5 world market themes for the week ahead

Global investors have yearned for clarity over U.S. President Donald Trump's tariffs, but now they have it, they don't much like what they see.

As part of his "Liberation Day" on April 2, Trump slapped hefty tariffs on major trading partners, plunging markets into turmoil, just as investors parse through the first new quarterly earnings, along with Chinese inflation data, waiting for the rest of the world to respond.

Here is a look at the week ahead from Rae Wee in Singapore, Lewis Krauskopf in New York, Dhara Ranasinghe, Libby George and Amanda Cooper in London.

1. UPSIDE DOWN


Trump's tariffs have panicked investors, who now believe a U.S. recession could happen, jettisoning U.S. stocks in one of the most aggressive sell-offs in the past 30 years and hunting for safe-haven gems. The dollar has typically been the shelter of choice. But the extent of the fear over what damage the tariffs might do to the U.S. economy and the U.S. administration's increasingly isolationist tendencies has left the dollar in the dust. Gold, the Japanese yen and the Swiss franc have all soared along with Treasury prices.

Not content with turning the world order on its head, Trump and Co are turning markets on their head too and investors are having to find new ways to play it.

2. NEXT, RETALIATION DAY


Global markets have felt the impact of "Liberation Day," now they have to brace for what many are already calling "Retaliation Day" from trade partners in response to the highest U.S. tariffs in over a century.

Signs of that may come next week and beyond. The next steps from the European Union and China are especially in focus.

The EU is expected to pursue a phased approach that leaves space for negotiations to deescalate tensions. China, which reacted immediately when the U.S. imposed 10% tariffs just weeks ago, has not acted... yet.

For market watchers, it's pretty straightforward -- the stronger the retaliation to U.S. tariffs, the higher the chances the world economy lurches into recession and keeps investors away from risk assets.

3. TROUBLE AT THE FACTORY


"Factory Asia" has taken a particularly large hit from Trump's new tariffs. Six of the nine Southeast Asian countries on Trump's list face tariffs between 32% and 49%. Sri Lanka, which is clawing back from its worst economic crisis in a generation, took a painful 44% hike.

The news sent Asian currencies plunging - and Sri Lanka's sovereign dollar bonds to their lowest since last year's debt restructuring.

Investors expect Asia's central banks to counter the hit. Thailand's central bank has already said it's ready to manage tariff-induced volatility.

For Sri Lanka, it's trickier; the U.S. typically takes around 40% of its apparel exports, which brought in a net $1.9 billion last year - its second-biggest source of foreign currency. Yohan Lawrence, Secretary General of Sri Lanka's Joint Apparel Association Forum said the situation "must be addressed as a matter of national urgency."

4. EARNINGS ON DECK


A crucial quarterly reporting season for U.S. companies kicks off in the coming week, led by results from several major banks.

Investors will be hoping strong earnings can revive enthusiasm for stocks on the heels of the worst quarterly performance for the S&P 500 since 2022.

JPMorgan, Wells Fargo and Morgan Stanley are among those reporting on April 11. Delta Air Lines and Corona beer maker Constellation Brands also post results.

Overall, first-quarter earnings for the S&P 500 are expected to have climbed by 8% from the year-earlier period, according to LSEG IBES, with the fallout from tariffs likely to be a major topic for companies.

Focus will also be on the consumer price index report for March due April 10, with investors looking to see if inflation is moderating enough to allow the Fed to continue cutting rates.

5. SOME RELIEF?


Chinese inflation data is due on Thursday, and investors will be hoping households in the world's second-largest economy showed more willingness to spend in March after February's dismal consumer price index reading.

The figures come on the heels of China's State Council's "special action plan" reveal last month, featuring measures such as increasing residents' income and establishing a childcare subsidy scheme to boost domestic consumption.

While recent economic data in the country has turned more favourable and Chinese stocks continue to find themselves more buyers, persistent deflationary pressures remain a huge drag.

Trump's tariffs are also complicating matters for Beijing in its quest to mount a solid recovery.

In other news, a rate decision from the Reserve Bank of New Zealand (RBNZ) is due on Wednesday, where expectations are for yet another rate cut as policymakers seek to revive a struggling economy.