Markets react to geopolitical uncertainty

Financial markets remain in a delicate balance as geopolitical tensions, evolving trade policies, and economic data shape investor sentiment. While Asian equities continue their rally, concerns over US retail spending, upcoming tariff adjustments, and Ukraine-related negotiations weigh on broader risk appetite. Meanwhile, gold has surged past $3,000 per ounce, and oil prices remain elevated, reflecting ongoing geopolitical concerns and supply constraints.

1. US-Russia negotiations raise concerns over asset division

The latest developments in US-Russia discussions over a possible 30-day ceasefire in Ukraine have sparked concerns that the terms may include the division of key infrastructure assets in occupied territories. While a ceasefire would ease immediate tensions, such an agreement could set a precedent that effectively cements Russian control over critical areas.

Ukraine’s allies, particularly in Europe, have expressed unease over the possibility of a compromise that undermines Ukraine’s position. Moscow has yet to fully commit to the proposed terms, and some analysts suggest that Russia may be delaying talks to solidify gains on the battlefield before agreeing to diplomatic measures.

Any major geopolitical shifts in Ukraine will have broader implications for energy markets, global trade, and investor confidence, as prolonged instability continues to weigh on commodity prices and regional markets.

2. Asian markets extend rally on renewed investment flows

Asian equities are showing strong resilience, marking a third consecutive day of gains, led by rallies in Hong Kong and Japan. Investor sentiment has been buoyed by China’s renewed push to stimulate domestic consumption, as well as increased foreign investment in Japanese trading houses.

At the same time, gold prices have surged past $3,000 per ounce, reflecting strong demand for safe-haven assets as market participants weigh ongoing uncertainties. The upward momentum in gold prices is partly attributed to hedging against inflation risks and geopolitical instability.

Meanwhile, oil prices are inching higher, driven by a combination of supply disruptions and geopolitical risks in the Middle East. The broader commodities rally suggests that investors are positioning defensively amid an increasingly complex global landscape.

3. Washington prepares new trade measures – tariffs under review

The US administration is preparing a new round of “reciprocal” tariffs, expected to be announced as early as April 2. The tariffs aim to address disparities in market access, ensuring that trade partners imposing higher barriers on American goods face similar restrictions.

Unlike previous trade measures, this round of tariffs is expected to follow a more structured formula, though details remain unclear on how broadly they will be applied. Some reports suggest that Washington may invoke emergency trade powers to expedite implementation, raising concerns among businesses that new cost pressures could emerge at short notice.

The potential trade restrictions add to uncertainty for supply chains, particularly in industries dependent on raw materials, technology components, and consumer goods imports. Markets will be watching for further clarity on exemptions or retaliatory measures from key trade partners.

4. US retail sales show signs of consumer weakness

Recent US economic data indicates a slower-than-expected recovery in consumer spending, raising concerns over the resilience of domestic demand. Retail sales posted only a modest rebound in February, failing to fully offset the sharp decline seen in January.

Key weaknesses include:

• Slower vehicle sales, as higher financing costs and affordability concerns dampen demand.
• Weaker restaurant and hospitality spending, suggesting some consumers may be cutting back on discretionary purchases.
• Mixed homebuilder sentiment, reflecting rising input costs and uncertainty about future mortgage trends.

Although certain retail categories saw stabilization in February, the overall trend points to a more cautious consumer environment, with businesses highlighting the impact of cost pressures linked to tariffs and broader economic uncertainties.

With consumer spending accounting for nearly 70% of US GDP, sustained weakness could signal a broader slowdown in economic momentum. Investors will be closely monitoring upcoming reports for any signs of a shift in consumption patterns and inflationary pressures affecting demand.

5. Market outlook – what to watch

US-Russia Ceasefire Talks: Any breakthrough or delay in negotiations will have major implications for commodity markets and geopolitical risk pricing.

Upcoming US Tariff Announcements: Investors are awaiting clarity on Washington’s new trade measures and potential countermeasures from affected nations.

Gold and Oil Prices: Continued strength in safe-haven assets signals uncertainty in global markets, while oil supply constraints remain a key risk factor.

Consumer Confidence Trends: Retail and sentiment data in the coming weeks will be crucial in determining the strength of US economic recovery.

With Asian equities showing strong momentum, US policy developments taking center stage, and geopolitical risks evolving, the coming days will be critical in setting the tone for global financial markets. Investors should remain prepared for potential volatility as key economic and policy events unfold.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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