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Tariff confusion hits sentiment as China denies talks
Markets turned lower on Friday after China denied any ongoing tariff negotiations with the US, undercutting earlier hopes of easing tensions. Meanwhile, UK retail sales unexpectedly rose in March, offering a rare positive surprise amid global uncertainty.
China’s embassy denies any current US-China tariff talks, calling for clarity and warning against confusion.
UK retail sales rose 0.4% in March, defying expectations and marking the strongest quarterly growth since 2021.
S&P 500 futures and the US Dollar eased slightly on tariff headlines; Yen remains weak ahead of next week’s BoJ meeting.
Markets struggled to hold gains on Friday as a statement from China’s embassy in Washington shattered hopes of near-term relief in the US-China trade standoff. The embassy said flatly that “China and the US are not having any consultation or negotiation on tariffs,” calling on Washington to “stop creating confusion.” The reaction was swift, with US equity futures slipping lower and the US Dollar retreating from session highs.
The clarification undercut market optimism that had been building through the week on speculation of behind-the-scenes progress. Instead, the statement served as a reminder of the entrenched mistrust and structural challenges facing both sides. S&P 500 futures fell 0.2% following the release, while the Dollar Index (DXY) edged down from highs to trade near 99.62 — still up 0.33% on the day, but losing momentum.
Yen stumbles as BoJ looms and tariff pressure builds
In FX markets, the Japanese Yen was among the worst performers, shedding 0.7% against the Dollar amid broad-based greenback strength. Analysts noted that tariff-related headlines were weighing heavily on the Yen, as traders dialed back expectations of a potential thaw in US-China relations — a development that had supported haven demand earlier in the week.
Adding to the mix, the Bank of Japan is scheduled to meet next week, with expectations tilted toward a policy hold. However, the tone of the BoJ’s statement will be closely watched, especially after stronger-than-expected Tokyo CPI data released overnight raised speculation about future tightening. Market participants are increasingly sensitive to subtle shifts in central bank language, especially in a climate of high global uncertainty.
UK retail sales defy gravity with Q1 resilience
Meanwhile, in the UK, retail sales offered a rare bright spot. Sales volumes rose 0.4% month-over-month in March, sharply beating forecasts of a 0.4% decline. The upside surprise followed a downwardly revised 0.7% gain in February and marked the strongest quarterly performance since 2021. Favorable weather helped boost sales of clothing and outdoor goods, though food retailers underperformed.
For Q1 as a whole, retail sales increased by 1.6%, giving the Bank of England some breathing room as it faces growing pressure to cut rates amid weakening PMIs and falling business sentiment. While one data point is unlikely to change the BoE’s immediate trajectory, the strength in consumer spending may temper dovish expectations in the near term.
Looking ahead, the economic calendar remains light as the Federal Reserve has entered its blackout period ahead of the May 7 FOMC meeting. Traders will keep an eye on the final April University of Michigan Consumer Sentiment data and inflation expectations due later today, though no major shifts are expected.
In summary, markets remain on edge, caught between mixed economic signals and a volatile geopolitical backdrop. As tariff rhetoric escalates and policy decisions loom, risk appetite may struggle to find sustained direction.
