggesting ongoing US labour market resilience.
Germany’s retail sales expanded 0.8% month-over-month in February, surpassing forecasts and marking the most significant increase in five months. Year-over-year, retail activity grew robustly by 4.9%. Despite improving retail figures, Germany’s corporate distress rose to its highest level since July 2020 amid weakened consumer confidence and profitability concerns. Conversely, Spain’s tourism sector saw strong growth, attracting 5.4 million international visitors in February, a 7.7% annual increase, with significant visitor surges from the UK and France up 6.8% and 15.9%, respectively.
China’s economic activity strengthened in March 2025, with the Caixin Manufacturing PMI rising to 51.2, its highest level since November, driven by robust new orders and export sales. Concurrently, the Chinese Services PMI climbed to 51.9, led by stronger domestic demand and marketing efforts. Employment rose slightly in manufacturing but declined in services. Overall Chinese business sentiment moderated amid ongoing global trade uncertainties.
Commodities
Following steady gains throughout the week, gold could not escape the tariff-induced volatility unscathed. In Thursday’s trading, the precious metal achieved a new high of $3,167.84/ounce only to lose $113. However, pricing was later restored to above the $3,100 level. Gold ended the day relatively flat at $3,115.27/ounce.
The Bloomberg Industrial Metals Index (BCOMIN) fell 5.09% over the last five days to 145.4. The decline in the BCOMIN was led by copper’s trend reversal following a strong uptick since the end of February. Copper futures fell below $5/pound on Thursday, settling at $4.815/pound. Despite the pullback, copper has still notched a 20% gain on a year-to-date basis.
According to the US Energy Information Administration, US crude inventories rose by 6.2 million barrels last week, contrary to expectations of a 700,000-barrel decline, driven by rising imports and reduced refinery utilisation. Gasoline stocks fell by 1.6 million barrels, while distillate inventories rose slightly. Further pressure on oil prices came from an unexpected announcement by the expanded Organisation of Petroleum Exporting Countries, OPEC+, which plans to hike its output by 411,000 barrels per day in May. Also, demand concerns from Wednesday’s reciprocal tariff announcement weighed on Brent crude oil futures, which closed at $70.14/barrel.
Currencies
Prior to its 2.3% decline on Thursday, the US Dollar Index (DXY) was range bound between 104.0 and 104.5 throughout the week. However, the DXY reached a low of 101.3 during Thursday’s trading, a level last seen in early October 2024.
Amongst major currencies, the Swiss franc strengthened by 2.99%, the Japanese yen by 2.60%, and the euro by 2.41% and were the strongest performers, reflecting demand for safer assets amid dollar weakness.
The rand responded to both the US tariff debacle and homegrown issues after a tense parliamentary vote on the 2025 Budget’s fiscal framework. Despite passing by a narrow margin, the Budget vote created political tension between members of the Government of National Unity. The rand depreciated to R18.7262/$ from R18.47/$ following the tariff announcement.
Key indicators:
USD/ZAR: 19.08
EUR/ZAR: 21.03
GBP/ZAR: 24.86
GOLD: $3,094.53
BRENT CRUDE: $68.65
Sources: Bloomberg, TechCrunch, The Wall Street Journal, FXStreet and CNBC.
Written by Citadel Senior Equity Analyst and Advisory Partner, Thambo Mthwalo.