April Market Commentary: Tariffs, Tensions and a Tumbling Tech Sector

By Questa

The first quarter of 2025 has been anything but smooth sailing. Just when you think markets might be finding their feet again, geopolitics barrels in like a wrecking ball – and once again, it’s Donald Trump at the centre of it all. His return to the White House has sparked a fresh round of global unease, and with the arrival of ‘Liberation Day’ on 2 April – the day his reciprocal tariffs kicked in – things have only gotten more tense.

Let’s break down what’s been happening across the major regions and how it’s all playing out for investors.

UK: Stuck Between a Statement and a Shrinking Forecast

March ended with the Chancellor’s Spring Statement – and to be blunt, it didn’t move the needle much. As promised, no new taxes were introduced, but that might have been more about political optics than economic sense.

Here’s the key issue: low growth and expensive borrowing are painting the Treasury into a corner. The Office for Budget Responsibility (OBR) has halved its 2025 growth forecast from 2% to just 1%. That’s a big drop, and it’s a headache for any government trying to balance the books without cutting services or hiking taxes.

Despite this, the OBR reckons things should look brighter from 2026 onwards, with steady (if not spectacular) growth predicted. The Chancellor is clinging to her fiscal rules, but with little headroom left, it’s hard to shake the feeling that something’s got to give – and soon. Investors will be watching the Autumn Statement closely.

Meanwhile, business confidence has taken a hit. Only 44% of UK manufacturers feel optimistic about output over the next 12 months, down from 56%. Not surprising, when you consider rising costs and fresh US tariffs looming large. The S&P Global UK Manufacturing PMI dropped to 44.9 in March – its worst reading since late 2023.

There was at least some relief on inflation. The rate slipped to 2.8% in January, edging closer to the Bank of England’s target. But even here, caution remains the mood of the day.

Europe: Fragile Optimism, but Still on Edge

The Eurozone kicked off 2025 with better-than-expected momentum, but that optimism has been tempered. The OECD trimmed its growth forecast for the year from 1.3% to just 1%, citing weak investment and the geopolitical noise from across the Atlantic.

Despite the clouds, there were signs of life in European equities – Germany’s DAX shot up 11.3%, its best quarter in two years. Investors are clearly betting on defence spending and stimulus to pick up the slack.

Inflation is edging down too. Eurozone CPI came in at 2.2% in March, almost on target. That was enough for the ECB to cut its key interest rate to 2.5%, the sixth cut in seven meetings. Another trim is expected on 17 April, but President Christine Lagarde is treading carefully – anything too aggressive could spook markets all over again.

On the ground, the manufacturing sector is trying to claw its way back. March’s PMI reading rose to 48.6 – still contraction, but the closest to growth in two years. For Europe, slow and steady may be the best it can hope for right now.

United States: Tech Takes a Beating, Tariffs Take Centre Stage

Let’s not sugarcoat it – US markets got battered in Q1. The tariff announcements sent ripples far and wide, and Wall Street’s major indices finished deep in the red:

Dow Jones: -1.28%
S&P 500: -4.59%
Nasdaq: -10.42%

And it wasn’t just the indices. The so-called Magnificent Seven stocks – the giants of the US equity market – all took a tumble:

Tesla: -35.8%
Nvidia: -19.3%
Alphabet: -18.3%
Amazon: -13.3%
Apple: -11.3%
Microsoft: -9.7%
Meta: -1.6%

This kind of fall from grace is no small matter. These stocks have carried the US market for years, and now investors are staring at the cracks.

The problem? Markets don’t hate Trump, they hate unpredictability. And that’s what they’ve got in spades. Trade tariffs are being announced, reversed, and reintroduced faster than investors can react. The result is chaos – and that’s before you even get to rising bond yields and a looming debt refinancing crisis.

Far East: China Holds Steady, Japan Wobbles

China’s market has been remarkably steady so far this year, with the Shanghai Composite down just 0.48%. That said, the government injecting $72bn into its major banks suggests all is not quite as rosy as the calm exterior might suggest.

On the plus side, Chinese EV makers are booming. Companies like XPeng, NIO and Li Auto are posting record deliveries, fuelling optimism about China’s ability to shift to a more consumer-led, tech-driven economy.

Japan, however, is feeling the heat from US tariffs. The Nikkei 225 slipped 4% in March, despite decent corporate earnings. Worries about trade and supply chain impacts are dragging sentiment lower – especially in export-heavy sectors like manufacturing.

The Bank of Japan is holding steady at 0.50%, keeping one eye on US policy moves and the other on domestic consumer demand.

Emerging Markets: Indonesia Shocks, India Rebounds

Indonesia was the surprise story of the quarter – and not in a good way. The Jakarta Composite Index crashed 7.1% in a single day, its worst fall since 2011, as uncertainty around new president Prabowo Subianto’s policies rattled investors. The currency also tumbled to a 20-year low. Confidence is clearly fragile.

In contrast, India’s Nifty 50 staged a quiet comeback. After months of sell-offs, investors dipped back in, drawn by undervalued opportunities and signs of improving fundamentals. It’s not a full recovery, but it’s progress.

With US rates potentially stabilising and the dollar softening, there could be opportunities in emerging markets – but with volatility running high, the risk-reward trade-off needs to be approached carefully.

Conclusion: Tariffs Cast a Long Shadow

What’s become painfully clear in Q1 is just how interconnected global markets really are – and how quickly confidence can evaporate when political uncertainty takes the wheel. Trump’s trade policies have become the dominant theme, influencing decisions across every major economy.

There’s still space for growth. Inflation is easing in key regions. Interest rates are falling in Europe and possibly heading that way in the UK. There’s opportunity for investors who stay focused and don’t get swept up in short-term panic.

But now more than ever, diversification is king. Guessing which country or sector will ride out the storm best is near-impossible, which is why spreading your bets across assets, sectors and regions is crucial.

Sources

Market data

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