The Morning Edge: Tariff Truce Tames Recession Fears, Spurs Market Optimism

QUICK SNAPSHOT
Global Sentiment: Risk-on
Factors: US-China Trade Deal Optimism 

TODAY’S WATCHLIST
 - Union Cabinet meeting
 - OPEC Monthly Report

THE BIG STORY
A fragile yet promising pause in the US-China trade war has prompted a swift recalibration of economic outlooks from major brokerages, easing fears of a near-term US recession. 

Goldman Sachs led the shift, trimming its recession probability to 35% from 45%, while Barclays dismissed the threat altogether. J.P. Morgan now sees the risk as below 50%, a notable retreat from the heightened alarm sounded just weeks ago. The recalibration follows the 90-day agreement between Washington and Beijing to roll back tariffs, with US duties on Chinese imports falling from 145% to 30%, and China cutting its own from 125% to 10%.

The tariff relief is also reshaping expectations for interest rates and equity markets. Goldman Sachs revised its 2025 US GDP growth forecast upward by half a percentage point to 1% and now anticipates three Fed rate cuts stretching into 2026—beginning in December rather than July. 

Barclays and J.P. Morgan have followed suit, aligning with Goldman’s single December cut forecast, while Citigroup delayed its rate-cut call to July. In a bullish move, Goldman also lifted its year-end target for the S&P 500 to 6,100, up from 5,900, citing the lowered risks from trade and recession. 

DATA
US consumer prices rose moderately in April, with declining food costs partly offsetting higher rents. The Consumer Price Index increased 0.2%, below the 0.3% forecast and marking the smallest annual rise in four years. While shelter costs rose 0.3%, grocery prices fell 0.4% — led by a steep 12.7% drop in egg prices, the sharpest since 1984 — highlighting ongoing uncertainty in the inflation outlook amid Trump's tariff policies.

WHAT HAPPENED OVERNIGHT
US stocks extended gains for a second session on Tuesday as benign inflation data compounded optimism from the US-China trade truce. The Dow fell 0.6%, dragged by UnitedHealth's 17.8% collapse after its forecast withdrawal and CEO departure, while sector performances diverged sharply – tech rallied 2.25% but healthcare plunged 2.97 per cent. Coinbase Global soared 24%on its upcoming S&P 500 inclusion, highlighting the market's risk-on tilt despite healthcare woes.

The benchmark 10-year US Treasury yield edged up 1.6 basis points to 4.473%, while the more policy-sensitive 2-year yield inched 0.2 basis points higher to 4.004% as markets continued adjusting to the Fed's higher-for-longer rate stance.

The US dollar declined 0.79% against a basket of currencies on Tuesday as April's softer-than-expected US inflation figures offset prior trade-driven gains, with the euro advancing 0.94% to $1.1191. The retreat reflects recalibrated expectations for Fed policy following Trump's tariff announcements and their muted initial price impact. Currency markets appear to be balancing trade war risks against domestic inflationary pressures.

Brent crude oil prices surged on Tuesday, buoyed by a temporary easing of US-China tariffs. Brent crude rose $1.67, or 2.57%, to settle at $66.63 a barrel, while US West Texas Intermediate gained $1.72, or 2.78%, to close at $63.67.

Day’s Ledger

Economic Data:

• Germany April CPI data
• India April WPI data
• US weekly crude oil inventories data
• OPEC Monthly Report

Corporate Actions:

• Jan-Mar earnings: Hindustan Aeronautics, Eicher Motors, Tata Power Company, Shree Cements, Lupin, Muthoot Finance, Torrent Power, Hitachi Energy India, Jubilant Foodworks, Piramal Pharma, JB Chemicals and Pharmaceuticals, Sagility India, V-Guard Industries, Kirloskar Brothers, eClerx Services, RITES, Westlife Foodworld, Kirloskar Oil Engines, Graphite India, Shree Renuka Sugars, Berger Paints India, Apollo Tyres, Brigade Enterprises, Apar Industries, Aditya Birla Real Estate, BASF India, Asahi India Glass.
• MM Financial to consider rights issue

Policy

• Union Cabinet to meet
• German Buba President Nagel Speaks 
• German Buba Balz Speaks 
• US Fed Waller Speaks

TICKERS

• BHARTI AIRTEL’s March quarter profit jumps over 430% on exceptional gain; revenue up 27%
• CCI clears LLOYDS METALS' acquisition of Thriveni Earthmovers and Infra
• EXIDE eyes ₹200 bln revenue from lead-acid battery biz in 2–3 years
• LUPIN launches Tolvaptan in US with 180-day exclusivity
• TATA MOTORS March quarter profit beats estimate despite tax hit; auto biz turns debt-free
• UK regulator clears CURATEQ’s filgrastim biosimilar Zefylti
• ZEE ENTERTAINMENT wins arbitration case against Aditya Birla Finance

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