April 16 – Stock futures are pointing to a lower open, with the tech-heavy Nasdaq showing the sharpest drop following the announcement of stricter U.S. export controls on AI chips. Much of this drag comes from chip majors Nvidia and AMD, showing pre-market drops of 6.6% and 7.4%, respectively, with the former company stating the measure would cost them an extra $5.5 billion. The VIX looks to start the day elevated in response, rising above 31.8 after dipping below the 30 mark yesterday. The dollar is starting the day in red, falling back below the 100 level as it trades around 99.5, but still holding within this week’s range. Treasuries are roughly unchanged to start the day, with 10-year yields around 4.32% and 2-year yields near 3.80%. Crude oil is narrowly in the red this morning, with the nearby WTI contract hovering near $61.30 after probing briefly below the $60 mark earlier in the session, while the ags start the day mostly in the green.
China’s economy grew by more than expected to start 2025, with today’s data showing first quarter GDP rising 5.4% year-on-year, beating analyst expectations of 5.1% growth. This positivity should be taken with a major grain of salt, however, as Q1 data does not yet reflect the impact of the escalating tariff war between the world’s two largest economies. The strong exports seen in the first quarter may largely be a reflection of exporters pumping products out ahead of the looming tariff deadline at the start of April, with exports accounting for 32% of growth versus the 30% share seen in the first quarter of last year. Meanwhile, domestic consumption’s share of growth fell to 35%, down from 45% in the same quarter last year. This is not a promising sign for the Chinese economy, as the country’s dependence on exports puts them in a vulnerable spot if trade tensions with the U.S. drag on, placing more importance on domestic consumption to offset some of the impact.
We’ve seen a tranche of measures taken attempting to stimulate domestic consumption within China, and that has led to some bright spots, like today’s better-than-expected 5.9% retail sales growth in March, though plenty of lingering issues remain. Those issues remain in the focus of investors, with the better-than-expected GDP reading doing little to bolster the Chinese stock market. Global investment banks remain on the pessimistic side, with widespread cuts being made to 2025 Chinese growth estimates this week. Among the most pessimistic was UBS dropping their estimate down to 3.4% from 4.0% previously, while Morgan Stanley is among the most optimistic at 4.2% growth, with that being down from 4.5% previously. The official Chinese government target remains at 5.0% growth for 2025, but that target looked difficult to achieve even before the tariff shock and certainly looks much more difficult now. The White House again upped the ante with a fact sheet released yesterday stating “China now faces up to a 245% tariff on imports to the U.S. as a result of its retaliatory actions,” up from 145% previously, though the numbers mean little at this point with tariffs already being high enough to effectively shut off trade.
Average 30-year mortgage rates jumped to a seven-week high at 6.81% in the week ending April 11th, up from 6.61% in the week prior and marking the sharpest weekly increase seen since October. This followed the sharp jump in treasury yields seen last week, as 10-year yields spiked to a two-month high on Friday before softening early this week. In turn, overall U.S. mortgage applications fell 8.5% week-on-week, the sharpest weekly decline seen thus far in 2025. This total was a combination of a 12.4% week-on-week decline in refinancing applications and a lesser 4.9% week-on-week drop in applications to purchase a new home.
U.S. retail sales surged higher in March, jumping 1.4% month-on-month to mark the largest monthly gain seen since January 2023. This is up sharply from 0.2% month-on-month growth in February, though this was largely expected (average analyst estimate was +1.3%) with consumers rushing to make purchases ahead of tariffs going into effect in April. Much of the rush to get ahead of tariffs centered around automobiles, with purchases of motor vehicles and parts shooting 5.3% higher month-on-month. Excluding autos, retail sales were up 0.5% month-on-month, down from 0.7% in February but still soundly beating expectations of 0.3% growth. Digging even deeper to core (sometimes called control group) retail sales, a figure used in calculating GDP that excludes autos, food services, building materials, and gas stations, the picture was less rosy, with 0.4% month-on-month growth falling below expectations of a 0.6% rise and marking a notable drop from the upwardly revised 1.3% jump in February. As outlined with China above, the big question will be how these readings fare in the months ahead once the impact of the trade war is realized. This will keep considerable investor attention on rumblings of potential negotiations and trade deals between the U.S. and China, though to this point there have been few signs pointing to progress.
