Market volatility has surged, with significant swings affecting investor confidence globally. The Paris Stock Exchange saw drastic fluctuations, while U.S. indices initially dropped but later rebounded. Speculation about potential tariff pauses has spurred gains in certain stocks. Concerns over economic slowdowns and inflation persist, compounded by the Federal Reserve’s reluctance to cut rates. Analysts predict a challenging outlook, with recession risks increasing and corporate earnings likely to be revised down. Meanwhile, bond yields have risen, and key corporate developments are underway.
Market Volatility: A Rollercoaster Ride
The stock market is experiencing significant volatility, resembling a chaotic saloon door as fluctuations shake investor confidence. The Paris Stock Exchange saw a dramatic shift, plummeting from a -4% drop to zero, before settling at -3.5% after hitting a low of 6,770 points, which represented a 5.5% decrease, with 23 stocks locked in decline at market open. The CAC40 index swung wildly, moving from 6,900 to 7,280 in mere minutes, only to retreat towards 7,020.
In the U.S., indices that had initially opened lower—down 4% for the Nasdaq and 4.5% for the S&P 500—reversed course sharply, jumping into positive territory with the Nasdaq and S&P seeing increases of 2.5%. Meanwhile, the Dow Jones remained steady around 38,000 points before also succumbing to losses, with the S&P down 2.5%, the Nasdaq by 1.5%, and the Dow by 2.7%.
Market Response to Rumors and Economic Concerns
Despite massive selling volumes, buyers are attempting to reclaim control amidst a spread of rumors suggesting that Trump may announce a ’90-day pause’ on tariffs, excluding China. This speculation led to a dramatic rebound for several stocks, including Apple, Tesla, and Broadcom, which gained as much as 10% in a short timeframe, while Super Micro Computers soared by 20%.
In Paris, trading activity surged, with 4 billion euros exchanged within the first part of the session, and projections indicating a total of over 9 billion euros by the close. Notable declines included major players like Safran, Airbus, Air Liquide (down 4%), and Total Energies (down 2.5%). Meanwhile, oil and energy stocks faced severe pressure on Wall Street, continuing their downward trend as oil prices hovered below $64 per barrel on WTI, marking a significant market drop of 10% since the onset of Trump’s trade war—representing the worst weekly losses since March 2020.
The ripple effect of this volatility reached Asia, where the Nikkei index fell more than 7% just as European markets were set to open, and Hong Kong’s Hang Seng index dropped over 13%. The VIX index, a measure of market volatility, surged to 60 before settling at 49, indicating heightened market anxiety.
According to Michael Brown, a strategist at Pepperstone, the existing economic climate is precarious and may worsen. ‘With growth expected to decelerate significantly and inflation on the rise, the markets have not seen the worst of it yet,’ he cautions.
Investor sentiment is further strained by the lack of intervention from the U.S. Federal Reserve, which typically provides a safety net during turbulent times. During a visit to Arlington, Virginia, Fed Chairman Jerome Powell tempered expectations for an imminent rate cut in the second quarter, asserting that it is premature to lower rates, given the inflation risks posed by the newly announced tariffs.
As uncertainty looms, analysts are questioning the duration of this correction phase and the potential onset of a prolonged bear market. Citi projects that the S&P 500 index would need to reach 4,700 points to fully reflect the implications of the changing trade environment, indicating a further decline of over 7% from current levels. JP Morgan estimates a 60% chance of recession, while Goldman Sachs suggests close to a 50% risk, forecasting growth to slow to 0.5% by the fourth quarter.
‘The economic slowdown is now a certainty and will inevitably lead to a downward revision of corporate earnings,’ warns Gilles Guibout, head of European equities at Axa IM. He added that while Germany’s investment strategy might provide some respite for Europe, it is unlikely to be adequate.
In the bond market, U.S. 10-year T-Bonds saw yields rise from 3.87% to 4.12%, while 10-year Bunds were at 2.65% after a fluctuation. The euro weakened slightly against the dollar, trading at $1.0950, while the dollar gained 2%. Additionally, copper prices continued to decline following a significant drop last week.
In corporate news, Airbus announced it secured a firm order from EVA Air for six A350-1000 long-haul aircraft and three A321neo single-aisle planes, solidifying a deal first revealed in March. ArcelorMittal has launched a new share buyback program, while Thales has signed a contract with Sweden’s FMV for its Ground Master 200 radar system. CapGemini is set to establish an AI Center of Excellence in Egypt, slated to open in May, to enhance its clients’ transitions towards advanced AI technologies.