Global markets rattle as tariffs escalate, political uncertainty mounts, and growth fears resurface

Markets began the week under heavy pressure, dragged lower by renewed trade tensions, political instability in Europe, and signals that the recent equity rebound may have exhausted itself. The S&P 500 and Nasdaq futures slipped following a wave of corporate profit warnings and geopolitical stress, while safe-haven flows buoyed gold and Treasuries. With volatility rising, investors appear increasingly reluctant to chase gains as macro risks grow harder to ignore.

US equity futures retreat on tariff fallout and growth concerns

US stock futures fell early Tuesday as signs of economic and corporate strain from the trade war became more pronounced:

• S&P 500 futures: -0.7%
• Nasdaq 100 futures: -0.9%
• Dow Jones futures: -0.6%

Notable movers:

• Palantir: -8% (disappointing results)
• Ford: -2.6% after pulling guidance and warning of a $2.5 billion tariff hit in 2025
• Tesla and Meta led declines among large-cap tech names

The selloff follows a record-setting 9-day S&P rally, which appears to have lost steam as investors reassess the economic impact of aggressive US tariffs and the fading prospects of imminent Fed rate cuts.

Europe under pressure: German chaos and EU trade threats

In Europe, the Stoxx 600 broke a 10-day winning streak, down 0.6%, after incoming German Chancellor Friedrich Merz failed to win confirmation in parliament — an unprecedented event in post-WWII Germany. The uncertainty threw Berlin into turmoil, weakened the euro, and weighed heavily on the DAX, which fell 1.8%.

Meanwhile, the EU warned that Trump’s expanding tariff regime could hit €549 billion worth of European goods, nearly 97% of EU exports to the US. In response, Brussels is preparing:

• A proposal for negotiations to reduce trade frictions
• A retaliation package, including reactivating suspended tariffs and possible export restrictions
• The risk of trade diversion — especially from cheaper Chinese goods — has prompted the EU to launch a surveillance task force, with initial findings expected mid-May.

Bear market rally or bull trap?

The sharp rebound in global stocks over the past month — nearly 18% off April lows — is showing signs of fatigue. Market breadth has weakened and technical signals indicate that many investors are reluctantly chasing the rally, despite concerns about valuation, policy uncertainty, and weak macro visibility.

Key highlights:

• Systematic investors bought $51 billion last week, with $57 billion expected this week
• Retail saw its strongest buying month since 2017
• Hedge fund leverage rebounded to the 96th percentile historically
• Derivatives data suggests professional investors are fading the move, not expanding risk

This mix of short-term euphoria and long-term doubt points to a market driven more by positioning and momentum than fundamentals.

Macro and monetary backdrop

Despite strong recent US data, bets on Fed rate cuts have been pared back, with markets now expecting the first cut in July and only three cuts by year-end, down from four. Meanwhile:

• The Bank of England is expected to begin a rate-cut cycle this week
• The ECB is also signaling further easing
• The Bloomberg Dollar Spot Index rose 0.1%, stabilizing after a 7% YTD decline

Markets are entering a precarious phase marked by overbought conditions, policy uncertainty, and deteriorating sentiment around global trade. The recent rally is beginning to lose conviction as structural risks — from tariff blowback to political instability in Germany — come into sharper focus. With Fed policy unclear and corporate earnings increasingly reflecting downside risk, caution remains warranted.

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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