The Morning Edge: Fed Researchers Sound Alarm as Economic Clouds Gather

QUICK SNAPSHOT
Global Sentiment:  Risk-on
Factors:  Tariff exemptions for smartphones and computers  

TODAY’S WATCHLIST

• India March CPI data 
• India March trade data 
• Germany April ZEW economic sentiment index
• US April New York Empire State Manufacturing Survey

THE BIG STORY
A new analysis from the Federal Reserve Bank of San Francisco is raising fresh concerns about the strength of the US labour market, warning that beneath the surface of a seemingly solid economy, there are subtle signs pointing towards rising recession risk. While the unemployment rate has crept up only gradually—reaching 4.2% last month from a low of 3.5% in mid-2023—less-visible indicators are starting to flash yellow. The research highlights that unemployed workers are taking longer to find jobs and are spending more time out of work—patterns that, historically, have often emerged in the early stages of a recession.

These labour market shifts come at a time when the economy is facing heightened pressure from sweeping tariffs introduced by the Trump administration, which have fuelled fears of both higher inflation and rising joblessness. Though many Fed officials have continued to point to the relatively low unemployment rate as a sign of resilience, the San Francisco Fed’s latest Economic Letter urges caution. “In the past, such patterns frequently occurred during the onset of recessions,” the report notes, suggesting that the job market may be weaker than headline numbers suggest. As policymakers weigh their next moves, these underlying trends may play a growing role in shaping the Fed’s outlook.

WHAT HAPPENED OVERNIGHT
US stocks modestly higher on Monday after the White House exempted smartphones and computers from new tariffs, sending Apple shares up 2.2% and giving the S&P 500 its biggest lift. The rally was tempered by lingering trade uncertainty, however, with major indices retreating from session highs as investors weighed how companies—particularly in tech—will navigate shifting supply chains. 

US Treasury market showed tentative signs of recovery Monday as the benchmark 10-year yield fell 11 basis points to 4.382%, easing fears about the market's global dominance after last week's historic rout.  While the US dollar steadied against the euro but remained under pressure, hovering near three-year lows after last week's selloff left it technically oversold. The greenback slipped 0.2% on the dollar index and fell further against the yen as President Trump's unpredictable tariff policies continue eroding confidence in the reserve currency. 

Brent crude oil prices inched higher, supported by a rebound in China’s crude imports and temporary exemptions on some US-bound electronics from fresh tariffs, offering a modest boost to market sentiment. 

DAY’S LEDGER

Economic Data

• India March WPI data
• India March CPI data
• India March trade data
• Germany April ZEW economic sentiment index
• US April New York Empire State Manufacturing Survey

Corporate Actions

• January–March earnings are scheduled to be announced by -- Bombay Wire Ropes, Delta Industrial Resources, GM Breweries, Hathway Bhawani Cabletel & Datacom, ICICI Lombard General Insurance, ICICI Prudential Life Insurance, and Indian Renewable Energy Development Agency.
• Max India will review a proposal related to fund-raising.
• Mini Diamonds India is set to consider raising funds through the issuance of equity shares or convertible warrants.

Policy Events

• ECB President Lagarde speaks      

TICKERS

• DR. REDDY’S denies report of 25% cut in workforce costs
• Home First Finance raises ₹12.50 billion via QIP at ₹970/share
• ICICI Bank to consider bond issuance and buyback on April 19
• IHCL expands with 100 new hotel additions in FY25, portfolio reaches 380
• IndusInd Bank receives PwC review on derivatives; no blame assigned
• LODHA BROTHERS amicably settle brand and business rights, part ways
• MANKIND PHARMA forms committee to integrate BSV, to set up subsidiaries in Russia and India
• NTPC plans 30 GW new coal capacity by 2032
• Patanjali Foods in talks to acquire India Transact
• TATA POWER Renewable Energy signs 200-MW PPA with NTPC for hybrid green power project
• Zydus Lifesciences gets USFDA nod for Deflazacort tablets in Italy
  

MUST READ

• EU tariffs on US goods suspended until July 14
  
• Goldman Sachs sees profit amid tariff chaos
  
• TCS delays hikes but promotes 1.1 lakh staff in FY25
  
• OPEC cuts global oil demand growth forecasts, citing US tariffs
  
• Centre to revamp guidelines for Ratna CPSEs to improve performance
  
• US order shipments resume after tariff pause, but new deals uncertain
  
• BSNL not keen on selling tower assets as 4G, 5G rollout looms ahead
  
• Deposit rate cuts likely to be moderate in current easing cycle: Bankers
  
• China exports skyrocket in March as trade war drives businesses to frontload shipments
  
• G-7 central banks prepare first responses to Trump's tariff chaos