ORLANDO, Florida, April 30 (Reuters) - TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist

Halfway to recession

If investors wanted a reminder of the impact tariffs and trade

wars have on markets, they got it on Wednesday as figures showed

that U.S. GDP shrank in the first quarter, pushing Wall Street

sharply lower before a powerful late rally ended an incredibly

turbulent month on a positive note.

Wednesday marked U.S. President Donald Trump's first 100 days in

office, also a tumultuous period, by any measure. But what do

the next 100 days hold for markets? More on that below, but

first, a round-up of the main market moves.

I'd love to hear from you, so please reach out to me with

comments at [email protected]. You can also

follow me at @ReutersJamie and @reutersjamie.bsky.social.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Fed signals rates will remain unchanged despite

market

bets on looming cuts

2. Stocks set for worst 100 day start since Nixon as

Trump

injects semi-permanent uncertainty

3. Tarnished Magnificent 7 stocks rebound faces test

with

earnings

4. Sterling sneaks higher as UK assets rally: Mike

Dolan

5. Investors seek new tariff-proof market niches as

Wall St

chaos hits Europe

Today's Key Market Moves

* U.S. stocks stage a remarkable rally in the last 30

minutes of

trading. The Dow rises 0.4%, the S&P 500 gains 0.1% and the

Nasdaq is essentially flat.

* For the month, the Dow is down 3.2%, the S&P 500 dips

0.7%, and

the Nasdaq is up 0.9%.

* Shares in tech giants Meta Platforms and Microsoft rallied

in

after-hours trading as investors cheer Q1 earnings results. Meta

shares rose 4%, Microsoft shares leapt 7%.

* Super Micro Computer shares slumped 11.5% after

company

cuts Q3 forecasts, while Snapchat parent Snap shares sank 12.4%

after it said it will not provide Q2 financial forecasts.

* Lucky for some - Britain's FTSE 100 extended a winning

streak to

a remarkable 13 days, gaining 0.4%. That's its best run since

early 2017.

* European shares rise, supported by surprisingly

strong

euro zone GDP data. But April is the second straight monthly

decline.

* Dollar rises 0.4%, as cautious recovery from recent lows

continues

* Oil fell for a third day, with Brent crude futures

down

1.7%. So far this week, oil is off 4%.

Trade? It's a drag

The U.S. economy shrank in the first quarter for the first

time in three years, as trade dealt its heaviest blow to GDP on

record. Another contraction in the April-June quarter will meet

the definition of a technical recession.

The late rebound on Wall Street was remarkable and came out

of the blue, but perhaps even more interesting was the bond

market's reaction to Wednesday's U.S. economic data.

Since peaking just below 4.60% on April 11, the yield on the

10-year U.S. Treasury note has fallen around 45 basis points.

But it crept up on Wednesday and the curve steepened again,

suggesting inflation concerns rather than contracting economic

activity drove longer-dated bond prices.

Meanwhile, the 0.3% contraction of GDP in the first quarter

pushed the two-year yield lower for a fifth day in a row, the

longest declining streak since February. Traders moved to price

in a Fed rate cut in June and another three by the end of the

year.

But prices are sticky, and tariffs are likely to keep them

that way. The GDP deflator, a proxy for inflation, was 3.7% in

the first quarter, higher than the expected 3.0%. Meanwhile, the

headline reading of PCE inflation in March also released on

Wednesday was slightly higher than expected at 2.3%.

With stagflation pressures rising and barbs from the White

House flying, Fed Chair Jerome Powell is in a difficult

position. Powell has steered a straight path down the middle,

insisting that more hard data is needed before the Fed acts. But

right now, it looks like the 'stag' risks are weighing more

heavily on policymakers' minds than the 'flation'.

If there's one central bank traders are convinced will sit

on their hands for the remainder of this year, however, it is

the Bank of Japan, which announces its latest rate decision on

Thursday.

Global trade, economic and market turbulence looks to have

put the BOJ's tightening cycle into long, cold storage - rates

markets are pricing in only 15 basis points of hikes this year,

down from around 75 bps in late January.

Japan's economic surprises index is heading south and is

close to turning negative, while Japanese bond yields look to

have reached a plateau.

That's a yen-negative backdrop. But Treasury yields are

falling faster, U.S. growth is shrinking, and Fed rate cut

expectations are intensifying. Throw in the yen's 'safe haven'

status as Japanese investors bring money home, and the yen's

outlook is suddenly a lot brighter. Strategists at TS Lombard on

Wednesday said dollar could fall close to 130.00 yen later this

year.

Dazed and confused, markets brace for Trump's second 100

days

The first 100 days of Trump 2.0 were incredibly turbulent

for world markets, as tariff-fueled chaos wiped trillions of

dollars off U.S. asset prices. What will the second 100 days of

President Donald Trump's administration look like? They will

probably be less volatile, but markets may be underpricing the

downside risk.

Wall Street and the dollar ended Trump's first 100 days

sharply lower as investors around the world reassessed their

willingness to hold U.S. assets.

Even though many markets, including the S&P 500, hit record

highs in the month after Trump's inauguration in January, U.S.

stocks ended up having their worst first 100 days under any

president since Richard Nixon's second term in 1973, and the

dollar index ended the period down nearly 10%.

But several global markets have rebounded from their lows,

as Trump has backed away from some of his more extreme policies

and dialed down his rhetoric. The MSCI World index is now off

only 3% since inauguration day. Chinese, British and European

stocks are essentially flat, while the MSCI Asia ex-Japan index,

Germany's DAX and India's Sensex are all up between 2% and 7%.

Some of this relief is justified, but markets may be a

bit too optimistic about what the next 100 days have in store.

ROCKY ROAD

Peak tariff chaos is probably in the rear-view mirror, but

even if global levies are reduced, they will still be the

highest in decades. And trade tensions between China and the

U.S. - the world's two largest economies - likely won't ratchet

down quickly. Markets don't appear to be priced for the trade

disruption and economic slowdown this is apt to cause.

Global equity valuations have cheapened since January, but

not by much, and European multiples are beginning to tick back

up again. Meanwhile, 12-month forward earnings forecasts for the

S&P 500 continue to rise to new highs, nudging $280 per share.

Does this point to confidence in the resilience of the U.S.

and the global economy or complacency? Keith Lerner, chief

investment officer at Truist, reckons it's the latter,

especially given how narrow the scope is for sizeable U.S.

fiscal and monetary policy support.

Lerner estimates the near-term potential for the S&P 500 is

no more than 5% on the upside, and greater than 10% on the

downside.

"Markets have gone from pricing in a decent amount of bad

news at the recent lows, to providing less of a buffer should we

have a rockier road ahead," he wrote on Tuesday. "The

risk-reward appears less attractive at current levels."

The sudden collapse in U.S.-China trade, record uncertainty,

and months of limbo for households and businesses while the U.S.

negotiates dozens of trade deals suggest downward global growth

revisions like the International Monetary Fund's last week may

be too benign. Even if recession is avoided, stagflation may not

be.

PEAK TRUM

The bullish case, of course, is that the first 100 days

marked "peak Trump", meaning the shock, chaos, and selling

across markets won't be repeated in the coming months. Tensions

with U.S. rivals and allies will thaw, and the world will return

to something resembling normalcy.

Perhaps some of this is playing out. Elon Musk's influence

on White House policy is waning, as the Tesla chief has scaled

back his DOGE time commitment. Trump has tempered his attacks on

Federal Reserve Chair Jerome Powell, and the U.S. administration

is sounding more conciliatory on tariffs.

In that light, one could argue that U.S. "Big Tech" is now

cheap and doubts over the dollar's safe-haven status are

overblown. The U.S. economy remains the world's most innovative

and dynamic, and there are huge fiscal boosts coming down the

pike in Europe and China.

Time to buy then? Not so fast. As a recent JP Morgan survey

notes, even though investors may be hopeful for de-escalation in

the trade war, they also fear "lasting damage" is being done by

the administration's efforts to create a new world order. They

also have "very little conviction on the (administration's)

endgame" or which asset classes to own.

Low conviction, high uncertainty and fears of long-term

damage don't make for a particularly bullish backdrop, even if

the next 100 days are a lot less tumultuous than the first

What could move markets tomorrow?

* Bank of Japan policy decision

* Japan consumer confidence (April)

* April PMIs for several countries, including Japan, UK,

Canada,

US

* Q1 corporate earnings flow continues, with Apple reporting

after

the closing bell

Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.

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(By Jamie McGeever,)